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This document is subjeetto theptuvisions'of the Priviney Acta 174,.andinay Tegnire ukdaettoi beiore
diseinsure•oihisa parties- no redaction has been perfPrinabrthesOffice of kpector:General- Recipients of
this reportahould:trotdiisonsinate. or copy it without. the insPeotorefenorsills approval: •
. .
REPORT a INVESTIGAliON
Report or Investigation
Coble 0.1G-496
Table -oftontents
L SPeech 12
diseNO. 010496 •
1_ (b)(7)(C)
ed a Great Deal About Allied Dining Coulae
(b)(7)(C),(b)(8)
vestigation 4)
a. • Showed lib Efigagettititt fit
( 0)( 7)(C).(b)( 8 )
20
(b) (7)( c )
b. Ate a00.1410a
hifermnrandum,viIth
%adire ploh, Hi the (b)(7)(C).(b)(8)
Inveatigatibp„ 22
(b)(7)(C)
essively Queationed Eiñ1orn ia
• eatimeny . 22
•
I.)i. Boxts ahattito.entg:
gutydentied tat)lif ".
• V.-in4ont, -2$
(b)(7)(C)
2. • tight Einhonen Teienlione Records
• and ent List iiii(. b)( 7)(C) . (0)(8)
Investigation
2
iF 4O0i#44141s4tiblgato theprOviiions of the rijvaey.iiit-,41974, and ziayregen feiedoiliani befiltg
.03#144.00 ehir4 Nowedatclion. hier been perfotmed brdieOffieeollnirpeckF Coeval. Retipiesis
Odd* AVvnt imitilisseminot.eareopy it without the bislieeter Oenerarcapprovad.
Report of brirestigation
Case No, 0I6-496
Table otConteuis i Can't
z AlEcdMater ,
1444 ►tIPIPtibll (DOM
=wars of Other,,SgC Attiori.%Reited:
During likveptig&ion.
a. (b)(7)(C)
Fes' *pig 'two_trioy. .
No iketionviaicrateo 27
b.. (b)(7)(C)
OCII? iwas Cad4tietite
athAlltageouslEutubiatiezi of Allied
ColuigelltifOtanedilet ,
Wrongdoing •
5. RiatirO WAS NoiininVed Ile Was No Lon& Subject of
Invettigitiori, Despite .1tieOesUilg SOiWieb
•
LAit1101,E0 Met Sjopifie04114ttatiniogo
1
H
.44-440.1 4how`ginifroyenriat .
b. . ( b)(7)(C) L-
Fits :Miced A toivb Thiföreenle&
iiiis4lor.umegissiko4 tgo.pktolislosiA foertivooyite.t41§74.'oodziay.togoiro reatootioggtoiore
glisd000tolto tardporites: No.rodootikok towboat performed lity fiie OffitootinspitiOr Otoototi R*4111141*
-
Report of Investigation
Case No. 010-496
Table of Contents, Con't
Pane
(b)(7)(C)
AiliestOne Year
34
(b)(7)(C)
13tacts4 Mies Offleo 4beit
Cnneenabl (b)(7)(c) Patentierecidict efIntgtest - 33
t . *• Inftwnlett ateCtitnionlAvholities, That
(b)( 7)(C )
ed in Preteging OfEinhotes Teleiihotie Itecotet
e Left the . ste, put NO One Elfin- 10=0 Binhorit
This Matter 36 •
1, • Pretexting
2. 0'S Acimiss
Hicm. and SEC Diseiosere qf liretexting 36 -
3. Mietro Lawyetkt Told the. SC that (b)(7)(C) was ,
RestintigibIe PrOttiing .,t 38
Repot of invostiggitionc _
Case No. 010496 *
-
L The Examination
and SuPervised 43
D, The Allied Work Papers Wore Deleted from Shared Computer Drive 5.I
.55
5
A us
Report of bwe.otikatiOn •
ctise,filo..0106496
TAW. Or eff0000, °Diet
Page
63
(b)(5)
V. 65
(b)(5)
A. 66
B. 67
Coliclusion
st
This' document is aubject to The inovistonstifithe Privacy Act 141.9W, and Mity.'requirrednettoil beibre
- :
digiosere o third. parties. No redaction :has been performed by the bilice ofluspectorGenerst. ;Recipients or
.
REPORT OF.NVE§TIGATION
Time -A Long-Short Story e'..F.inhorrei hordel The snfinler gtateci th at nnel vr Einit
, -
7.
in a letterliontrinho
ra'slrenufisetiltiehardzabe
- 1 r in), to thvoiG.Y. Th
- . 02005 inctuay
` -
Ttit,s :/kkgueutibOttO tneprovlsios• °Atte Privrift Act ot ION aftd- IRIWTeggi 1 01vida4311 %tore
All.sriSilipt to third pad*. NO 1:M246642.111*Uen perfortaed by °Mee etinsnectigtomerat, .R*701*fi,
of this too,rt %nada not flissemilage4r. copy it without thelastiettotiOraPs appyavair.
*Mild I • • 1 I rceme,at invcstigationinto Allied was opened after (b)(7)(c)
(b)(7)(C)
eft i u u *ion but tliat exewasiiospecftcvola
wastionldarly, law; rtijeT
re fleXtrirt (b)(7)(C) After reViewiUstlie4afennaiionproldeil 21)Clhy then
Chiefof Shift; the OT -
*0 Woes in that inquit,5 , and. litoadettettits invesigatiOu to
include additional alleg na tinhorn Made in his brat Published in mitk2008, EiriltOreS honk
recounted the much,publicized heated feud betweenEinhorri and Ana, Which continues:today. : ,
The feud began in May 2002 when Einhorn gave a ilsgailit speech atneonferenee--about Allied
and described why Greenlight Capital had a short position in Allied. Einhorn'S speech
compelled =WV also short and sell Allied's stook the next ii..y..Alliodxgsp qadgd, according
4) Einhorn, int a "Waliiiitton, D:C.zstylo spin job," agackillg
Einhorres book included allegations of the SEC's: failure to.take appropriate action
related to .Allied's wrongdoing- Fathom Wrote thathe sentabour a doUtt letters with detailed
information and evidence related to his allegations OrWrOnlitddixtg at Allied to several 68C
Officials, butnover 'received a telephone salt orviaittenledpouse. abort), stated thathe did not
have :any idea Vihether.anyone fat the SEC followed ;up tat the infornianienlepinvided. In fititd
letters, and in his book, Einhorn claimed that Allied overvalued many of its InveStmerits...
Einhorn also stated that hebehevedhg was invd,stigatf4* the $E( at the behest of
opting. the unusual timing of reeeiiitixa subpoena for his testimony and.,dOctuileAts after .*
Enforcement anomeys called him the same day:he. aSitelii Allieda question on nfereng4
• The•= conducted a compreheniive investiptionatheallegatioxis hi Mahout's:book.
The investigation revealed that Allied sitereSsfally,lehhietitheSEC to begin ittgestiitnino .•
• Einhorn and his hedge fund Greenlight Capital viithetit spedific evidence of witingtking, oget-
Eithouils negative speech about Allied:14May , 20fl2 The 010 investigation found that
Ertfoteemenes investigation of Einhorn and ,his,heilvie4uul ong otherbedgefindainctudiag . .
(b)(7)(C) (b)(8)
NV41$ OPMITitiVed shOrtly.after ,
me W' iratiarM=r1TESUfarAr41111 n C),(b)(8) WregilgatiOn ,rhvgis .
. • , (b)(7 )(C)
supervise l Avlinjust o
•1 , ecame a (b)(7), Itor.Aulect. we row that g the (b)(7)(cmb)(8) nve.stigatio
aggressively viettioned Eiolioniintettiniony, subpoenaed several. boXes,of c a, Ill ;I:.
1• sought Einhomh telephone repords-andliSt aids clients, We also found tha (b)(7)(C). :
inv gado.
•
• ' The QM iuirestitgationfmthetrevealed:thtttdutiigjhe: same time Allied was Ore to
onnvinee:the SEG Ityinvestitate Eitihorti,. even without any evidonqe-Otwtougdohig, %Amu 4z
investments and requesting the SEC to investigate Allied. We found that although the SEC'
(Acei3f Compliance Inspections and EgaininationsMah7).badbegun camination Of
2
' This Ottuaent is sabject tothapro3;:tsions of ttra Prwioy-.i.kt O. OM in may reiiiiikretliell'eur4erar4
' !rise1osin .04o Ihifill Rainier. No reilaerteallasbeea.pedonned by. the Office otiaspedotteronei -4 'fReeijiteaU
..ettlila ritillid silould.aat
. 4 bsgt/aingt0Or teltr it:10.4bOat t4: laWiritar GeneOrtu4.0104
. .
llied' hased npongioltordeallegations% .Ettfoiceinetiataff was thlawarethatOCth•was : '_ - . •,•
exainining Allied,anpl the lead Worcehtent attoutcy..WakOrcvolled itOttoMniading* 461119r
,Offieial to learn: that Einhorn hegait stilinfittlhg letters onflinitt evidence;of,Allied'a
*rohidolikg- 0 .
. .
The OIG investigation.alsO found that very soon after Enforcement began looking at the • ,
allegations ageing EinhOto, timPorlohlikdth* taw. . Waxnef oferli61eV*10.1.0e 0 deniell$100
th.atthe . :' ;!esothis hedge Arid viol any l:algal 4.0PAnitie$ :W.% Eloweveri afthoughlhe
investigation againsfanhont was Oa pxoetical.Oattor completed by . 044120034 the inVaticallea
was not forraany closed until December 20o6; ma EinhotnAval &wallowed tut ik&igia.1410
longer a 4ilijeet of investigation„-despitelds request for , . Soh notificatien. . ..
. .
fotind that in 2003,, while SuPeoig lfig tlieltivesagAtiak *gala Dillow QM
others b) 7)(C)
f
asked to leave Enfeiconient.because .., ormance problems. In
(b)(7)(C)
onmediately after ...: , 2 .SS 4. (b)(7)(C) gingd - , . t rgt,Of Venabip .
office to re&ter as (bx-/Hc) P 1/ AA.9 A .... A.S : 4WrOlgro$600-400$ IX POO 4latitO 110 AO
0
. WO , .I Olt A A Alli - -re rf.r7r ilLatters- While working at the SEC. In fad, the eVidence Wgiltoti
-
'
regaoling Einhom and Allied. Ilovrieet,the010 found no evidence ' )(7)(0) ,itilt hhsititiir.;
4 . 1 (13
at6d dentinietits nithidni When he la the SEC. Nerd" . woo. , • eviderale
*vedany non-public information fronk.any SEC employee after leaving the
The OIG investigation revealed thatio March 2005 Elam raised concerns that Allied
; -
illegally gained access to his telephone records. In 2007, after a' grand 1, 4. Unrolled, Allied
in/tamed the SEC andithited, States Attorney's Office rUSAO, that
(b)(7)(C)
engaged in .
the offense of pretexting (Impersonating someone to obtain their telephone XeftilTds) artiMt •
Einhtft onlvhalfPf Allied. Allied 0=04 an SEC Form no,(roziknowl4ieng that One of -
its agents tial diegaijy obtained Ealf-torti's telephone records, WOW* it claimed net to baye .
authorized the pretexting , The co found that the SEC took no action against Allied teloted to -
,
the pretexting.
