April 20, 2010 / 6:45 PM / 8 years ago

U.S. lawmaker probes SEC's Goldman case

WASHINGTON (Reuters) - A top Republican lawmaker is raising questions about the U.S. Securities and Exchange Commission’s fraud case against Goldman Sachs Group Inc, implying political motives -- a charge that the SEC denies.

Since the SEC sued Goldman for misrepresenting a debt product tied to subprime mortgages, some Democrats have said the case shows Congress should tighten financial oversight.

Republicans have raised questions about the timing of the SEC case, filed on Friday just before the Senate was due to start formally debating a bill that would usher in new rules for Wall Street.

“The timing of the SEC’s filing of a civil securities fraud action against Goldman Sachs has created serious questions about the commission’s independence and impartiality,” said Darrell Issa, the top Republican on the House Oversight Committee, in a letter to the SEC on Tuesday.

SEC Chairman Mary Schapiro told reporters on Tuesday that the agency’s decision to charge Goldman was “absolutely not” politically motivated.

House Financial Service Committee Chairman Barney Frank, a Democrat, said he did not believe that the SEC timed its case against Goldman to spur reform.

The SEC is occasionally accused of bending to political whims but maintains that it is an independent agency.

Sources familiar with the matter say the commission voted 3-2 to file suit against Goldman Sachs, with the two Republican commissioners dissenting.

Schapiro sided with the two Democratic commissioners, Luis Aguilar and Elisse Walter, in deciding to file charges, these sources said. The two Republican commissioners, Troy Paredes and Kathleen Casey, voted against charges.

An SEC spokesman had no comment.

Issa is asking Schapiro to provide information on whether any SEC employees or commissioners told the Obama administration or key Democrats and Democratic campaign committees about its plans to charge Goldman before the case was publicly announced.

“The events of the past five days have fueled legitimate suspicion on the part of the American people that the commission has attempted to assist the White House, the Democratic party, and Congressional Democrats by timing the suit to coincide with the Senate’s consideration of financial regulatory legislation, or by providing Democrats with advance notice,” Issa said in the letter.

Goldman has been accused of hiding from investors the fact that a prominent hedge fund manager was betting against a subprime mortgage product that he helped create.

Issa wants the SEC to provide him with all records and communications between SEC staff and the administration and other Democrats.

Issa gave the SEC until the end of the month to comply with his request.

The SEC filed its lawsuit the same day the agency’s inspector general released a damning report on the SEC‘s’ failure to stop Allen Stanford’s alleged $7 billion fraud.

The SEC is still trying to rebuild its reputation after the inspector general found that the agency bungled probes that could have uncovered Bernard Madoff’s massive Ponzi scheme.

Frank said the SEC under Schapiro’s leadership was very different than under previous chairmen.

“Of course we are” seeing a new aggressive SEC, Frank told reporters after a hearing to examine Lehman Brothers’ collapse.

Additional reporting by Kim Dixon and Karey Wutkowski; Editing by Tim Dobbyn

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