All's Wells that ends Wells?

Maurice “Hank” Greenberg, former CEO of American International Group, may face civil charges from the SEC for what it alleges is his role in attempting to enhance his company’s financials through collusive transactions with General Re Corp. Today’s Wall Street Journal reports that on Friday, the SEC served Greenberg with a so-called Wells notice, which alerts its recipient that the Commission is considering requesting permission from its commissioners to bring a federal enforcement action against him. The previous day, the federal district judge who had presided over the criminal trial of five former Gen Re and AIG executives wrote in his ruling denying the defendants a new trial that there was “an adequate basis for a rational jury to conclude” that the conspiracy of which the defendants were convicted began with a phone call from Greenberg.

Veteran criminal defense attorney Robert Morvillo, who represents Greenberg, continues to assert his client’s innocence. The Journal article quotes from a statement Morvillo released yesterday: “We remain confident of our position on the merits, and we believe that none of the remaining issues are material to AIG’s financial statements. When the commission has had the opportunity to consider all the facts, we believe that they will agree.” When the phone call came to light during the criminal trial in November, Morvillo agreed that his client had initiated the transaction in question with a phone call to one of the defendants, but insisted that Greenberg “believed he was initiating a totally legitimate transaction.”

The recipient of a Wells notice has the right to respond and try to convince the Commission not to proceed with lawsuit. Bob Morvillo has done a brilliant job for Greenberg over the past few years fending off all sorts of investigations and rumored charges. There is no doubt he will continue to wage an aggressive battle against the current threats from the SEC. I know from my own experience with the Commission that their bark is often all they’ve got, and when push comes to shove they shy away from going to war in the courtroom – especially when they face an opponent as skilled and forceful as Morvillo.

I’ve got a secret.

The SEC has refused a congressional request to disclose why it dropped its investigation into Bear Stearns’s valuation of bundles of subprime mortgage securities called collateralized debt obligations, according to a story in yesterday’s Wall Street Journal. In an April 2 letter to SEC Inspector General David Kotz, Iowa Republican Senator Charles Grassley requested “a thorough investigation into the facts and circumstances surrounding the agency’s decision not to pursue enforcement action” against the defunct Wall Street firm. SEC Chairman Christopher Cox responded on April 16 that “the Commission does not disclose the existence or nonexistence of an investigation or information generated in any investigation unless made a matter of public record in proceedings brought before the Commission or the courts.” The war over access to this information is expected to continue.

Most of the time I fight with the SEC. But here I agree with Chairman Cox’s position. The U.S. Attorney’s Office for the Eastern District of New York is investigating the very same issues that the Senate Finance Committee is seeking to have disclosed by the SEC. It’s no secret that the SEC and federal prosecutors work very closely together on many investigations. Rule 6 of the Federal Rules of Criminal Procedure prohibits unauthorized “leaking” of secret grand jury proceedings. If there is any overlap of confidential facts developed by both the SEC and the U.S. Attorney about the Bear Stearns investigation, there could virtually be a Rule 6 violation if the information is released to the Senate. Individuals and companies under investigation are entitled to protection until and unless allegations are made public by way of a formal accusation. CR