,
Moreover, althoughInferconeitt found no evidence Jot Wrongdeingagainsttinho94.
based upon Allied's V.PsUPPPited . allegations, Eltholies. 4Iabits against 41110d. woe ivaiiihoot to
-
•
•■
Which Allied was financing its tfividends.was akin i0-11"PhOZI-Sesh010." MOttfaiekall, of. the
work papers from thatt exa
examination were laterinetplioabbr deleted front the DOB Aso*
eomputer
in April 2004,. the recind shciws that OM ii&rred Mr& findings from itsexainirtation of
Allied to Enforcement, including the conceit' about how Alliedfinanceditsdividends With
Whiehthe AssociateDirector disagreed. The OM determined that•the issue of how Allied
financed its dividends was never investigated by Enforcement. 111Mg 21.104, gnforectnent•
finally began its investigationorthe claims raised byEinhorn 'in*Vand AMC WV, We fonud .
that Eutloreernent determined by-mid:4W that more than adozela of Allied'S investment., - had
significant problems with the calculation of their vahz and that Allied had materially °merits
. .ted
-
oversee its quarterly valuation process and third-party valuatiOneOaSultant$ to OSSIStin its
quarterly valuation PrOteS8Rir tvv.d years. No penalty Was assessed against Allied or any of its
-
officers Or directors. The DIG itivestigationfurther crigeltited that Allied'S ocatosel had requested
qtrid Olitiahtld111V-W011s* 441;frft.**g.iliclroin , 4** *14911, 0401.Cr 040ritifotebaidtt
.
reoade tharge. We, further bind that under the settletnent with AI110114'6 Wire AO .efforts
-
Fin.ally, we found that after the OIG initiqed itt ir*estipOtibit Arsil was
published about his experiences with Allied and the SE4 (b)(8)
7
earanteatii subject to thiproyisians otthePrivrey ittilitit974; ;aati inay re*re rethietliin.hrtlire
-disrliserpte third jun-ties. :No redaction bar been pork:ruled by theOfficer ttOlpforts
plats reportaborld rot disrmnfraaker Omit wittiont:the instriclot Cen30•01 00,r0rokrulit.
(b)(8)
concerns with both the OC examination of Allied and the resulting Enforeernentinvestigadon,
and bOlkvotherO Ore questions about the extent to whithAllledN'SEC COMeraibitt Vitt
-
5
. •
thlf doklumentlaObje4tcleeptiovislons otthePrivotyAct tr1974i and. may.frogairvrodactioiLlyefore
414.41os too* third pat** $0: gadataon talpbegoverformea.bytheetfilteorkqe.e.,totDeneral gtotipletik
-of Veit retibitAiould Adt disdettruide or copy itivithstut ttielapictor Gentrars opptoltalL
(6 )
ensuring dint OCM uiaiiapeinenr iS•nOt iuidiily filillileticed1011 .6pregentd•
arclonerr SEC employees in examinations andtliatalt issueSidentirredas
potential: *.derni Seenritiw law viohttions be cnretidlY considered tor
Wei* Enrimonwat; ,and
trocurnentingthiet*.asotw speoilic ism.= tetetterl to Enforcement troni
.
Scope of InVestiptirdi
•
Theata obtoked nitd; reviewed:voluminous dbetunentN frektigi to 04 tad* including
stnfeelnalig, work ttaneEs from. s CIE.exarniriationof Allied , off afortentent documents
:
(b)(7)(C)
fanner OCIB examine and Branch Chic.f(Ittly 20; 2009);
(b)(7)(c)
(4) - ,Senior COnnsel,DivisionotEnforcement Pay 212009);,
- .
(b)(7)(c)
t5)
. Salta Connsel„ Division offziforcetnent Only 30, i009):
. .
1 (b)(7)(C)
Assisinni Dimon:RA-Division of Bnforceroent (Augusi
- 2009);
(b)(7)(c)
A.staiiate Counsbi, DivisiOn)tinfOreetrierit Ougust
6.
*4000644 syltsfe4ta. ti*orsivilioro of tlietriiiael jug or itek ahoika:totOcereilicasktM00
t.1Yettfgowto tiiii..d 0014N ireda.004 bit bar WAtitiM1 IOW OffickOntitrOWPA'aeifOrill. *AA*
. ,
,
20119),.2 •
The OIG also conclutted On-the-moor(' intervietVs - ofi
(b)(7)(C)
-(1.) PhiladelphiaReglatial Office Braaeli Chief (rialy 24, 2009); end ,
enior.
Advisor to Director, Division of Inveshnent Management
e •
The Oununissioch Regulattgn CencenAug Conduct Of Meruhet$ and: 103 1e.A and
Vormer Members and Employees of the Commission (hereinafter 'Conduct Regulation"), nt 17
CT.R. 200.735-1 et req., sets forth.the standards ofethical Conduct required: of Commission
members (Lc.,.CoultuisSionem) and current: and former _employees (hereinaiterreferred to
collectively as employees). The Conduct Regulation states in part:
The Securities and Exchange Commission has been entnisted by
Congress with the proteotion of the while intepAst M a hir,hly
significant area of our national cottony. In view of the effect
which Cornm!sgonnetion fieqUentlyhasion The pUblic, his
•
. -
7
ON4011000 itsolijOttn:fitt PrOisbnis 01.00.ftroq Mit 9.1 tis14.**toay.iviin14.0041* befor4
inosesotroOkb.tol pOirti*l o:eo14010 P.Aktailkt9rttntaltktho Oftntionkifitktor .R0.1p1411.1§
• ofin)Sitoortslieold litscalogninitf or tot* frhaihont tnicnos-peglor 00.00eaft 00E04 .
8
Thigllacameat isgakettt4thapravistaai of the Pl*effiiet aC 1914.4ird 00446-
Ascurisaic tollef►d parties: Mayedartitin:tosi itt:044110ealed'hyVelViOeifilfielpektik 040crag Recipients
et tins repattshoilikaat illgs0.61.4144.9r coy It *kat thigiitoeCtar Oftterat'sivplisvat. .
Results of the Investigation
. ..
Background Puidings
A. Allied Corporation -
.410 1940' Act- txhibit 7 A major difference between .s ROC i.vtatore capital fend is that
Wes allow smaller non-aeoredited Investors to invest in ,stgiop companies: :S ree
)
httpg/wwwinvestopedia.cOnt...
(b)(7)(C)
Arco riling: BDC.slate•
of regiSte - • milli de iifikfij a. u iirrelare i i y •PII- I I fiber'. BDC.
Tr. at 11. (b)(7)(C) V 60 lained,13DCe„ by their very nature, are akinto either privateequity Or'
venture capita.' -type Of fund, burit happens to hen registered:fimd. Th Rm.& invest In
illigiud instruments that don't trade." ki at lZ Therefore, according (b)(7)(C) ValtlattrailiS
often an issue because ofihe nature of dieir investments: Id; at 11..
:Allied provides privately negOdated tiebt and equity fugulOng:tu *ale 'market compathes,
with a ptimaryfocus on private finance Exhibit 7 Allied Tither described:
- the. 1 940 Act. .ftibit 6., lillVo .ar0 designed t.0 4ccOlnaltAaro plink .40/013.404 4vg.s.tilVIAsa ,
E They have *el" omakiniiti framework and tiOir oNVIRMiquolAsge,sq Solor OSzIal
Tx. a- t 1 16.... Aveording
- ' y -view ptBDeoleaveryenq ,ofdientis an taireetnent.
cAse waiting to llepppi" ., 064. Yet, OPTidOes net auttently have . §ygtartirce
attributing riskprofiles' • . Nrestinetit companies; onty investment adifitora: 4 /4417. While -
the Commission;has resisted assigning tisk profiles far-investment eorapanleaas f
;..
......Artstciaeirt visom t.t.o.nOiritt1 4 sit thit entritglikdon.e0.ftsidbr pro to .be high risk (b)(7)(C)
,
w o 0)(n(c)
3 i ,. . ,- ,- , lis.athi • t g at
, .- Tidy 24, 2065, auk (b)(7)(C)
11.... at 17;:nre also SeigClr OffiPiat Tt-at 101 i ACc9g141g am:1011TO. areg
. eo4lidercd hi 1 .a °s
u a a -, :there Ia . 9.134 1451 tkowww Ow a a ' W e a :i r - • ore lo ba examined
the 8:40. mai t.. At 17,. TiteraOroi acCOrrting (b)(7)(C) )3DCS can go more ttien five
Yzar$ wilhou . - trig 6411iiiited., 5 4 la TO: . •
. .
See am OTO "Review otthe Copunission's Proces,ses for $lenting Joanne*,
Advisors and Investment Companies for Examination." (November 19, 2000, ivailaiile 4
http://wwit see-oig.goviReixestAnditsItispectiend2009/470.pdV • •
(b)(7)(0) ed ire &Os hOtfurd okiervation tzrolttR It .heCAUSO -BlIgs are
or the.maiketplac.e and onlyalibett, small number uttharehölders.
of 17. A Senior MOW lobe Divbiowlrhivoli.nailt:1400gement
_Mensvameoelstatedilitt lavastmeat kangnient 7.
=Mt oftiumno: Wogs relatedto MIC4, giventheir nuniberand tiies compared
otherinvestinertroompaniet. Senior Qffieial Tr.. at 17.
10
1:14.41641fixcnt is ett thefrolitgims ottlie PfiraY Att -Of Wir. find ipty reggire auractien lab*.
di.sclasure Mini -patties, No rettnetion tar been fierfornted•b/Rie Once 44 Inspector General: Recipients
.orthislepuntshonkl bet WisseniiontiOreopy it without the Inspector Getterarsupproval.
• .
C. Valuation al Investateatt
-states that no single standard e:Osts .forclefettoltiing fOir value of assets for which MankeA -
quotations are not reeditytavattablO,,nna that the boAnInfatoctots should telllow
appropriate factors relevant to the iraIneofthe:t eetint ' itSt PAtliibit 11 Ia 10.5.90: Said Official
in investment.Management Vifittdia leucite ihelnyestraent.Cokupanytttittitwoihieh stilted that
APRs 113 and 1 18 oottimr41 to weliggt ilieviows, dike Commission iiintecl .th Ihir value
'Exhibit 11. • • -
••
upthdetl guidance is needed, Senior Metal Tr: fit-89 & 7)(c) Tr.v14: Investment •
1:1
k- •
until •Updated guidance can be issued. Senior Official fir. at 93; Exhibit 9. •4
b( )(7)(C).(b)(8)
Ti: The 2064 inVestigation,
s. •
Allied S Urged 1.40$16P to Woe_ atigata-laliont and his lustlt
Fune•Greenlight eking, Withraort Widow tit Wraftdoing After VitlibiOneS
Igegailve, Speech About:Allied
L Einhorn's Speech
• -
.011May 15; 21)02, *horn gave aSpeeeh attire ha W. Solto. Research ConferenCe for
charity wirerche and Other portfolia-mnirgers were asked to share their most compelling
inIfealineUX lliztohgles ifti the oomph* videotaped
.speech). .1:turhtohla-speeelt; Einhorn desedbed livhllte believed Allied Stock would decline and
Greenlight Caiiital held a short portion ha Id, $peelfitalfz- Elam expressed Ns 'view that
Allied bxfonhinber of Impaired ittirestaitalS4hatititeld at itglatattalue§. ,whia resulted
overstated results . 13inhorti concentrated on its Valuation methodologies for
portfeliOinvesunents. Id. .
