SEC Said to Select Postal Inspector General for Watchdog Probe

The U.S. Postal Service’s inspector general has been asked by the Securities and Exchange Commission to oversee a probe of possible misconduct in the SEC’s watchdog office, according to two people briefed on the matter.

David Williams, who has been at the Postal Service since 2003, will use his investigators to review allegations against former SEC inspector general H. David Kotz, said the people, who spoke on condition of anonymity because the decision hasn’t been announced.

The SEC inspector’s office has been in an uproar since the end of March when the unit’s chief investigator, David Weber, alleged that Kotz may have had a personal relationship that tainted reports on the agency’s failure to catch the Bernard Madoff and R. Allen Stanford Ponzi schemes, according to a copy of a March 23 complaint from Weber to the Council of the Inspectors General on Integrity and Efficiency.

On May 11, the council sent a letter to SEC Chairman Mary Schapiro declining to investigate because Kotz had left the SEC. Kotz, who has denied the allegations, didn’t return an e-mail seeking comment.

Weber was placed on administrative leave when some of his co-workers said they were bothered by his suggestions that he and others should be able to carry guns on the job, people with direct knowledge of the situation said.

Weber “was engaged in investigating several significant matters at the time he was effectively excommunicated from the SEC,” said Teresa Goody, an attorney at Kalorama Partners LLC who is representing Weber. “That is something that could have a devastating and chilling effect on future whistleblowers, discouraging them from coming forward.”

Former Agent

Williams, who was a special agent with the U.S. Secret Service, has been an inspector general at five agencies, including the Nuclear Regulatory Commission, the Treasury Department and the Social Security Administration, according to his official biography.

He also was awarded the Bronze Star and the Vietnamese Medal of Honor for his service in Vietnam.

Williams’s expected appointment comes after the commission brought on Jon Rymer of the Federal Deposit Insurance Corp., to run the SEC’s inspector general office on an interim basis. Rymer started work at the SEC this week.

Agapi Doulaveris, a spokeswoman for Williams, and John Nester, an SEC spokesman, had no immediate comment.

To contact the reporters on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net; Joshua Gallu in Washington at jgallu@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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