Skip to main content


April 10, 2014

SEC Caught in a Lie: The SEC Needs to Disclose its Secret Collusion with Wall Street

Dennis Kelleher, President and CEO of Better Markets, an independent nonprofit organization that promotes the public interest in the financial markets, made the following statement about the Securities and Exchange Commission’s collusion with Wall Street over settlements related to Collateralized Debt Obligations (CDOs):

“Reporting by The American Lawyer shows what Better Markets has been saying for years: the Securities and Exchange Commission isn’t just derelict in its duty to enforce the law on Wall Street, but it’s intentionally lying about it as well.

The SEC’s own internal documents prove this, as revealed by the American Lawyer’s Freedom of Information Request. The SEC produced documents from its own Inspector General’s investigation into its handling of the investigation into Goldman Sachs’ sale of toxic subprime mortgage derivatives.  The SEC’s documents tell an ugly story.  Despite the SEC’s public claims that the $550 million settlement with Goldman Sachs resolved just one of Goldman’s toxic CDOs, it was also secretly intended to be an all-encompassing settlement that covered a dozen CDOs.  Contrary to what the SEC told the public, Goldman got away with paying about $45 million per CDO — this is nothing to a trillion dollar bank. Moreover, the documents reveal that then-SEC Enforcement head Robert Khuzami decided against charging a high-level executive of Goldman, even though the enforcement lawyers handling the investigation were in favor of doing so 3 to 1.

The SEC appears to have deliberately misled the American public.  According to the American Lawyer article, Khuzami did not want the American public to know that Goldman was getting a sweetheart deal, settling 12 investigations for the price of one. So, the SEC press release proclaimed that the settlement did “not settle any other past, current or future SEC investigations against the firm.” Yet, as a practical matter, the SEC did just that, since Khuzami apparently assured the bank that they were “concluding” their other investigations “without recommending charges.” This isn’t just weak enforcement, but it appears to be collusion with Goldman Sachs for the purpose of deliberately deceiving the American public.

Given that the SEC followed the same practice with the other big, wealthy, powerful and well- connected Wall Street banks, there can be little doubt that the SEC’s actions, which appear to be a fraud on the American people, were widespread policy.  JP Morgan, Merrill Lynch/Bank of America, Wells Fargo and Citigroup each settled just one CDO case with the SEC trumpeting how tough they were, when in fact they were letting them get away for just pennies on the dollar.

The case of Citigroup, the largest CDO distributor in the world in 2007, is particularly egregious, as Better Markets demonstrated in court papers in a case that is now pending before the Second Circuit Court of Appeals. There the SEC allowed Citi to settle one CDO deal for $285 million, yet it appears to have actually been settling at least 18 CDO transactions. So, by claiming that it was settling just one CDO transaction, the SEC may in fact have been misleading both the public and the court that was asked to approve the settlement.

It is past time for the SEC to fully and publicly disclose its secret dealings and agreements with the Wall Street banks it has pretended to punish. It has been obvious for a long time that the SEC has utterly failed to protect the American investors who lost billions and billions of dollars on the CDO products big Wall Street banks were peddling.  But, the American people deserve to know why and they deserve to know the truth. The SEC must answer these questions: Why did they settle these cases for essentially pennies on the dollar instead of actually punishing Wall Street for its illegal conduct causing the crash of the financial system? Why did they let every senior level executive banker off the hook? And why did they lie to the American public about what they did? They must also publicly release all the documents related to all these settlements immediately, including emails.

It is time for the secrecy and lies to end. After suffering so much, the American people deserve the truth.”

Press Releases


For media inquiries, please contact us at or 202-618-6433.

Contact Us

For media inquiries, please contact or 202-618-6433.

To sign up for our email newsletter, please visit this page.

This field is for validation purposes and should be left unchanged.

Sign Up — Stay Informed With Our Monthly Newsletter

"* (Required)" indicates required fields

This field is for validation purposes and should be left unchanged.

For media inquiries,

please contact or 202-618-6433.


Help us fight for the public interest in our financial markets, protecting Main Street from Wall Street and avoiding another costly financial collapse and economic crisis, by making a donation today.

Donate Today