. .
0.4*Ith.9 apacch, several in the audience wete on their Xilackberries, although when
4*(4 about tbi inhis SEC. testimooSr, Einhorn said he did not realize this. Einhorn's book at
161 , Exhibit 14 at97 98 According to Eloltoro, the day after the speck the WW1 York Stock
-
Exchange closed Allied shares for trading because there were so many sell orders it could not
open triulivitt anerderty.gialloo- Eboth'sbedat5.•
•.
iolvizamotes on Ins welisite relupddixfaia:book,
12
• This:doerottent subjeetto the:provhihms Oftire Privacy Arta 1974,, end Kay reqularredadiendiefere
disclosure MAW parties. NIA redaction.hisbeen performed by the Office.efinspeetor Georxeft- Becipients.
orthis reportNhould oat dissemiatte.oreepYit without.thelespertorgemierers appra.ak
btrp-liwwwirooliElgtortiepeciple.ann
•
• This Wee'Cli EiBlionk sot PIT'a well-publicized feud hetwecuAllied ods.Einhoru that
continues WO; .See, . 4,..Februaty3., 2007 Forbes Magazine, "Allied Capital's Blond
As *discussed below, toople of Weeks after the spe4A. Etalicirat,olt*ted the C *elep1ion -
and then in writing .with detailed allegations of falai by Allied. At the salu$1:kor, A11104
tuteessfagysouglit a meeting vvith.sgaalitiaisio urge att Etifuregaeut itivestigatieu
Emhorn. F.ufOrteiticia ahriostitunediately begun luvesilvting:Elactatelateato speech '.
abort While the agency did begin lengthy eicamin atiOnot Alliedas a. resaittif
Einhom'i allegations, it took Enforcement-another two yeatS before beiginoing its initeStigaticia
of Allied_ •
addition,Allied hired Lanny Divis ilbutter White Elouse counsel fur Plesideat Oilteligou r to '
Ode Allied tiutuagegiout during the time *it:EU:thorn's speecJm Einhoras booktitt-$4..i
(b)(7)(C)
.senioradvisor to the.Director t4f1tWeihnent Managmatt
• rhw : f :
(b)(7)(C)
: • to* a vim pet** on 13p.CS.
It;, ..61.0
• 13
• 4.
• .,
Tfili:doeumeiti.isubfeettO Iliwprovisionvorthe.Privory ittort974, oashmkgrequireiredacaOli idea
disclosure tit:third parties. No redoetioli twill:to performed by the. ffice atinspeeter Omer& ReiVieok .
More rer.ently,131)0:5 have been antivOy fddittirig Witli CO11gptit Witi :the Cooriiitiict:
—
meetings between BDCs and the SEC Chairman Commissioners. Ai ut-29; see ao • -
Exhibit N. • -
(b)( 7 )(C)
currently (b)(7)(C) (b) (7 )(C )
(b)(7)(C)
,Allied. sYee .0573=V 0.11 g it 1_,W 0 la A -
=Os
(b)(7)(C)
Seel •With•Allied.• I ( (7) hew. (b)(7)(C) AliiedAnce
03 )( 7)(C)
• 4. )
(b)(7)(C)
d rib - the iiMe stale: melt #iont
14:
-•
• hi Aocrerrent is-sr 4 Wee*: 4, theitrayis inns e e$ Actor 07400 may riti10,R4 x a o i /*Owe •
414ctiltOctottriM pitette$: ge area*ttion has Wan Ottrormed by 0* Offite'Ortisfitatiir : :h ipients
at Os rOattshoistil taitillattailasig Y 00'Afi Athtratit the rrittiggork.Ooratripooravat,
From theirpetspective., they' were itt.the tight aeil he vas itxtbe
wrong and Eaforeemerit Should hop to it.
at 51.
-Wrong,dOeIP: 'tinhorn DiAlligit 14 at 49, The S90190 1004 tetift.9d that beViolohepoOtioa
that Allied shouldirnrAstlgatixt. tok at:52. :Ent instead, Ett.f9t9ergelltstativAlingStWing
HiliI19131.0.04 at 49. •
(b)( 7 )(C) • cOnftitriedthat Allied identMe4.1ditillon2 as xtpOSgibl eet
l'ojten.
with 6Rent Ilittifforotoolaut A#sbeiafe Wiest°
St .+ 1611 E4tibit;
20. Actioirlln (b)(7)(C) o. ,1 Ion Entorternexit
• * " . s-of it
I
.011. I .
8 (b)(7)(C)
tai n0 t6 :111P Olatliat the Chaim= of Felpnethlao (Fat L 111 •
(b)(7)(C) mum
statoconiplaintto
;0.
15
th*document 10eloct teitte•OCAVon* eare rlivaty ita:t.of074iantatay - , lre redsetionlefara
disclosiF4 :4 *WOOS* N .6;06g ilimbeekL:PaitOrtitel.b.71#6 Olftwif. vilinerAE *Iteeltileittg
*."
i AccOrding:to the Senior Official Einhortivalled back shortly thereafter. Id. at mi.
Senior Official recalled that Imhof asked if it was ahight If the phone call were recorded, and
I . ' the Senior Official said he agreed :16.1idifilit the ikeVeitiiiiim Itcoidati. IL Einhom then
explained he knew the. Senior Official mild not talkeboticAllied, huttet; he did want to talk
about valuation *464- ig- '701§..0440T 040:40, testified it wa..5. :cleat, OnIto.m.'wPotecilo1411E .
about-Al . : .
Itlidretthink he -tvas jud Theoretically intitoted ifa valuation hy
T- ithieStmeakbropimle ' s. There aren't toe many people out therein
T the -world that-vimild do that. I could put bee and one - tOgellietand ..
. *.
5
16
400ü 6.10.10.4441014;itaboa,y 0014 oed.iictioit lorto
.1.1*110arrelo AlnLprtLes o re4.400i tow becorpott'onted by thevirigtot taspector A0044.44_
4014 ldot4isuainater copy icwitiootthelospc.ctor00.000:opltopvall.
• hlapprwitai-tOra Wi.ta vahielita ittvtaigIVSI -Oat. di° fund would expect-ta.pi:tor it at
gang P-Oitit uttho.fotlgo because the appropriate standard is 'what Oft you get for tOdaYr"
-Eibb,orn responded, might, but commentary, their response would be took nobody
ever 64U:these loana.and theta:001e anybOdy evet - ella these.loabS Viltudiey're iti
&mess or when the nAtierlsiti financial•dis̀ Cress atidlits tb tondatta fife tit"
The Seater Official replied, "twotild saythstwOuld beill.the More reason to hold if at. IOW&
value teedisethaes what irs Avarth.::"IL At the end of that - 411, the Senior. Glacial testified
-that Irma* *Win was saying was tit was 4.'wqrAbr ofturthet inquiry by the Stai' Al. at
4047-
• ,InstafterthatPhOne•Call, on May 3J,, 2004 Einhorti . hegaz writing to the scEC with•
fdelaital comg*gslitoltaiectr Exhibit 24 In a% Foluirn sent about a, dozen leettera:To the
,
=. awl Mgt tvvite. vial Frittrattie;at :stet Aindd. luhitZS Inthat titat 1400 '
Attiri=e4 to the Senicir Official, Einlioni ‘iVret'te,flaVe dre 'writing to call yOur attention: tckeettaixi
• discioiliesauul lecoutitit4#eutthetits by Ailed. Capital Corporation CALM &awe believe
are work of itivestiOi0oe Exhillif24. Ile Added, 510 summarize the rnaba point, we belie-lie
that ALD does -not OOTATIY witheTAVO,51n.le1t Company APrOf no, 1d zx'ozggpr93400.
aPooliOo examples of its investments and his 4&7:#i410144gaton owm*1r and gitaohpil ib4liorA
white 1349,F on valuatiQn of illiquld epuntes.it holcl,,a.N.tay 20()2 1■100,1 I,yuch report -0.0
alookansctiption of au Allied codetenee call, am:mother thiugs. a The Senior
Official. testified he believed he forwarded to ocie,ond Enforcement- Senior Official Ti. at 47
-: • Einhorn sent tWo more letters tie. the Senior Offititd. in:Iiivesenent Management. about
Allied .. 0./4 342002 and tuiSeptetubo 1 2002. Exhibits 26 & 27, lathe July 2002 letter to
The Seolor Official, glohcIaacidressga. the recorded conversation be hail with the Sealer Official,„
s.. since Allied expressed coneernaboutthis cOnversatieu. .Exiiibit 26, Inaddition,'Einliorn
adages.* Allied's white paper. &missed: above, whleh :discussed why SEC fair value
!am:144114,04a* should* aPPlYtti A BM SitelitisAllicit statiftg,."Enhotoloiitof
;. 'Current sale for fiUrpoSet of determinin'$ fak *tie II ASIt :lit ISPZ &Mance' is .diffieult, if
I not impOssible to apply in the,case ora EDO* portfolio„" .14, Again, Eiohornatt4bedseveral
044F4 ._ including tePottlItVar-FAYOXOCulight Ospitalealledi. "An Analysis of Allied .
_9Pt41
lii1
i -CApitat:;9u0stiotAa of l/awl:Rut reelinique- 14 'FlitttatiWit apparently had been posted on
Critettlight Capital's Websiteallertlie Speech..
.
- , -- , • . ..
• •
- • Seatmber 2002 lettertO the ISea*Offieideoresge,4 covenisalsciWaram.itOthet - ' •
Milt% itteetittatifetel4ceoglistfiith Allied taid,dhange$ ittkAIlfgro tlisdiasum tottlag&telgoalti . .
•11:470416digwitiAvaAmits
k -
imil,4,11iixte -10$4 worvalv6,thme ofits.514.1win13.4ski*L404.
