Exclusive-U.S. SEC suspended internal watchdog for 7 days after misconduct finding-records

[February 02, 2022]  By Chris Prentice and Sarah N. Lynch

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission (SEC) suspended its inspector general Carl Hoecker for seven days without pay in 2020, despite an independent government committee recommending that the agency consider firing him for "serious misconduct," according to government records obtained by Reuters.

The SEC documents provide new details on how the agency responded after a government investigation, first reported by Reuters in December, concluded that Hoecker abused his authority by conducting a “remarkably biased and flawed” internal probe into allegations against two of his employees. Reuters obtained the SEC documents through a public records request.

The government investigation into Hoecker was led from 2017 to 2019 by the Integrity Committee, a federal panel that examines allegations of wrongdoing against inspectors general, after two whistleblowers alleged that he conducted a substandard investigation. Inspectors general are government watchdogs who guard against the misuse of taxpayer dollars.

The previously unreported documents show that the SEC, which received the Integrity Committee's report on Hoecker in 2019, also concluded wrongdoing by Hoecker. He failed "to avoid the appearance of" bias and exercised "poor judgment when contacting a witness during an active investigation."

The SEC concluded that Hoecker failed "to report allegations of improper conduct pursuant to the SEC's policy of preventing harassment," according to the documents, which include Hoecker's time-sheets.

While the Integrity Committee recommended the SEC consider firing Hoecker, its Commissioners voted instead on May 8 to suspend him without pay from May 24-June 2, 2020, the records show. At the time, Hoecker earned nearly $277,000 a year.

Signage is seen at the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S., May 12, 2021. Picture taken May 12, 2021. REUTERS/Andrew Kelly/File Photo

Hoecker, who disputed the committee's findings, and his attorney did not respond to requests for comment about the disciplinary action.

In an email he sent to staff two days after Reuters' report in December, Hoecker wrote: “I strive to do the best job possible" and added: "As far as any willful or negligent inaccuracies and omissions in the article or the underlying...Integrity Committee report, I cannot comment."

The SEC declined to comment on its response to the Integrity Committee's report. A spokesperson for the SEC Office of Inspector General did not respond to requests for comment.

Jay Clayton, SEC chair at the time of Hoecker’s disciplinary action, did not respond to requests for comment.

Three attorneys who specialize in disciplinary proceedings said a seven-day unpaid suspension appeared to be light given the committee's findings, and its recommendation that the SEC consider removing Hoecker.

"It seems odd they'd let [him] off with a disciplinary action," said Debra D'Agostino, a founding partner at the Federal Practice Group in Washington.

Hoecker got a "big break," said John Berry, an attorney specializing in disciplinary action defenses.

The SEC can fire its inspector general provided two thirds of its sitting commissioners agree and it notifies Congress of its reason at least 30 days beforehand.

In his email, Hoecker told staff: “I hope you still have confidence in me as your IG. I have been here for almost 9 years, and I hope to remain here well into [the] future."

(Reporting by Sarah N. Lynch and Chris Prentice; editing by Michelle Price and Edward Tobin)

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