In a letter to the editor of the Miami Herald, a former attorney of the Miami office of the Securities and Exchange Commission's (SEC's) enforcement division broke ranks with his normally tight-lipped colleagues and publicly criticized the Commission. Some readers were surprised at the way he blamed three former chairmen for leaving a legacy of crises and blasted the current chairman for undermining the region's prosecutors. But others say the ex-cop's indignation just underscores how radically the SEC has shifted its prosecutorial strategy.

The Way It Was

When the former SEC attorney worked for the Commission, decisions about which cases to prosecute were driven by an assessment of which cases would give "the greatest bang for the buck." Prosecutorial "bang for the buck," he explained, was measured in two ways:

1. Cases that have the most educational benefit to the investing public.
2. Cases that have the greatest deterrent to would-be scam artists.

The ex-cop faulted Chairman Pitt's private meetings because they "undercut the deterrent effects" of the law-enforcement program." He also faulted the SEC's investor summit for allowing the Chairman to answer pre-selected questions, presumably lessening the educational benefit to the investors.

The Way It Is Now

The criticism doesn't seem to pack the same punch in today's world, however. According to the Wall Street Journal, the SEC is moving away from prosecuting civil charges toward encouraging the prosecution of criminal charges. The Journal quotes SEC Director of Enforcement Stephen Cutler as saying, "There’s nothing that speaks more loudly to all potential wrongdoers than the prospect of jail time." The SEC's civil penalties, with two-to-three year probes ending in fines and cease-and-desist orders, pale in comparison. According to the Journal, Chairman Pitt has instructed all SEC regional office directors and headquarters staff to meet with prosecutors to build interest in white-collar criminal cases. (SEC Welcomes Prosecutions, Wall Street Journal, June 11, 2002).

-Rosemary Schlank