10
• iVo note :that Ehihota.ttated iirdiest lettems, 4131 rtil1 (*closure Oreenlightbas a short
position InALD tAlUedj common stocle 84e col Exhibit 24:
• 17
Allied to venous staff and officials at ii-(b)(7)(C) A 9 14 October 200 through January 2008. Sea '
■•• 9
Exhibits 2$ - Siallont4eatt kttgrs in October 16, 200 and December 12, 2003-.
bits 28& 29. These letters were supp e mentalrenarts. W11 (,)(7)(c) Is Acout MOOCVS alleged
wrottgcloiits,
" Ampting Nyith (b)(7)(c) 003., $'eg
Exhibit 28, IOUs ;sbiatiettertibout ob-golog fraud 4./1=4 i to t (5)(7)(P) :Apra
26, 20044 "QUO toittiottes• to raiseh.Undteds•ofmilliOna of dollars -anew investor capital
through registratien statements declared effective. by The SEC , - -BetauSeAllied'a'disalcoires.
are perititati4d.Mith:inflated valuations and pettbxmance smoothutig, javai.tottiViliöielyort them
are duped into overpaying Allied for its Stock?' Exhibit 30 Eirihorn added, "We, again, request
that the SEC put a stop to Allierrafraudulent practices through foreefid and timely regulatory
action? Id
(b)(7)(C)
*re foltowed WEL May 71 24041eiterk
referenced belOv4 about B •(b - )(7)(C) " Ihtee-Kra$0 4401 • "S§Ptentfe 201 :
(b)(5)
18 ••
This doitunOtis 5114Jfmtto thilfikitiOiciii$Of the lsdvitcy Act tfl.114,und [requite redi-e(iintzbookt
0;0040'4 third rothidioolhat beep pArterite4 by ti* Who oftganfttOorke1041; g1/140
othii repart•sboblit eat intsoatilate ht copy it WitilieidAlie /0,lieetOt 0.00414 4Sq4.0.00/21,
(b)(5)
(b)(5)
r
(b)(7)(C) b)(7)(C)
9.9 I
(b)(7)(C) (b)(7)(C)
are no longer COmmi,ssion employees
•19
. This document issubjectto. the provisions of the:Prhincy Act of 74 aid may ectinire rednetinn beibie .7
:discinsurelo third.porties. No:redaction h,se hem performed ky'tbeiNTiena totPector Generale . Recipients:
- erth.WirPort'should not (Ibsen:daunt oi- cOPY. It itithnut the finsprieter Genetallit*pproVnt s
1. ed a Great Deg A Ant Allied Dewing Con. 00
.. of
voidgatiton . ,
(b)(7)(C)
claimed
tr.........__2 .,...,_ ________,. to have
_.,_____ "%Ore ittV:Ohreai,etit in tint' grArri• inn;tri oiof
that . ii I ... . oto(b)(7)(c),(b)(8) -
1 If I ° I ■ t 4 I ..: ''
i3 Mcording to the• SEC's Intranet (b)(7)(C) auttently works:in the SEC's ifew York .
Regional Oface. •
20
Ithiarlocummit is subject to the ptaVisions the'Privaey A.ct oft tOtiaad may requireraar*it before
:
illatt
osure Id thud parties. No redaction haebeell Performed by the Oftke aflattpetio GenerAL ?tteeipients
,of this ArepArtshoultt uottlissaninaM or eOpY kwithootthe inspector Genotairs approval,
(b)(7)(C)'
In a April 9 rtspon.din about dreenlight Capital's production. of.
&drawn (b)( 7 )(C) rdvideci s • he had learnetahoutOre0Allight Capital ht that -
point Exit' eelfidelly (b)(7)(C) (30 ixirt,
(b)(7)(C)
001004414 the matter lootwany Joet even ,
eve t vyas a NtITI) tutatielred it to. ?Nifty when sit rildn't. kg*
like a fast hit agiinst Allied0heres no write up) - 01111Y did some
sort ofreview, though its not clear they re-visited [sic]. the
valuation issue..
Id.
(b)(7)(C)
(b)(7)(C)
Tnadd41oi .t made contact with aeolleave in [ruvestnient
Matisgertettl ut,..70 • :o tertrtatalhoakid, *.66 Wk.**, on getting some
gifftsimdnt Alknagezugnt] help. t put a riew call 14to .1; $ kanz
yingthoui
magcecparti
endchie
(b)(7)(C)
!Opt:4W *Montages Id. That ended
eontaefa vitt]. s other CPtunoltssi-On Pf0e0a2"
(b)(7)(C)
After feat-Urn& 11 fr $ that ;Ailled's:eptiniel toldber thater
-
(b)(7)(C)
ilad ;beep, eo ing the comnanv overlie last few weeks -to .
<tweets .vatuation , (b)(7)(C) riole;d, • talk .ovitt (b)(7)(C) I 1111.1is ubi,vs:to me: I'll
mentionit I - Speak tel (b)(7)(C)
(b)(7) (C) (b)(7)(C)
tomorrow." Exhibit 47. In Ma' 20T6l (b)(7)(c) (b)(7)(C)
(b)(7)(C)
I taiderstatid:thi (b)(7)(C) 0,13dItillybe 111W .
heen. looking at '1 ,...compani
an 91 • 9 ei.e 9 . , . • Is in 9
(b)(7)(C)
certain; privately-hel4 -, all attorney in my
an
branch, hai reported that OCIE. is. conretninanng a *feud to.
' Enforcement
Enforcement
ten on this issue. - I talied yesterday to find out a bit- more
abouttPCIttriview: and determine, theta* tgattiOs w1lirelou..
- Moduli te -ipxe . ez ; Isici Ws 4 referral been nOnterrrplated. by • •
33.
. _ you and the OedfrOxit effiee2 talt.refettal midi? rd.opteeigte-
any infornuitloucyettcaneupptY ... ... • , ' ., — ' ' " :' -
(b)(7)(C) (b)(7)(C)
th e - - ttial - Ilin8 her he had ti.lengthrecaversation with.
(b)(7)(C)
Ut Alh Itor1 T:Ta learned °CIE would be:
21
Was dotwagutis nailed to tbe:mvielotti of the Priveiwketor; 1974,20,4 my require ttAUtidao berm
alsetostareto Wird parties: No redaction, Wm beett performed by ilmOrtee.orrotgeetor 0004 Recipients
of psis repartsitmddmot.tlisseei►utt•tir copy tg *Ohba the lnspeetergettereittAppitita.
(b)(7)(C)
Aggeeiglittbfratitatiiiitif Zlitliok* 1I1 Testiltiay
• tinhorn appeared• for testimonyat the SEC on,May #t 9, 2003. Exhibits .14:& 52
tinhorn was represented b er at the law firm Akin Gump Strauss Dauer
Feld," and (b)(7)(C) of the'law firm tteMelte.ny4.1V1yets For the
SEC, (b)(7)(C) atcl(b)(7)P appeited. •
(b)(7)(C)
Iris umfispote d i , present for tpart of ginhopes two.daYs 'of tOtizoo,O.Y
-befr.0 the SEC, and was wive , . 4 I . • : 0.w= id. loithetzt, however, te didnot
lalteEinitoin's tesliniouy; ho4KA , , :. b)(7)(C) as resew.* e, or: tliat and said he only "steppe'
•inr to ask '-'.41 wits ofoggregive questlims,„ - 'bit 20. Hoiaabit Oat in that 464inionYlva s-
to , gpt Eitgitgo to *twit Wattenipteak Mire. di! , i ,e • 'rice of Allied 0.00k when Sinhom gave
his Speer*in 2002, as Allied had:al ,, ,, id iiall fatthetWaimed poi to .have revievyed any
ifthe'dopittneiits:prodliced b (b)(7)(C).(b)(8) 1 =poise tObe subpamasi-they isgaqd, saying
it Wag*Ondar4 44101'Am:we .-=. 4 tit; rCeMent fOt a braudlfuhieftirielyonjbe:Stair
22
• This document is subject tirthe provisions of the Privacy Actof1974and may reilaire redactiOn before
disclosurethird parties.. No redaction has been parformed.by the alike of Inspeotor4Senera1; Recipients.
Or:Misreport should: not dissepilaateorcepy without the Inspector !Reueral!s approval,:
(b)(7)(C)
attorney who is taking thetastimony. id. didaddithe pnabably tore
testimony Wake. Id.
• Aleidelk of the. thihant testimonyshows that it began atahout 10 am. on ivia
and oottOnnedantil about 5.30 p.m.. that 4ay. ii 4. The transcript demons
sbourednp on May 8,2003 about an hour afte ( b)()7 (C) t the testimony, he began. •
Oquestions
. vet, quickly thereafter, and cOntinu- until the cod of that day atabo is •
Binborn again ap 13 4 (b)( (b)(7)(C) -
1 10.4 • : 9, 2003at *out 9 axai Exhibit 52. Once • I
,
gan
- 1)11ingbit
7)(C)
appeare-iat io t.piandlthmediateJybegan questlompg I Mi•
stayed -an I n. of that day's.: testiniony, uthiektoncluded at around 120*..
Einliortt coinplained tOthe OM *Out, and iici:IitAteil a.4 : . - 1 1 ' '
testimony he gave beforatheSEC In May 20.3. tinhorn daft: n - . (b)(7)(C)
' 'confrontational" and 'verlaggreskive in his questiOning at- 1 mm; tes*DILY-
Einui,es book at 162 & Transcript of T •AZill" 11 11 1 -.. t DA .• g ("Eitthoto Thl March 9,
. -
I qi
(b)(7)(c)
AmOrgibag she believed chning_Einborn's testimony - 'tried his
hardest :to get David to jitser 0112 he hadi., ated; e sto utDavid
Tinhorn did I 11:11 : the ttoeie (11)(7)(c) r.at4l (b)(7)(C) testraert that $bp-)04-a lot of •
problems wi (b)(7)(C) le• 14that testunony, including thatte`did not assigther, had an
inadequate reason or . mg late, and be starting trii7-iin8 bet about vvbatshehad asked Mahan
- -
uncomfortable wi
Ma
= questioning. Einhorn Tr. at $0-
(b)(7)(C)
eached Qut: to SECO (b)(7)(C).(b)(8)
I it ". I
i 0 Gill'
arma abourkAlliid tinatt
j.
. lavestigittion
. . • •
- (b)M (C).(b)(8)
Dunogthe devise of the Itivesti` (b)( 7 )(C)
*the babe,
.1
.reached out to Several officialism onteterit ornces to d niiings- and/or aCtinns.
t4.1-6 were relpteato Allied, pthibita, As a restil (1))(
7)(C)
learned wbatactiOnshad and
were being taken related to Allied,: and the positions atl i etent staff and officials held about
•
23
Thl4i14.mtniegt Sable404 the pOtvi*OF Who pl:blo Actor i90,xod may require reduettuu-betOre
4444ate 411;d14 ptes. Istottioetion kas boa perrototo ilyibe..oingwottistiffeter central. itecipiiim
kihis repottoonki itoitlisSatinate'ortopy wittinarthe tispeitor GesItraPiiiikroval.
