SEC Says ‘Spoofed’ E-mail Called for Inspector General’s Firing

The U.S. Securities and Exchange Commission said an electronic message scolding Chairman Mary Schapiro and urging her to fire the agency’s inspector general was sent by an outsider posing as an SEC employee.

The mass mailer, distributed to the chairman, SEC commissioners and reporters who cover the regulator, “was sent from outside the agency’s network,” spokesman John Nester said yesterday. The message, sent using the e-mail address of enforcement attorney Irene Gutierrez, was “spoofed,” Nester said.

The message urged Schapiro to terminate Inspector General H. David Kotz, calling him “incompetent and corrupt.” It also targeted Schapiro, saying she’s too concerned with congressional and media perceptions of the agency and claiming she mishandled the February resignation of former Enforcement Director Linda Thomsen, who came under fire for missing Bernard Madoff’s $65 billion Ponzi scheme.

Kotz, who is probing the SEC’s failure to detect Madoff’s fraud, has stepped up internal investigations and published reports faulting the enforcement unit since joining the agency in 2007.

His March report on stock transactions by two SEC attorneys that he said “raise suspicions of insider trading” triggered a rebuke of the agency by U.S. Senator Charles Grassley.

“It’s hard to imagine a more serious violation of the public trust” than SEC employees profiting from non-public information, Grassley, an Iowa Republican, said in a statement issued last month. Kotz said he referred the matter to criminal authorities.

Schapiro subsequently banned employees from trading stocks of companies being probed by the SEC. Kotz’s report didn’t conclude that insider trading occurred.

‘Manufacture Headlines’

The e-mail sent using Gutierrez’s name said the report showed Kotz is “driven to manufacture headlines.”

It faulted him for flagging a trade in which an attorney purchased shares of a company the SEC investigated, saying “anybody with half a brain could immediately see that the employee got the trade backwards if they were indeed trading on material, non-public information.”

Kotz declined to comment and Nester declined to say whether the SEC planned to investigate who sent the message.