H. David Kotz

H. David Kotz, also known as Harold David Kotz (born June 24, 1966), is a managing director at Berkeley Research Group. At the SEC, his department conducted investigations about improprieties, conflicts of interest, and the SEC's failure to uncover Ponzi schemes. He referred 30 cases to the Justice Department; 2 were prosecuted, leading to 1 conviction. In 2012, an independent review of his conduct by the Inspector General of the U.S. Postal Service concluded that Kotz violated conflict of interest rules by conducting investigations on persons with whom he had a personal relationship.

Education Kotz graduated cum laude from the University of Maryland, College Park in 1987, with a B.A. in government and politics, and earned his J.D. at Cornell Law School in 1990.

US Agency for International Development (1999–2002) Kotz worked at the US Agency for International Development (USAID) from 1999–2002, where he was an Attorney Advisor in the Office of the General Counsel and later a Chief in the Office of Labor and Employee Relations.

Peace Corps (2002–07) Kotz joined the Peace Corps in 2002, and worked there until 2007, during which time he handled labor arbitrations, employee grievances, and prosecutions of rapes, sexual assaults, and other violent crimes against volunteers. He was tasked with conducting independent objective audits of SEC procedures and practices promote economy, effectiveness, and efficiency. His reports touched on the SEC not uncovering the Madoff Ponzi scheme and the SEC's office-leasing program after the Dodd-Frank financial overhaul.

Kotz's tenure at the SEC was contentious and controversial, marked by critical investigations, charges that some of his investigations lacked evidence of wrongdoing and distorted facts to build a case, criticisms of him for conflicts of interest and ethics violations, and a determination that he had an inappropriate relationship with an SEC employee. According to his reports, he referred about 30 cases to the Justice Department, of which 2 were prosecuted, leading to 1 conviction, as of September 2011. Mary Schapiro, Chairman of the SEC, in her announcement of his departure from the SEC praised Kotz as a "committed public servant who has served the agency with great distinction."

Investigations

Madoff Kotz investigated why the SEC failed to detect the $19 billion Madoff fraud. He also investigated the responses by the SEC to written complaints about Madoff since 1992. Kotz followed that up with extensive recommendations for improvements to SEC procedures and training. Speaking of the Madoff victims, Kotz observed: "People's lives are destroyed, but they can find some solace in knowing there was change as a result."

Kotz's investigation found that the SEC received more than ample information in the form of detailed and substantive complaints over the years. The OIG found that between June 1992 and December 2008 when Madoff confessed, the SEC received six substantive complaints that raised significant red flags concerning Madoff's hedge fund operations and should have led to questions about whether Madoff was actually engaged in trading.

One of his findings in his Madoff-related investigations was that the SEC's General Counsel, David M. Becker, had a conflict of interest, as his family had invested $2 million with Madoff. Kotz referred the matter to the U.S. Justice Department's criminal division. Becker said:

I have seen Inspector General Kotz do this before, make a big fuss... about sending reports to the Justice Department. Nothing has happened in any of them, and some of them ... from my time at the SEC were laughable.

He also investigated whether the romantic relationship between Eric Swanson, the SEC Assistant Director of the Office of Compliance Inspections and Examinations, and Bernie Madoff's niece and in-house compliance attorney Shana Madoff, whom Swanson met in 2003 while he was investigating her uncle Bernie and his firm for running a Ponzi scheme, influenced the SEC's closing of the Madoff investigation. Swanson left the SEC in 2006, became engaged to Shana Madoff three months later, and married her in 2007. Kotz concluded that there was no evidence that their relationship influenced the SEC's closing of the inquiry.

Financial analyst and whistleblower Harry Markopolos said that Kotz "was unflagging [and h]e restored my faith," in the Madoff affair.

Stanford In March 2010, Kotz issued another report finding the SEC also failed to uncover a $7 billion Ponzi scheme perpetrated by Allen Stanford. Kotz accused SEC attorney Spencer Barasch of having a conflict of interest, in that he participated in decisions not to investigate Stanford when he was head of enforcement in an SEC regional office, and then briefly representing Stanford before the SEC after leaving the SEC. In 2012, Barasch agreed to pay a $50,000 fine to settle a Justice Department conflict of interest claim. He stated he did not think he was guilty, but settled to avoid a lengthy court battle. His recommendation was not accepted, and no disciplinary action was taken. He released two reports documenting his findings.

Controversy and departure Employee Complaints At least two formal complaints were filed against Kotz by SEC staff members (including Linda Baier, acting Branch Chief of Acquisition Policy, and Nancy McGinley, an enforcement attorney, in April 2011), with the Council of Inspectors General on Integrity and Efficiency (CIGIE). They alleged that Kotz distorted facts to build a case, and that he created a culture of fear at the SEC of Kotz's "false allegations and retaliations".

Another complainant against Kotz was the office's former Chief of Investigations, David Weber, who accused Kotz of improper conduct in the Madoff investigation. In November 2012, after he was terminated by the SEC, Weber filed a federal lawsuit alleging that the Madoff and Stanford cases might have been compromised by Kotz's personal relationships with some of the people involved. An independent, outside review of Weber's charges by Inspector General David C. Williams of the U.S. Postal Service found that Kotz may have had conflicts of interest in several investigations due to having a personal relationship with the people being investigated. Kotz responded to the civil lawsuit saying that: "for some inexplicable reason, my name has been dragged through the mud in the most ludicrous and unbelievable allegations," saying that Weber was hired for a position a couple of weeks prior to Kotz' departure from the SEC, that Kotz barely interacted with him, and did not know anything about why Weber was placed on leave and eventually terminated or about Weber's allegations of retaliation. The SEC settled with Weber for $580,000, one of the highest SEC settlements in a whistleblower retaliation case, in May 2013.

Report on improper conduct by Kotz

Because of concerns of improper conduct by Kotz, Inspector General David C. Williams of the U.S. Postal Service was brought in to conduct an independent, outside review of Kotz's alleged improper conduct. He also concluded that Kotz may have had an inappropriate relationship with an SEC employee.

One conflict of interest for which Kotz was criticized was his decision to buy three box-seat tickets to a Philadelphia Eagles football game from a financial adviser who had interviewed him for a radio program. Kotz paid $95 each for the tickets (less than half their actual value).

Senator Grassley, an Iowa Republican who was a frequent critic of the SEC, said: "David Kotz produced strong, conclusive reports, even as critics claimed he was too aggressive. An aggressive, independent inspector general is best for the agency in the long run, even if that's uncomfortable for management."

Gryphon Strategies (2012) In late January 2012, Kotz joined Gryphon Strategies, a small New York corporate fraud investigation firm, as its Washington representative and managing director.

Berkeley Research Group (2012–present)

In August 2012, Kotz joined the anti-corruption team as a director in the Financial Institutions practice at Berkeley Research Group. Kotz had become familiar with Berkeley when he hired the firm while he was at the SEC, during the Madoff investigation.

Family Kotz's wife Deborah is a reporter for the Boston Globe. The couple has three children.