(b)(7)(C)
whaller Allied was *dating tIttw. In additio 1 Id the OM tfat least one meeting
(b)(7)(C)
with Allied at which he ••• k I Id Acooplio Ugh, they had probably four
(b)(7)(C)
to fiventeeliags with Allied. at 41-
(b)(7)(C)
and. minim (b)(7)(C)
" The itivestigatiOnfottad I I 1 1. 1
(b)(7)(C) (b)(7)(C)
abetit Allied.. SpecOialltas fikkingahout OCIra
I;:
wiping . :. . f Allied
II It • Ott I 1
(b)(7)(C)
it was u
' ,, y. to result end
(b)(7)(C)
..8)Chiliii49 t o *lied ; •hd.haat:leitstkt COnVettatiolt (b)(7 )(C)
.atoitt I
Allied on o i ., and found out that 00E' was looking into two primary gsues: to the ,
way Allied determined fair value of its private holdings, and (2) whether.-Alliedinust
raiseibotrow•caiiital to pay. out its dividend. Exhibit* The e-maii continued, (b)(7)(c)
saidOCIE not exwealPlating.--a. referral to Enforcement at Oa OM? but
Sai
as their get a beir handle busines,s." 14. adclitieni hereceived extensive
commentsfrog b)(7)(C) regarding the difficulde.s bringing a. case against Allied ,on
com (
• , the 0145-*s tilephOne conversations ivt (b)( 7)(c) he indicated that I he retained
*Pm his - 0t:the$E allowthai he 0 (b)(7)(C) n...larinary2.9,
6. ... 2001 an (b)(7)(C) Id W 'm
Al *.had been. u ovem,h‘
P 1 611 " I - Ninth 6I
routine no cause"
(b)(7)(C) (b)M(C)
,exarns. Exhibit 20, recall I : 1• oka s b4ween StaAaryand lune
(b)(7)(c)
2003, after his testtu 'a
' ony• rn, 1,1 id hini eyed Alitedwasnoterigagedin
wrongdoing. SinceEinhorn's testimony vva.s on May& Zit' 9, 2 '•
took place in Iviay or June 2003. As discussed belOw; clesrajz w (b)(7)(C) (b)(7)(C)
ickY
May 2003 the 0C1E.examiners had found evidence of wrongdoing ed. (b)(7)(C)
II
(b)(7)(C)
to : • $, and that Allied Was not financing their diVidenda. I 6 ' recalled
(b)(7)(C)
satisfied Allied was not engaged '
:
ugclolng &Age 205-
IQ II (b)(7)(C) told the Me. his notes showed (b)(7)(C) led Min On JalgialY 27,
20.03 tut ONUS II II they wereclosing theirinvesragano .0 lied lieeause them was lie -
'evidence rOper vialilatiOli of its funds . • r
16 . .
arooked ifthat wild have iecna . more:accurate Agent I I"Inalte in
tomp Wined-Mt
tesponse to
whether itappeared Alli Tr. t: :ttcl. in wrongdoing, ' tOttealt
(b )(7)(C)
whathe said and asked • had notes. ki
24
. . . . . . .
This document is subject to thcproildiortsofthe Privacy Act of 101440 way rciptirAtagliin'WoO3:
ditrlosureto third partici; No redaction has been performed:kr:Mc Ofte.vrtagp.ettOrtAtat* 14ciliktits:
ands martshour•roit d*Croisatogr copy 7itmaititit Itti6 iits4e.rttek0.0000$ tilliittY.01, - :
t Alliddit145 kon2r
- 'cite bpliev and
111111.1 ere makingiudiments virithout digging into. is, and that•not think.:tlicy
mere n t and asked them to look ;into it further. iv
43.
2602 farword; Einhotiftelook at 14%•olgolivrefie thatlatei in Epting2003•Onzeilfight -
Nal received ittnbpoetia for mthooes tegthium And that doenninl. 744 153. Whom
said the seeed4'4 149P01 fiot41Nummts requdgc4 intomation cla 0014compok itifamatioi
,
Greenlight: t ital. produced tegetal dtictUtieuts to SEC in. retptalse to a subpoena they -
received on.Januuty 23, 2003, including Gteettlig4Capitirs tv0.440 011 Allied, tra.din# F40 as; •-
• al* oftheir;bauk and brokerageamientvt tut4., ttleirtelePhon6 reeovds" from January 1.;,,20p,
EbliorOlOT3sink at 149 Boyer (b)(7)(C)
-`) ' - i tor vilitrthet at* idephow ritcoulcvtre., produced to .
41i6sEe
. . froux.GieeniWeap' p: acrthatlhalad not believe:Vicar:had requested, or
4licetcred, any teleptinttereeottls ri ., *--;1 • , 1 Itti CaP40.91: 01)Ito allk Outing
- Einhories testimony'btfoieth6 OA he resiitec1 that Gieenlight o prodtree any
rtelephonerecords. Elia= Tr. at a Siihorn.V.Oteitiltis.— bio4,1toWelet„ • among-:the .•
documents Greeolight ital .prodtmed to the *C in response to asUbpoenn they iccp.iv.* co.
Thkslocument is subjeetto the piiivislons of the Privacy Act of :1974isuidinay require redaction before..
d toThdpartie No redaction hos been performed by the Office of Inspector Geueral...Recipieliis
of this report should not disseaubsote or Copy it without :the Inspector General's approval: .
Janti: 3, 2003. Woe. eneenlight Capital's tele . reeard:g.frOm January iO2;the OIG
ti ion did at Subatantithe this claini.t 7 Einborreabook at 149.
(b)(7)(c)
r. at tifiefi that theydid get36. BinbOries - clientt :lis diem!. -
thatilisrlo find some name on the list and name in our ue s oet trading .
would beluce! this great.mOthent•where (b)(7)(C) e ease came together 11 1 16 6, e WOUlti
II : 1,16
dientlitt -wi I. .thhorn ' . , • tetitiffitik, (b)(7)(C) eve I figure out why he waited it tobe
11 TI .
• • V • • The O1 was unable to obtain the Janutiq 2003 Subpoeparoin friforcethent. The April
-
290 $tibpoena, however; did not seek telePhone records. Exhibit 54. .
Blue Sheet trading data shows cugornet ;tradiniiilfgratadroi. .3g,e'SEC g.ystenis" on SEC
Intranet
27
thttithicmue.iitis subject. to Ike provisionslittlie, Oriyaey.Aetot 1914 xtild niartiiquirored244aberore
(list tes'are:to third parties:: lio..ntftetion has beu iietrotm0 by thOrlitta atIng#00tOt. Oueiat-
oiltastopott..ohotad not fitssonlote:tor eopyltvitatilathotnspouirCentors-appyroal.
(b)(7)(C)
b,. *aware that - 00E waa' CoutdUeting
Shnultawrits Itxanunatwn- of MBA ThudAilietrs tow*sel
Informed Rer .
„During the inv Was unaWlitethat. 002 Waakekinchletiag
artexarrun' allow° i r..at5344 nly-leamqd_aboof this e 0:1'4 &
(b)(7)(c) 03)(7)
counsel . (0101.1fintailICT 011$. 14; .o-galloo ()
c (17
• her, "I'm just tel log you because I ised tO "91/C atihe SW and I know tha one :I4
• dotsn't 'always know other hand is doing" Id.;.see also Exhibit 4 7 (b)(7)(C) tified
C)
• after hearing this'fro
IlOt want to say that we had no idea, but We tatt
(b)(7)(C) Ift. at 53-54.
'fled that she was unaware that OCIE conducted
.exammations of MO in L994 And 1999. Id. at 32. Vhen 'asked about those 0001'114ms in -
EIS algo unaware thgt; Einho gi I . , • • hmittedsevetal lettets. to The EC :when she
was con. u . 1 gthe histstiggibtl. LI at31 (b)(73( c) 4. i ed that she late, (b)(7)(C) ii. d contacts
With the Senior $ h • 'it was unaware the calor Official had received - rs . int, Eitihom.
s
Id. at: 31 In fae (b)(7)(c) - ed.* wanted to speak to the Setdoi:Officitd before EitlitOWS
testimony, but i : (b)(7)(C) Adamaot•she not ve*. to th9:Spni0;0100111. Id. at 55.
Accupang , (b)( 7)(C) (b)(7)(C) old her that the Senior Official was very embarrassed by being
quoted by Enh.orn'in repo on Allied, Sinc0b0.0tatid not have beed4uotettin neeordOnee.
ib. -Cointifission piiliq. 19-i rd. '
• 3. There is. No Eviden bysically Took Non-Public SEC
Documents •
tell the Did tliathe toOk with Jilt a a `tineino pad.oftba*?' "personal lo
time atihe SEC 2(4 teleph000intiaNieWs
he refetrid to theSe notes and ealendatS which he said tufted telephone ;As be'mtide• H
-Toted tö (b)(7)(C) ' (13)(8) ilifestigation., II As discussed above, rextrtp1e,
olcItheDid that his. personal logs show -that on lumnty 210 2903,.fr igot a.telephone
•
19
getilOr OtOC.ial tegOned he kaew Who (b)(7)(C) was nOt sure .! iiâdever •
spoken to him. Senior fifruial Irr, at tiS Hetestified :Wawa quotedhim seem**, he
did not:need Commission approval to be quoted,. and.the climbs didnot cause :hint a
prOblern. Id . t62. , . ••
-23
This dricumenils subjcato the prOvisituMnithe-Privag Act of1974, and may require redaction 'Ware
disclosure to Arra parties. Nalmiactionlas been:performed by ihe Mike of Inspector General. Recipients
athis report:Amid nadissemlnate iireopT Union:lot the Inspector Gesuararafapprovat
tall troll k
(b)(7)(c)
ing hint closing the Allied investigation
becanse thdre was no evidence of improper valitatiott o its :funds. Irt The 0'6 liar:overact no
evldence% i (b)(7).(C) oak any non-p related documents with him when die left the
SEC. :NOr., do Wei) .•: eVidelice-ilini (b)(7)(C)
, wed any non-public information from any
SEC employee afterleoing the•SEC,
,
• When we'asked: Einhont if he was uoneerna (b)(7)(C) tairxtratoonuito Capital
documents when he left the SEC; Einhom testiRed that
1016V.Cdiai hoW Many Am'cigueettlight Capital 'w& short In •11 i -8 ' gri rlr tihat
a4datX01- ,
did•ot trade after:the Speech, 41 think :that Wendel have been infomiation. I v.eity touch did not
Want Allied Capital to have,” Finborn Tr. at 3 4-arlhOtatOngnn4 `Just- 014. iinPvile4ge nftbe
size of the position..... - Allied so desperately wantedto know the tizaaftbo position .. . 2: 1 V, ,.
at 3647. • - . •
es of the hedge funds violated the federal securities laws: 'Exlatit 31, Bat
vastigation was tot founally cloaca until ter 1.8 20661 Ejthibit36..
ganoti remained open, but inactive after tnid-20O:becausethallew VirkAttorney
606=1'g office was conduo parallel investigation; which ultimately. 'resulted in r1Q charges.
Exhibit 37 According
• 29
•
This iduiumeut issubjetito theymisions ofihePrivaiyAefof 1974 ; suit may. require redactitutbefori
•:disolosuse toihird.:parties: No redaeirlouIuts bemperfurtued.by ibt Of*Aut !initiator rye/MAL 'Reepienis- -
or reportihourd uutdisseaduate or uupy It-without :thelaveiror Gmesuniippri:04 •
who "asks for such a notice (assuming the statflasdecitied than° enforcement *•
'recoMmeadation. will be recormnondod hanst :tiotpetuott Or entity).- .fir}
. -
Enforcement Manua atticulateAtheilDEPyin effectprior fit Oetebei 260%, since the OM vas
• unable to find any ittliefPO40 761k sending taInitlatiOAret4eM Viexef*ifThis140/Eld
. !len in Wed -4 440Mo of gii6544104011Y, tilforoomitit *en tO:ica
nim at terluinationliOlice :Shady . after his testimony, whe;.:ficeording VOW closing •
• inentorataitina, 'they had deter iced heitid **engaged i- n wrongdpkig,
30
. -
this doatmentidsublectititheprovis' ions able Act Of 191.4ond mai require redaction before
disclosure ro third parties: no redsntkut lino been performed by the:0Mb offaspectorGenerat 'Reagents
of t4is reportatould not dissiminadeor molt without the latpectar GenetiPsAppraval.
