* National Archives comments on SEC document destruction
* National Archives says SEC violated federal laws in past
* SEC has since stopped destroying records
* Allegations first surfaced from SEC whistle-blower
* Internal SEC watchdog also probing the matter
(Adds SEC comment)
By Sarah N. Lynch
WASHINGTON, Aug 18 The U.S. Securities and
Exchange Commission violated federal rules when it destroyed
investigative records over a 17-year period, the agency that
safeguards federal documents said on Thursday.
"The SEC did not have the authority to dispose of them per the
Federal Records Act," the National Archives said in a statement to
The National Archives added that the SEC has since mended its
ways, although it still has lingering concerns that "the SEC has
been slow" in creating record schedules to determine how long the
data must be retained on file.
The findings by the National Archives come after Darcy Flynn,
a 13-year-veteran of the SEC, decided to blow the whistle after
learning the SEC had destroyed over 9,000 "matters under inquiry,"
or MUIs. MUIs are preliminary documents the SEC compiles when it
receives evidence of possible securities violations.
In a letter Flynn sent to Senator Charles Grassley, he claimed
the SEC destroyed files on important, high-profile cases,
including Bernard Madoff, Goldman Sachs Group Inc (GS.N), trading
in American International Group Inc (AIG.N) credit-default swaps,
alleged frauds at Wells Fargo & Co (WFC.N) and Bank of America
Corp (BAC.N) and insider-trading probes at Deutsche Bank AG
(DBKGn.DE), Lehman Brothers and hedge fund SAC Capital.
Grassley sent a letter to SEC Chairman Mary Schapiro on
Wednesday asking questions about the document destruction.
Separately, SEC Inspector General H. David Kotz said his
office has also been probing the document destruction and plans to
issue the findings of his investigation by the end of September.
"We maintain records of our inquiries and they are available
to investigators across the agency," SEC spokesman John Nester
said in a statement. "As NARA notes, it works with federal
agencies on a regular basis to resolve allegations and we are
committed to that process."
(Reporting by Sarah N. Lynch; editing by Andre Grenon, Phil