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SEC Pushes Back at Criticism Over Porn Surfing Report

 

WASHINGTON -- The Securities and Exchange Commission on Friday sought to defuse the uproar over reports of senior agency staffers surfing porn sites during the economic collapse by noting the story is old news and that reforms have already been instituted.

The SEC was responding to a new report from SEC Inspector General David Kotz that revives the details of senior agency staffers spending hours surfing pornographic websites on government-issued computers while they were supposed to be policing the nation's financial system.

SEC spokesman John Nester issued a written statement saying the memo by Kotz shows that every instance of inappropriate use of the Internet" was detected by the SEC's own surveillance and referred to the inspector general.

"Each of the offending employees has been disciplined or is in the process of being disciplined. Some have already been suspended or dismissed," Nestor said. "While any misuse of government resources is always a concern, since February we have further increased penalties. We will not tolerate the transgressions of the very few who bring discredit to their thousands of hardworking colleagues."  

The memo comes at an inopportune time for the agency, which is already under suspicion by Republicans about the timing of the SEC's lawsuit last week against Wall Street powerhouse Goldman Sachs Group Inc. News of the suit surfaced as the Senate prepared to take up a sweeping overhaul of the rules governing banks and other financial companies that has caused more partisan bickering.

The memo was written in response to a request from Republican Sen. Charles Grassley

Rep. Darrell Issa, the top Republican on the House of Representatives Oversight and Government Reform Committee, said it was "disturbing that high-ranking officials within the SEC were spending more time looking at porn than taking action to help stave off the events that put our nation's economy on the brink of collapse."

He said in a statement late Thursday that SEC officials "were preoccupied with other distractions" when they should have been overseeing the growing problems in the financial system.

The SEC's inspector general conducted 33 probes of employees looking at explicit images in the past five years, according to a memo obtained by The Associated Press.

The memo says 31 of those probes occurred in the 2 1/2 years since the financial system teetered and nearly crashed.

The staffers' behavior violated government-wide ethics rules, it says.

It summarizes past inspector general probes and reports some shocking findings:

-- A senior attorney at the SEC's Washington headquarters spent up to eight hours a day looking at and downloading pornography. When he ran out of hard drive space, he burned the files to CDs or DVDs, which he kept in boxes around his office. He agreed to resign, an earlier watchdog report said.

-- An accountant was blocked more than 16,000 times in a month from visiting websites classified as "Sex" or "Pornography." Yet he still managed to amass a collection of "very graphic" material on his hard drive by using Google images to bypass the SEC's internal filter, according to an earlier report from the inspector general. The accountant refused to testify in his defense, and received a 14-day suspension.

-- Seventeen of the employees were "at a senior level," earning salaries of up to $222,418.

-- The number of cases jumped from two in 2007 to 16 in 2008. The cracks in the financial system emerged in mid-2007 and spread into full-blown panic by the fall of 2008.

About 16 percent of men with Internet access at work admit to looking at online porn while at the office, according to a 2006 survey by Websense Inc.

Former SEC spokesman Michael Robinson said he shares the public's outrage about SEC staffers who enjoyed porn on the taxpayers' expense when they were supposed to be keeping the markets safe.

"That kind of behavior is just intolerable and atrocious," said Robinson, now with Levick Strategic Communications. He said he expects the head of the SEC, Mary Schapiro and her team, are "very focused on" the issue.

Schapiro has been parrying Republican complaints about the Goldman Sachs lawsuit, which agency officials hoped would mark a new era of tougher oversight of Wall Street. They followed high-profile embarrassments including the failure to catch pyramid scheme kings Bernard Madoff and R. Allen Stanford.

Republican lawmakers also accused the SEC of being influenced by politics. The SEC's commissioners approved the Goldman charges on a rare 3-2 vote. The two who objected were Republicans.

Schapiro is a registered independent who has been appointed by presidents of both parties.

The Associated Press contributed to this report