(b)(7)(C)
misplaced on a perforinaiire imerOvtinent plan (l°11r), w is ia:givett -
10: - thuttilliloPe4 Viten fit ,ii„;1,vels000 -ciaterrnitiddib belmiteCerablan One or 'mote. eleingalof
-their job tetiairetneots. ''' at 1.1. A PA' is arwritten-Piaa. Oitned raising an
:employee°s lob performance to an accentable, assfstanc•suchas closer supervision..
.ilrflillit.161 ( b)(7)(c)
(b)(7)(c)
31
(b)(7)(C) (b)(7)(C)
(b)(7)(c) (b)(7)(C)
bout:tile $tatattotteys
a to &kap (b)(7)(C)
is akiiit •
eci terllookititO. the Concerns. le Let 21.. • rfitd that ,
(b)(7)(C)
had worked wt spoke U .
(b)(7)(C) (1:1)C7)(c)
lipps
(b)(7)(C)
(b)(7)(C) (b)(7)(C)
on for
(b)(7)(C)
atichea*
( 3)(7)(C)
(b)(7)(C)
IlleaeVperson (b)(7)(C)
work aWgnillents:
(b)(7)(C)
as Asked :to Lettlre :Enfitrcement
basically kali let o kncw, the desire- was t#, have tint biappen asvne as
v -
(b)(7)(C)
could. 1d. (b)(7)(c) 9 V Ifli na:crflitly,, and then used
leave he. I _I •I (b)(7)(c) as Olt be went t (b)(7)(C)
I .going' awaypartyatthecud
ofjuly 2001 (b)(7)(C)
.• .
.. • 4. f, 31,,
. . I. 1 0.1 !(0)( 7 )(C)
iviiv WAS V*gfigirt19 atmgeRar A (b) ( 7 i (C)
a go to werkin OCW
(6)(7)(C) 4 : ; A (b)(7)(C) I L. ,_,
. Ace .:..:: w , i . 9 i, period ilsOPPEttaxiio
• ^ br 45100. 4. ta
,puskyar 11 I . I (b)(7)(C)
;•4,4•4m mama (b)(7)(C)
@, 9 *Oda po§ilion fo
`berms (b)(7)(C) (tinned se .
Nee 1,)1 '''-? ' firavAry shortmita at:fine,
.
32
Thiv daetuneatk subject fa•the pro/ideas otthe Privacy Actor 19.74,:andiearreqiiirendaetiorklefore-
diseleseretodifititikaffet; Nos redaetiolo has bees perfonaahy the Offieeetlespedor Geperalk Reelpients .
. 'emit report sheald eat disletaktete or copy it without the JesPectdr eInersieli IPOtel'aft•
(b)( 7)(C) (b)(7)(c)
1£ for about two 1111..."
Ir. at 8 (b)(7)(C) tMedthat 2 t 'hat
(b)(7)(C)
this Was the solutlo (b)(7)(C) I re
up vin tho .•
4 that: e woa MOM r I • a e ge for a w e. 16 -
(b)(7)(c)
According
My understanding is thai (b)(7)(C) was moved..m OCIE
working outany torwerneEnforderbent
paitieular, had fort everal mei"
p with a solution to the problem
'
wont ( X7)(c)
,
lit
(b)(7)(C)
Atco*gto
basieilly timed over the supolvisiOn Ofthe (4)(7)(c) started la., • ,
(b)(7)(C)
s gaup as witaffatterney, beCaose he hadtssenlWly "lost con 1 bzt+uctr.
33
04 04440 t i sableet Otovtiitossathe ktivacy Act -01074, And .saig tequiit redgiin!il>#tore
tlisc7nsul^re third WO* iii.i.to#Oliakkiis.hgetk performedthe9nUe-.000000 amie01,
:
let them. [the SEC] act their job" id (b)(7)(C) said that SEC Chairman William Donaldson at '
the time was pushing far .a hedge fund rule. Exhibit 20.
• •
there is na _evidence tbee)"(c) s (b)(7)(c)Ifor Allied vidatedanY SPer40 rule,
rvilation. or statute. For exanik (b)(7)(C) doeinot violate• no otiminal stabitoau4h:os IL
U-S § 207, which prohibits forn*.goVerilt4ent IMIPICO!"*ItgAilFgq. 11.jlixIodili4:$
it 11y
communication to, or axiearance hafine,aP_ ny ...titu ., ,,, I. Oiagency with: the a - a II ingligneei
NiVettlintOSSi. the OIG-inveatigation rontid , : (b)(7)(c) , : bed dam,;- (b)(7)(c) or Allied : „
based npon'i nom plete. information, includilig o while he didnot $pet tgli$r Vittld oil.
.
As voted above, the 9IG oondoeted on inquity1n2005 and found:no viiilationof any.
4aw, SEC fule or .replation, orethics
`.I.44:40gogikut 1:tl kigcttar epr.goitigt* tbOtfkaggi Mier 1974, 310ov rPgaiote4,14:0).irstr*
4.114douro to 604 solo. No:redastkitt toi*Oegitogieti000Y WOffice 'Of 1 1404406Antral;
tx nits ;Nottslitiolg nottlitawiinatelottopy it *Hokum Inscptdot Gifigras opreva
the Alifrit invfmtionitcm be hadieented gteat.deelabout Allied dialoghisivorkand enpetvidion
of ttie (b)(7)(c).(mq imrPstigattea.04beforolaileperture..floin the' 23
The Ethics Cetelsel tol •Oatilateveti 01°110 there may be an app.:AO/IWO*
impropriety for(Hip yea titles leaving the SEC, affer lto !embed :
if
ied that the E ce *ed that they had given.
/
rstood .Y
11•4•61 :
knew "some tithiga" about Allied,
- -
• • •
(b)(7)(c) L
14- Ow QM ill 105'. Mot el/mil " 4a4 wraicga Mied (WU gum
at the t d. not be a problou with (13)(7)(G) tot:Allied; Exh ibit X62• .
This is tru Id the OA •heoaust (0(7)(C) typically involves =some otovediy.e
actionibat C4701PanY Vaixts Congress to" e! Ootigres.a prolub0.41.40o1
influencing the outcome ofCeminiisiewinvestigalions: ' .
.
35:
this itoggrout fooldadla tti4prOSOontathe iitittflOgoittitta*r*toircirejtaitiOkt- tie-tire
- • 00,10sUre4attifiritgarde 144. kedAtioti. WI** #0,00004 tt.ie-Otaittarts. ofet.orgoliot.41440catg
:40.14 yopotstmigikt wit otto gtigitailA (it 0.0Yftiwithoa(tha intootatOooestwapprevatt. •
-
(b)(7)(C)
C. - AfiledIstotuaselinforoared the.S.E0;and CeiminA UM 044es, thg :
March 24M -letter to Allied's Board. Exhibit 67: Einhorn wrote," hay home phone records
were among the records thatmere illegally accessed-- Mt me,atleast four additional
irtdivoldnaLs have been the victims orthis identity theft and access device fraud. The only flung
t hat connects the victims is that they have alkheen critics ofAitied," let zoo
,g6sponcicdi a
week later, asking Einhoxn for spool& information :related to tlis.allqatiOnS Exhibit 68;
-
gePt#1111)q-2006 seek* to *vete 13oord conduct aninveStigationloto The menet, Watt 69.
-
We note this was a: shtit tinid . 03)(7)(C) eft the Commission and began workut
Nicitabie representing Allied.
36 .
•
lekkeine. ottW4p:4o -the gtogtiins. is PikotomtatiOlkoktot waiiPetipire veflokko Woo
*woo 'WOW virtitlif, 1 ,10 toystiOlovi **boapolettecil 11.000.014 pfhtspoigt:0004, 40010:6:
otth4lepaSsliaigniatAigetugittor eiVY 4it the twozdo 040001-es 00itir4t4L• •
*At Alliiedys management played a is ae 10:41). attempt to.aoctew Tow. phorktecnr4a404 :13Ave • •
f.0404.110 04 :IWO tO sOPP.0#: yontataituP Thchilit 70. Allie.4 .atsolifitotthattli4 Nir4.* SWUM
•of Riohones •riotives anti -woe; thetefore, hot disposed; to emit his dim -without.
'totrobaatiagexiidence." /4.` •
•
Aftetdenying for mania litrie4hat Wad: aky involwthent
telnpliontreords, SEC VOttit with theSte in:Mardi 2007, and. disclosed
• . .the followingleganiing thepretoctintp
t.
37
1
•••-•:.
thla-dor
anicatis subject/a Thcpravisioas alba PriVaTi,Asit 41040 aid may regaira redadian Ware
.
s
. disclasnre to.Alird parlies: Natant:lion has beeapterormalby the Mice at laspectoi GeneaL Recipteet.
orals repartakauktnid.dimeadnate ar capi it-without dee. faspectarCeagrars aPprivalr
ow, CIOPegO. 4.11r Allied (from the law firm Wilmeigaie.:41s well (b)(7)(C)
'El tholow tinati . • '‘ k.; N e to the SEC tosay.. "Them is :strryie.thintr vrm
' ..N,44 N
iiat
MITT-11.1 V17117Thrill toe
(b)(7)(C) (b)(7)(C)
• • I '1 II I were the
partneri faun Nikner e. Wetefresent I is . 0 . (b)( 7)(C) Osibe One who
imparted the infoonatiOn. at Moreover (b)(7)(C) • c.outhiel for Allied also
informed theTISA0 about a 115..
everyonewas really surprisedand ctshocked" to learn
neveci (b)(7)(C) fOritlet Pri;SOMPSZt
ee.. id.. Sr 112. Atter the tate tified be,
ebtiefing about the ptett N - whether Enforcement had
-
38
Thissdoconsent is-subject to the provisions id' the Ptivacy Act of ISITitiand stay require rcdactiosr before
discickuroAo, third: paillts. No redaction has been perfonuabythi (Arica orlaspector Gapers& Resipican
adds report should notdissinninate orcopy without the Inspector 4cairaraapprOVoilt
(b)(7)(C)
(b)(7)(c) earned, and a grand:jury was COnverted, at L. assumed
a.subject, taiget vitrids§..ofmat
(b)( 7 )(c) C
(b)(7)(C) : 4 Plilegabig
(b)(7)(C)
tnE i t II S attention that "there wage posst
tt - I. .4
some 1.trtt. 4 II, iretextin g olEinhOties phone records. (b)(7)(C) rat 4%48.
tesItifi (WV)
(C) emberedlearniiig from Allied% colinse . •
(b)(7)(C)
had possibly hired someone, an investigator: Andl
don t remember specifically, but that the investigator rpayhave
&ten access tahese ids and that there was aqueaftoll es
wbth (b)(7)(C) Aske-dor autivtized that partiolaw
a64011 • mpany !lad boen.aware of
a at 41.,
-
•
- • —
"ooed.
