Police aren’t generally in the habit of destroying evidence from failed investigations—but the SEC is, according to one whistleblower. SEC attorney Darcy Flynn spilled the beans to Congress in July, saying that the SEC routinely destroys all documents related to its preliminary investigations if they don’t proceed. That appears to violate federal law, writes Matt Taibbi in a lengthy piece in Rolling Stone, making it “far more than an administrative accident or bureaucratic fuck-up. It's a symptom of the agency's terminal brain damage.”
In one case Flynn described, the SEC’s director of enforcement dropped an investigation against Deutsche Bank without explanation, then got hired by Deutsche Bank a couple months later—an all-too-common phenomenon. When Flynn alerted the National Archives to all the documents the SEC was destroying, it demanded answers. Flynn’s bosses huddled for a meeting in which, according to his notes, they openly wondered if telling the truth would lead to prosecution. They estimated that 18,000 case files had been destroyed—including some on Bernie Madoff, Lehman Brothers, AIG, and other financial crisis rogues.