Newly installed SEC boss Mary Schapiro is quietly searching to replace Linda Thomsen, the agency’s embattled enforcement chief, with a prosecutor’s Street cred, according to people familiar with the situation.
Sources said Schapiro is scoping out the ranks of professionals in various offices of the US attorney, who litigate cases on behalf of the US government under the direction of the attorney general.
SEC spokesman Kevin Callahan declined to comment on behalf of either Schapiro or Thomsen.
As the head of the unit responsible for ferreting out securities fraud, Thomsen has been at the center of a public flogging over allegations the agency was asleep at the switch while Bernie Madoff allegedly perpetrated his $50 billion Ponzi scheme.
Critics charge Thomsen and her team ignored obvious red flags and repeated warnings from whistleblower Harry Markopoulos, whose congressional testimony Wednesday portrayed the SEC as a vastly incompetent outfit.
As a result, calls for a revamp of the agency have grown louder.
“It is imperative that the SEC quickly earns back the trust of the American public in the agency,” said Lynn Turner, who resigned as the SEC’s chief accountant in 2001. “To do that, the new chairman will need to replace those in the agency whose credibility has been damaged during the past few years.”
Other high-ranking former agency officials echoed Turner’s comments, but declined to comment on the record.
If Schapiro follows through with her plans, she would be replacing the most senior department head. Thomsen, who has been with the SEC since 1995, was promoted to division chief from deputy in 2005.
Her most recent public drubbing came Wednesday during a hearing before a House Financial Services subcommittee.
US Rep. Gary L. Ackerman (D-Queens) gave a harsh tongue-lashing to Thomsen and acting general counsel Andrew Vollmer for failing to catch Madoff and for not answering the panel’s questions. The duo cited a form of executive privilege related to the ongoing investigation.
“[Markopolous,] with a few friends and helpers, discovered this thing nearly a decade ago,” Ackerman said. “He led you to this pile of dung that this Bernie Madoff was and stuck your nose in it and you couldn’t figure it out. You couldn’t find your backside with two hands with the lights on.”
The debacle forced Schapiro to send swift apologies to the panel, promising full cooperation in the future.
“[The] hearing before your subcommittee cannot have been satisfactory for you,” Schapiro said, adding she is available to meet at their “earliest convenience.”
Some critics, even though they agree staff changes are needed, said Thomsen’s apparent downfall could be tied to former SEC head Chris Cox, who they said took too much control over the unit.
“The previous chairman weakened the enforcement division,” said a former SEC official. “He demoralized it.”