-W vappoit recall there being some issues aliOut .figuring out soniemOre Of
tails." Id. In additio Id the 010 they leaned that the• USAO.statteci
investigation altho d •not: know the status ofthe investigation. Id. at 49.
111 - •
discovered handwritten MACS from a telephone the 010 fro
AN WM ' 4.' • : 5, 2007, that eppOrconsistent v4 tk, : e,tt Ullirr
learned abo- (bmc) • • saible loin the tartexdug. Exhibit71 It ap , -: . (b)(7)( C) -
been responsible for the pretotti ng, (b) did riot mean vontactiog anyoneabout this.
r. at 5a •'-
_ This .document tigsubjpctprosigiOns - oftbi Privaaltet • ;of 11,9741,.and may- requirt ie4iatifea netare
disclosure :to third varrus. No redactiow has beakt*etoniled bribe Offolinspeetorollenik ;14dpients: .
;(41101:opsiiri should naafis:W.010o* atiit ttNetthowthe uspeitikrOoot0 5,000:A.
40
• ihkoocumeo iitsimikiti *the PrOvisbps fhb reliliOr Aec Or *V1100 t o FtffIaltgitidaciilqn WOO
41$40.44s0 16 #1101$0*. . iYh 0440110Att be0.4•004Arg0.0 lit the Oilke of NIVOctig Creqtrittr get11004 •
kitthi$100446014.04414(0440i6rall %.(4404:00 ifistigtorriceiltrilt$ apprma.
. At 3 748..,
white paper, which would not haiebeenappWriate, Id at 513„ According to: the Senior
.
meeting r (b)(7)(C) d Enforcement k Alta that hitting, the Senior Official said, Allied •
'took down they re-paper fromits website. Id. •
The OCtE examination was conducted ot headquarters beginning:J.4Iy 23, 2002 and was
completed on 1.4arch 19, 2004 EXhibit 75, According to the examination report, the last
elcamination of Allied was conducted 1111999, Oozing the period atii examine' tior4
examination town received thendditiOna lettert from Einhori ts Well at Irani thlOtbiet-44itio of
Allied, Jan Brickinan tlItieldum0. 29. Dining tins same time &tits& staff numbers of
Investment Management and EnfOrcement coatteted llteir own reviPwPraMlie.d,arid.)ctint.
divisional meetings were held, .14 7.114 examination report was braid °PAW'•204.4 , and it
.
was formally referred to Enforcement forection. I L Enforce neat had already opened a matter
under inquiry (' ATH") Mardh9k 2004. Exhibit 76. Ott May 9,, 2604, Enforcement opened a
tr*W:i4veSPIglitigan discussed :Wow into baao&otk.thatexainination4. Eichibit17-
Despitc Boding problems thatmetiteria leen-alto EnfoiVertient :ctle did not send Allied-a
i
defielen0 letter, t'which meant the people tatAllieCitst 14t as &ging vinatibey woe CloIng,
:
- . • •
BrielonariA201;ed roal:earatodevelop.ier.froxt;Dallas vita obiektiOund i3$14, lending, '
Vocalditid of AlSe tvho also sent letters Oteoltplaint tii .the SEC about Allied.
ambit i;, Efig%o040:book at t37 According to. 449%0414.4m 5.ontwitorl. n about
Allied -and/hey - began a tong dialogue *About issues related tQ Alia. ginkgo's book at •
138. Einhotn, described Brickinaii as "one-of the best forensic dlacetiveS I live: ever
met,' and -claimed id ough hadtpent many horns analyzing Alliert.griekmair hai
df
42
?Ire
subipairitliAolAtooserthetrivlity4:001414,401.111:atay eeiaira. redicil.en:herarA
dlselastirel0 Wig parties. 14040114•0.40.100j.4.6e0 gertOrmol by kliOiCifikeitiOlietbt cnCL itiohilehtt
Ontlisepiirt should cligiegaliAte ,or 'to-1w at without the lespeetor aeiteretts'oprovat. .•
unless they get the hint that w- . k t _t . I • et.. Qin -Mataing Pertain issites1P
Transcript of Testimony of (b)(7)(c) uty 20;209, attached hereto as
F-Ybibit 78 429:
A. I.)00eierteies and Unitstial Circutostancea. vdtb the*PArrillmition : of Asia :
SEC to write a.report andthen tend a deficiency letter, Tr. at 12 & 20. But in this
ease, there was no Visit to Allied'anifice -whatsoever : caency lettei wassent (althougli
e '•• •
it was referred to Enforcement). - This examination ation of Allied •Wasililso prolonged by - delays and
thelli%gtilitoini months kb mniMA Moreover A'S discitsed.-below, the evidence thaws Pihithe
(b)( 7 )(C) (b)(7)(C) and . • worked- at •
' .the SEC,. andbebelieVes anyone •
•
l
(b)(7)(C) itiiii(b)(7)(c)
worked attheige :from (b)(7)(C) as an rambler,
(b)(7)(C)
(b)(7)(c) Irv. at 6.
iirintelnilifingthel }worked at
(b)(7)(C) Revenue, Sexvice.- (b)( 7)(c) tr.. at 17.
(b)(7)(C) hai.been retirement.siiio 07)
& 481.
-
TL
(b)(7)(C) -
•
(b)(7)(C)
told th IG that one'reasOn sheeOMired fivralhe SE(wa.s her
hoiethe: turned into a kind of . t, and a xeview °frisk,"
Tr. at 49: testified that at the time OCIE would send investment companies lan
43 .
IlitS.diffrOgiftagt IS tubiggt:t0 thelirOfislois of the 0400 A041974,804 foilr*Olfrcriflactiog Wore
sit' setosurourffilial piirtles..• Dia OftietiOit hos.fleeOperiOnoottliyibe Of* of lavotor C000roi. Oeciolefirs
" OttftloropOttiltoolillsof tIlsieoiloofe or tier if ivIthoitr rti te,poitoto 0.4t.ofts appiavid:
(b)(7)(C)
eight-question letter; which they ultimately reeked "illoVved.theirt to lie louse" .fd.:*
51 She further testified that examiners, Avero notencouraged TO:fix4 gtongdoiliz stating
-
44 •
This dq^cunientis 10 tile**.* IWOJIS OtheItlitAty.Aettort#74Faatt inay *Notre 004* *too.
instiostoo toolitt fiii63.04 144 itthot10$114/044 .petratätilb Atti.401kee4fUskotorgigkati, 0i44iagats
ot this roPott: sh(414 spot 4114igaliiiit*at.ciMitly;t1wiat
-
., the it GenekaPsapprovai;
a to (b)(7)(C) testifted.afier sterwn assignict this otarni":. we hit° see
eran e sat down and SheisIanited
e na reentifildindlitcords, add t• h dsle V.4
requested andanalysis She had done." Id- at 8. (b)(7)(c) _ opd
.
tesafied (b)(7)(C)
ptekdititint Se. She ■•• I WItittlwaccoolititit „at (b)(7)(C) •
r- at B. Aceordin (b)(7)(C)
1
2. There Was No Visit to Aqietrs Office Located Breda front the SEC.
the I xarnitation:ofAlliedri0 •o (b)( 7 )(C) SEC CVO visitigAllied.
sI. I 11.11 IT .8 •
at : i5 (b)(7)(C)
(b)(7)(c)
at 21. edthatirdinarn an:
°Risco 'No Rt east in, aa r r r e's=_ofce: (b)( 7 )(c) at 27.: (b)(7)(C)
tcstitiecL.“1 never go; • : t: wc were
(b)(7)(c) 1
I tightWAS 1. ; -
—
(b)(7)(C)
testi4ed.hodidnot reramnber tidiY hendquatterS . *as conclueting 2001
examination of Allied, andnot the nst.14. . ;.I o uvr* 00-C.1 10") which has 3
Jurisdiction over AC.. firms auchas• Allied, ()()()b 7 C
roit (b)(7)(C)
tett that: thiS
I •
•. It
examination .wasprehably not toidueted .,• ins. '1" t -.. n •-■ • RiTi * v-nanovitoous" ta• •
Valoaticinissnes. id. at 1920. In•ddifiO (0)( 7)(C) -, i alfrelahn'edAllied: vvaititewiniiesawaY _
.
from the SEC .andithat it would lie mote .effieietit tel tOtidiftt-thb eicantirattiOnathe SEC: fd. at
Zt-a But ti4 . i (b)(7)(C) c ' co '4047 441.014145 OillY close's At 44, Iatet, Allied was just iti .
., , '
. . .
114.trinetunent Iamblectto the previsions ottliertivneyAeterikAiked soy .telinet$04 iletote
-ftbelesure to Third prties. No redo 4111 ina too periernte4 .bytt*Ofticoet*petterteter.el. ;Recipients •
0
-her kvolvereent inhe t Allied =Urination they met Wit1.31 (b)(7)(c) an several •occasions (b)(7)(C)
Ti, at lg., Whea asked irthe.branch chief wa,sintolvotl. in ine examination,sshote,stified ; no, :
washigherk sort o4 than a normal audit. I mean it really was something dim . '
involvairi. Which itself was unusual.* eft 'asked, "Arid so what was
Imp ession of why -that Was in "OrligitSg (b)(7)(C) ed, "Well, he
A
•
31 14 mtv4iittitte:OVS-Atioisl 200.P koreitispitimi. ofeahre 1,VOC to V/lover .
46.
•
. Irhis document is subjettto:the proVisiims of-the Priracy Act of 197.42nd- may require. redaCtiOn. Were. •
, :
Aiselosurelit third parties. Igo redsWon lies been.performedlythe Orme lespeet0r. GeneraL Recipients
-
they're not [doing sontetidug illega]" IL WO•then ok 1 Do. yoa• think. then that
colors yarn-view:if therei-somebody Oille4 working at a ton w worked at the SEC that •
A of giving them the bot#0.t of the doubt as opposed to being more suspicious?"
tad, "Min the Venefit:ofthe doubl;ProbablY, Yes. rriou:' 11.64116.wiLsOmaiodY ot
even. they didnq reitlbrlitowthentbut you knew re—... Well., they should '
hoperullyhe doing the right ' : ....-.."- 1,1* `fled that she(b)(7)(C)
" v -, a 6.0d
examiner needs to be "Pro PRIYjcipugJ
__, t Tr. at 43 While she faun
ha goelloatt. c741011tgr sl* TOMO Aim. tbeliO (b)(7)(C) 41PINedY alASP.iCiQW f; .at
43 a it&
.
(2)
(b)(5)
(b)(5)
•
.47
•••
(b)(7)(c) (b)(7)(C)
e§tifiatlui a vidend tither,- I•
* 0 b)(7)(C)
1 t"
that she an' BIM ere "'VeryeQueerneewitil what they found and conclusions
meshed tog , - 14.
