By Rachelle Younglai and John Poirier
WASHINGTON, Feb 9 (Reuters) - The U.S. Securities and Exchange Commission's top enforcement official, Linda Thomsen, will resign, the agency said on Monday, less than a week after a congressional panel chastised her for failing to follow up tips that might have uncovered Bernard Madoff's alleged $50 billion fraud.
Thomsen's departure date was not given. She will stay at the agency for a period to ensure a smooth transition, an SEC spokesman said.
The agency declined to comment on who would take over the top enforcement job. A source familiar with the matter told Reuters over the weekend that former assistant federal prosecutor Robert Khuzami was expected to succeed Thomsen.
Thomsen's enforcement division has been heavily criticized for rebuffing Wall Street tipster Harry Markopolos, who urged agency officials for nine years to thoroughly investigate Madoff's investment business. Madoff was arrested in December.
At a House Financial Services subcommittee hearing last week, several members expressed irritation and frustration when Thomsen and four other SEC officials declined to answer specific questions about Markopolos' tips, citing continuing investigations. The SEC's new chairman, Mary Schapiro, sent a letter to the subcommittee leaders after the hearing ended, offering to find a way to give information to lawmakers without hurting the civil and criminal investigations of Madoff.
William McLucas, a former SEC director of enforcement, defended Thomsen.
'The reality is that Thomsen was not the person who sat down with the whistle-blower,' said McLucas, now in private practice at WilmerHale. 'Let's assume that (SEC staff) missed something, that's not a personal failure by the director of enforcement.'
Former SEC Chairman Harvey Pitt said Thomsen has done a spectacular job.
'She did not create the problem. It was handed to her,' said Pitt, now the chief executive of Kalorama Partners.
Schapiro has been under pressure to restore the agency's reputation as a tough policeman on Wall Street.
Less than two weeks into her new job, Schapiro has taken steps to make it easier for SEC staff to use subpoenas. She also stopped a two-year program that made it harder for SEC lawyers to negotiate penalties with companies.
Thomsen was appointed SEC enforcement chief in 2005 under then SEC Chairman William Donaldson. She remained in the post when Christopher Cox became chairman. Cox left the agency last month.
During Thomsen's tenure, the SEC negotiated settlements with some of the country's largest banks over whether investors were misled about the safety of auction-rate securities. It also took enforcement actions against former Bear Stearns employees for fraud linked to collapsed hedge funds.
(Additional reporting by Karey Wutkowski; editing by John Wallace and Andre Grenon) Keywords: SEC ENFORCEMENT/ (rachelle.younglai@thomsonreuters.com +1 202 898 8411) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, Feb 9 (Reuters) - The U.S. Securities and Exchange Commission's top enforcement official, Linda Thomsen, will resign, the agency said on Monday, less than a week after a congressional panel chastised her for failing to follow up tips that might have uncovered Bernard Madoff's alleged $50 billion fraud.
Thomsen's departure date was not given. She will stay at the agency for a period to ensure a smooth transition, an SEC spokesman said.
The agency declined to comment on who would take over the top enforcement job. A source familiar with the matter told Reuters over the weekend that former assistant federal prosecutor Robert Khuzami was expected to succeed Thomsen.
Thomsen's enforcement division has been heavily criticized for rebuffing Wall Street tipster Harry Markopolos, who urged agency officials for nine years to thoroughly investigate Madoff's investment business. Madoff was arrested in December.
At a House Financial Services subcommittee hearing last week, several members expressed irritation and frustration when Thomsen and four other SEC officials declined to answer specific questions about Markopolos' tips, citing continuing investigations. The SEC's new chairman, Mary Schapiro, sent a letter to the subcommittee leaders after the hearing ended, offering to find a way to give information to lawmakers without hurting the civil and criminal investigations of Madoff.
William McLucas, a former SEC director of enforcement, defended Thomsen.
'The reality is that Thomsen was not the person who sat down with the whistle-blower,' said McLucas, now in private practice at WilmerHale. 'Let's assume that (SEC staff) missed something, that's not a personal failure by the director of enforcement.'
Former SEC Chairman Harvey Pitt said Thomsen has done a spectacular job.
'She did not create the problem. It was handed to her,' said Pitt, now the chief executive of Kalorama Partners.
Schapiro has been under pressure to restore the agency's reputation as a tough policeman on Wall Street.
Less than two weeks into her new job, Schapiro has taken steps to make it easier for SEC staff to use subpoenas. She also stopped a two-year program that made it harder for SEC lawyers to negotiate penalties with companies.
Thomsen was appointed SEC enforcement chief in 2005 under then SEC Chairman William Donaldson. She remained in the post when Christopher Cox became chairman. Cox left the agency last month.
During Thomsen's tenure, the SEC negotiated settlements with some of the country's largest banks over whether investors were misled about the safety of auction-rate securities. It also took enforcement actions against former Bear Stearns employees for fraud linked to collapsed hedge funds.
(Additional reporting by Karey Wutkowski; editing by John Wallace and Andre Grenon) Keywords: SEC ENFORCEMENT/ (rachelle.younglai@thomsonreuters.com +1 202 898 8411) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.