SEC Inspector General Kotz leaving agency

WASHINGTON Tue Jan 17, 2012 6:34pm EST

1 of 2. Securities and Exchange Commission Inspector General David Kotz testifies about alleged conflicts of interest in former General Counsel David Becker's handling of aspects of the Madoff scheme, at a joint hearing of the House Oversight and Government Reform Committee's TARP, Financial Services and Bailouts of Public and Private Programs Subcommittee on Capitol Hill in Washington, September 22, 2011.

Credit: Reuters/Jonathan Ernst

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WASHINGTON (Reuters) - David Kotz, the tough internal watchdog at the U.S. Securities and Exchange Commission, is leaving the agency at the end of January, the SEC said on Tuesday.

Kotz, 45, joined the SEC in December 2007 after previously working as the inspector general of the Peace Corps.

He has made a name for himself as a prolific inspector general at the SEC, investigating everything from leasing and contracting to insider-trading and even pornography-watching by agency employees.

He has also faced some criticism from SEC employees who have complained his tactics have led to a culture of fear at the agency.

He plans to join Gryphon Strategies, a private investigative services firm where he will serve as a managing director in its Washington office. He will focus on conducting corporate fraud investigations and helping whistleblowers seeking to expose fraud, the SEC said.

"I am tremendously proud of the accomplishments of my office and the agency over the past four years," Kotz said in a statement. "The reports we have issued have not only been significant to the agency, Congress and the investing public, but they have also directly resulted in a transformation of many of the divisions and offices of the commission."

Kotz's aggressiveness has won him some fans, particularly in Congress. His exhaustive 477-page report on the agency's failure to catch convicted Ponzi swindler Bernard Madoff prodded the SEC to be more assertive in implementing a new database to help track tips from informants.

Most recently, one of Kotz's past investigations helped lead the Justice Department to reach a civil settlement with a former SEC attorney over claims he improperly represented alleged Ponzi schemer Allen Stanford after departing the SEC. [ID:nL1E8CD9DB]

Kotz's successes have recently been shaded by growing concerns about his tactics.

In December, Reuters reported that at least two SEC employees had filed formal complaints against Kotz alleging he bullies witnesses and twists facts to build a case against them.

In addition, several recent articles by Bloomberg have raised concerns about potential conflicts of interest after Kotz did a sit-down interview with a financial adviser who later sold Kotz three tickets to a sold-out football game.

(Reporting By Sarah N. Lynch; Editing by John Wallace and Tim Dobbyn)

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