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

Keep the cat in the bag!

On Monday, Albany County District Attorney P. David Soares asked newly minted New York governor David Paterson to allow evidence regarding the Elliot Spitzer / Joseph Bruno “Troopergate” investigation to be released to the public. Yesterday the governor sent New York Attorney General Andrew Cuomo a letter requesting a “formal advisory opinion” on waivers of executive privilege and the secrecy rules surrounding grand jury presentations.

While the press has focused on the issue of executive waiver, the real story seems to me to be the DA’s request for a “waiver of Grand Jury secrecy” under a specific section of the New York Criminal Procedure Law that deals with motions to quash subpoenas. As I told New York Times reporter Danny Hakim when he called me yesterday for comment, a grand jury is ostensibly a protection for us all. It is a buffer between the unfettered power of the state and an individual citizen’s rights. A prosecutor convenes a grand jury to go after bad guys. If there are no charges, then the grand jury process should not be made public. That’s what the rules say. By the way, it’s nice to have a law professor of the stature of Stephen Gillers say I got it right! CR