September 13, 2001
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SEC Enforcement Office
Is Destroyed in Attack
By MICHAEL SCHROEDER and MITCHELL PACELLE
Staff Reporters of THE WALL STREET JOURNAL
The enforcement office of the Securities and Exchange Commission was destroyed in Tuesday's terrorist attack, leaving the nation's top securities regulator scrambling to reconstruct some of its longest-running investigations.
The SEC's New York regional office at 7 World Trade Center -- a building near the huge twin towers -- housed 320 employees on three floors, by far the largest and most important SEC operation outside of its Washington headquarters. The collapse of No. 7 on Tuesday took with it documents and computer records focused on hundreds of investigations, as well as records related to broker-dealers. The New York office is well-known for handling numerous insider-trading cases, as well as small-company stock manipulation cases involving organized-crime families
Shortly after the first jetliner plunged into one of the World Trade Center's twin towers, the SEC staff was evacuated. Agency officials said they believe all New York employees are safe, though a toll-free telephone number (877-404-3222) has been set up for staff members to check in.
'Monumental Task'
"It's going to be a monumental task getting back in operation," said Wayne Carlin, New York regional director. Mr. Carlin said he and other SEC regional directors were in San Francisco when the attacks began, at a conference of the North American Securities Administrators Association, the group representing state securities directors.
Some of the SEC material lost in the building's collapse will be recoverable, according to one person familiar with the situation. Copies of some documents are held by the Washington office, and some computer files are backed up off-site, this person said. In cases for which the U.S. Attorney's office is conducting parallel investigations, documents are sometimes shared with that office. In addition, transcripts of deposition testimony can be recreated by the court reporters who transcribed them.
Other material is lost forever, including many raw notes taken by SEC lawyers during their investigations and audiotaped evidence that was not shared with the U.S. Attorney's office or other government investigators, this person said.
At a minimum, such losses have the potential to slow SEC cases, as material turned up in the discovery process and deposition transcripts has to be produced a second time, said John Coffee, Jr., a visiting professor of corporate and securities law at Harvard Law School. The loss of other material that cannot be duplicated could be more damaging, he said. "To the extent that you have real smoking-gun evidence, if that's gone, it's quite possibly gone forever," he said. Many prosecutors, he explained, are secretive about evidence and reluctant to send it to other offices by computer. "There's a certain paranoia among prosecutors in making sure information doesn't leak out."
The SEC will look for new office space as close to the federal court in lower Manhattan as possible, though space will be at a premium with so much destruction of office space in the financial district.
CFTC Office Is Destroyed
The New York office of the Commodity Futures Trading Commission, which occupied the 37th floor of the World Trade Center's North Tower, also was destroyed. James Newsome, acting chairman of the CFTC, which regulates futures markets, said that all but one of the 75 employees have been accounted for.
The staff began evacuating employees as soon as they felt the concussion of the first plane crash. Case investigator Elliot Ramirez, 37 years old, who doubled as the office's fire safety director, says employees calmly took to the stairs, without thought of carrying any files with them. In the stairwell, they passed firemen lugging hoses and axes, men he now assumes did not emerge alive. Occasionally, they paused to let burn victims from above pass them.
The CFTC employees eventually emerged onto the street, then hustled themselves away from the tower, moving eastward. Minutes later, Mr. Ramirez heard a rumbling and turned to see the building collapsing and a cloud of smoke and dust advancing toward him "like a hand moving between the buildings."
Despite the total destruction of the office, CFTC operations are not crippled, said Mr. Newsome. That's because the New York office's surveillance systems are backed up both at headquarters in Washington and in the Chicago office. While the CFTC begins to search for new office space, the futures exchanges have agreed to allow CFTC surveillance staffers to work on site. |
