SEC paying $580,000 to settle suit by former assistant inspector general claiming retaliation

WASHINGTON – The Securities and Exchange Commission is paying $580,000 to settle a lawsuit by a former assistant SEC inspector general who accused the agency of firing him in retaliation for bringing possible misconduct to light.

The SEC reached the settlement last month with David Weber, who sued the agency in November. Weber’s attorney, Cary Hansel, announced the settlement Monday. Weber was the assistant inspector general for investigations, one of those responsible for probing allegations of misconduct by SEC officials and employees. He is an attorney and a certified fraud examiner.

Weber had raised concerns about possible inappropriate relationships between former SEC inspector general David Kotz and women he worked with on investigations of the Ponzi schemes run by Bernard Madoff and Allen Stanford.

Weber also warned of a security flaw in some SEC computers that contained sensitive stock-exchange data.

Kotz, who left the SEC in January 2012, has denied the allegations. He didn’t immediately return a telephone call seeking comment Monday.

SEC spokesman John Nester said the settlement “resolves the matter to everyone’s satisfaction and permits the Office of the Inspector General to continue to focus on its important work.”

A lengthy report by the U.S. Postal Service inspector general’s office, provided to the SEC in September, found that Kotz’s relationships with the women created potential conflicts of interest. It also found merit in Weber’s concerns of a potential security breach caused by the lack of encryption in some SEC computers containing sensitive stock-exchange data.

The SEC has said the computer problem has been corrected.

Weber was put on paid administrative leave in May 2012 after some colleagues complained that he created a hostile workplace by talking about wanting to bring a firearm to work and bringing a bulletproof vest to the office. He was fired in October.

The Postal Service IG’s report did not find that Weber created a hostile work environment or engaged in threatening behaviour in the office. However, the report appeared to find some merit in two complaints against Weber that involved management issues.

Weber’s settlement with the SEC is one of the largest of that type paid to any federal government employee. In 2010, the SEC agreed to pay $755,000 to settle a lawsuit by a fired enforcement attorney who said the agency blocked his investigation of a prominent hedge fund.

In his settlement, Weber also got the right to be reinstated in his job. He does not wish to return to the agency, Hansel said in a telephone interview.

Hansel said the computer security issue was the most important problem that Weber brought to light, and hopefully there won’t be a reoccurrence. The point of the settlement, he said, is “not to allow this tactic of having smeared (Weber) to be successful.”

Weber, in a statement issued through Hansel, said, “Now that my name has been cleared, I look forward to helping others through my growing law and forensic investigations practice.”