7)
(b) ((C)
sdnittedhe had.rainv profile= :with *mink the'dividend issue &nil=
- - YahlariOrt Issues striae he ibelieted Allied was properly ii . i , its divideAbut testlfiedIhe
was the issue was referred to Woo= (b)(7)(C) at 50, Aeg,ettling to
getan esan1naton xCporLreetred.thEnitatemetitilieiailinch.chicfhato i coileni-
then. the AsistantDuetor, and 111615:V41. (b)(7)(c),
. would, tOnnuf onto
(b)(7)(C)
t .fit31:. - ACdOrd14 tC II 4 • Arefi -; irTalrfilI :Ie : to tnkreemen (b)(7)(C)
) :-:. It2- - i ,
03)(7)(c) -
heeded to generate their dividends, : Einhomisaid in order ter-Allied wifundlheir shortfall they
had to eyentu* s.eteCillitTIO•raisg capital to pay 4 30 04(104 itvorcegtwdarmow from
.
-
new investors to 'satisfy income neqUiretnents 'Oeslitinghwestois: Eithorn reninticed to the
eonferatee. attendees, Ilero's atiatnefor titat flanghwtr .Einhorintirga refbieneinga.Ponzi
seheme. See littpliwww,fOolinOonie*pie.cOtn4the videgtFtP94;akefh)0 .
-
'I he GIG found:that oniMarA 3 :AAA Allied-vithielthe•
(b)(7)(C)
Senior Ofheial and others liveSinteitt Mtinagenient, Cop (b)(7)(C)
and
Exhibit 114 In that e- :4TtPlYPtto.aa, line.apur ysia shows that
llied. more than eevered it.s fetal divi Ontstking.the pet:WI 1995 to.2002:oitittasli
. . derived from its inv'estinent riett'iritice Winne& . '•
Our artalysis, OfdiSpositions duriuglhe:petiod7:1:1/02 to. 3134"01
shows that about.3:p40440p1004pcir4045ppgr,gits
monitizatibuotnoiwAsh-filkitOrs legtignizedlcs incomeitearligt
•. periods . trSing this 39%- to calculate what
. Of the II
49
- TVs doom* touiliect to itte.prolas et* ttielbibley Aeuitl#74, *ma inOy teghikftWitc#4,_ bef
to thintorties, 1%4x:diction has been pettertned by the ottioe ofastidetor4 ontraL
•otthis report Soilift liotWaitolitilite 01=00 tieWithOdttlite itisPeAbie qtlifnaPs4POrOVO, '
-
prnoped sfroindispositions during dag period 199540 2002
presents me niertitization ofmOnash.inontrte ieoguiz' in
another year, m4041'4 this•Pa* tO the :cash flows generated by -
• 1 A4' 17Trii issue E., at 44: The examination iepert coat:shied the same language used
(b)(7) (C)
in mail: , . vo; . it added "However this is 'assuming that every year atleast:39%.01 .
;
the p Irwg':. -
- ; from dispositiOns :shOuid'i;o recognized: as cash Ntibich May bOhigher or lOvVeribati
actual," Drliibit 75. . + 2
(b)(7)(c) 1 (b)(7)(C);(b) (8)
orepared notes ribritit Allied related te her tvpik on 1
k
investigation. EKlakt. 80. Aaneted,abov - 0 1 • e 1 4* WW1 41. 1 t PM That Ot
(13)(7)P vat, 044 (b)( 7 )(C)
(b)(7)(C)
an examination
b)(7)(C)
of Ailleil, APP
ut the exatnation.rindwas. s Pi MIT *hey liait :several= .. .(b)(7)(C)
: a
* e I II vT :71 I "
50
This document hrsubject-to the pio,visions of the Sivi4Act of 1.04,..aud may tequitifg Odt.tgion Ji.dtete •
disilosure to iiiirii:perties.. Nored.setioo has been11 000mA by the OkrumlitOtopectoiaanepil. Recipmuts
,
b)(7)(C)
.enEibtuaty 11, 209; and f.tgreed to give
(
otitaeteil the
testitriony-imder oath. that sameday
-.. • . condi:111w= that WI of her Allied files:were
gone- ' "I:" drive where eatarnhintionwork-paperS-and
reports. r. at 24-25. Accrdi. 404s C‘lveD4 the ,ritei were missi
- JantlilrY w en:another letter0fteMP ed tame in4om run Dri*man.
-a 32-34. The Senior' cid for:VI/aided this- : letter tin .00IE . (b)(7)(C)
requested ouvert the-letter to eleetronii3 fontuto send to the•PRO. .H at 31
While doing thi 'cledia also send the PRO other documents from her
examination and ern missing. (b)( 7 )(0) "d: that _the last time she had checked- the:
Allied documents on the "le' dtiye *us smim ye.ar She campleted the Allhx1 -
totanfinatki Id: at 3i-32. According (b)(7)(C) hfrAMed uded.gircaidshiets '
(b)(7)(C)
exaMination report iooPles 0 r0, udgtitOpmemos,infoRranienfann
:relevant fr4 at- 26. , .
SwPrisinglY had:ma& io prOfille o ide ftorkthe f4P" .
diive to IlieCtr trafferted .-the,tase to Enkatement,;andihon transterro4 tat-
file to- a CD: te take home* for Safe .,_a±•,H -because staffs had .drifts had been walling-414 ' •
documents were.• /4.14.27.
b)(7)(C)
said her hard.dtive files had beentOtally deleted. .
AL at 39.. (b)(7)(C) Mught S is nentssho behevedwereinthe •
a oopy ofthe r (b)(7)(C) .
Allied file on e chive- Exhibit 83: lil additici ed that several timeis SEC
51
Tleis riadnaleat .ltatih,Rct ta the ptiaat OtbOrtiraey-Aet at 1#74, oitubajof rkitatrCrOugtlaa :41014t
il$61aSaftlf ttilr41:rit00,, tiou.414010.0101: bittn 000:004:PdWitftc of hgAlligefo O. karat 144sVetitt,
001.6kongsti slipiA4 Nia01410.1I1Witer. t011t VIVO* 004.1111000t Mr1.04e4Plfee-Vat,
(b)(7)(C)
*Alter': tier Allied file wasgone front the.“:1:n dri she bald her.
(b)(7)(C)
Id Ml. Upon beating that. the files 4. veretnits'
•7
(b)(7)(c) I eSnended, 001r. mrod., vtoCirA • IlOW•inany files?"
provicto b)(7)(c) whew. (b)(7) (c)
• 1 *low wily fdmiTyri .
ccordiniab)( 7 )(C) L (b)(7)(C) en. ei (b)(7)(c) e hilAli(r))(7)(C) IAA nreitims.
(b)(7)(C)
i -4(b)(7)(C) /
14 at
61-62, additior)( 7)(c) ingested they may also want .go to the • 010 Since
she*. read that the- 010 was reyiewing gmhOra'n hook. Ai 62.
(b)(7)(C) (b)(7)(C)
tified she et Witt to telt bim that the Allied file was
missing m e .L.:" drive (b)(7)(C) r. at 62. AccordIng b)(7)(c) (b)(7)(C) did not seem
veryaurprised or even concern oOded, • •
talk to 101T1 to see, Whatthey can do qbout it, Ler$ ibilkto• then4 •
see if tb.ey Van get them back and let's talk to Motto ,,geo who has
access t it, arid then well figure Ont!What we'le going te do,
'
not th!nls (b)(7)(c) •ea.e.tifim to the news was normal. "if. at 0 66- Two •
• to the 010:. Id- a 63. At that time; she had oot.hoard back from
-
tOatified, "Dq)
e di somebody gurposely deleted the Arnett Mel
dora ara.
r was . Saida-mild havelappetied *fine .between
20044nd 29019, M.4016. She:rinthe.r ibmeo e in, OCIgdatetedthe fades:hbealte .
only ontiWitii tfcceSS ba' it IL a 45 she taitaguifeeling.That
• responsible tor the deleted files and directed the files - be deleted or he
e ,•11.1 IiinistIE ar6869. •
r
33
.•After *lacing (b)(7)(c) tesiiinotty; -the OM tried te d eterinine if = cimid find when
awl who delWeri those Ities.. The 010 teamed, however, dutt.dierein no way to anyone
the SW ba determine:who deleted files from a sbared - dtive.
52
• .„
• •
This dqeutatntrissubjecitcrthe provisions of the kriv.acy.Acilit 101,:and bisty requite rerlaititia beforg . •
.distlosipreto thirdatie' No ri4actionta.vbeea.peiforaledIy the Ottlee-otlitipOctor donerat.
-
whether the files could be lento • (b)(7)(C) '^•• fiP4,:n don't believe s" Ict at 56
further teseified, "I just haveal follow .:-.7 . lap on that particular issue'
(b)(7)(C)
teatifiedinyone in OMB on the."40.Act tide *coal have .ddetectiliost *Ma tinge
they have ACCeSt, and that be did nothave any idea who deleted the file.' Id at 56-57. When
• asked whether he •deleted theta froni the: 41:" (b)(7)(C) t„,spended, don't evengo on-the .
W. The Enforcement InVeStigaiion 'of Allied Began Alingt Two Years After Einhorn
-
. I related entityor personas reSttit of ttutt investigation,. Separately, the MAO als0 .
.t .
- According
Accordingtnihe senior Official igreat job on theinyegigatian.: 5i9,110
. at P ..The Senior r isc
Official Tr tea e1:1, •
.53
• 5%
• •
This document is:subjecttothdproNiskuts- of the Privacy Act of 19ii i andluarreqUire redaction: her*. • •
disclosure-to third Otitis...No reduction hash= pertonueirby Thetitruce oLlispcclor General. Reetient$ '
ofthisreportshooki notdiaeurmete or copy it viithoubithelospectorGeiteraPiapproval.... '•
(b)(7)(C)
• Ae,cording t • Entbrcoment received approximately 120 boxes of
related. to Allied ii revs ox to ten million e-mails during their investigation?
Tr. at 58-59. In addition, Enforcement got six boxes of documentszelated to Allied fro •■
M at 16-17.
(b)(7)(c)
old the OIG take had. worked for 65opP.,or Its 'Lybrand fork
t - a; few years in
- .0. . • , , , ,,.' onvalttation itqUit relidkd to 0:C..brides rd. at 20. Doting
'the 1980s and had some (b)(7)(C)
the Allied investigatio , .• , • - three difterentaccountailt.q asSigtied -to work
t - ., 1
•ratit with ' (b)( 7)(C) (b)(7)(C) way, then wiggler acceliOtaut to r w _ .
brierporiociof , • :FM A 20 until the end of the .
. •nr-Fait04
inVeStigatiO n 't
(b)(7)(C)
testified that (b)(7)(C) .: vety finpressiiie, bufthey lost' him to
work oo another' itwestig • • ..
(b)(7)(C)
orcement did notavork direcdy • n. the imrestigation,Athough
hetalked to her at the be 11 1 I tefeirgandvould get regular;
.36 id, at 16. AccO (b)(7)(C) ' =Wilt "pretty much agreed
csatnent of the valued• ' • _:•0 1• •-it
A410 *444 ,(4. at 22. As to the
onzt- eso me and dividend issue (b)(7)(C) that Enforcement danot lock•at tbat
issue specifically during the investigation_ at 54.
• . •
Several days after starting at the SEC (b)(7)(c) °then at the SEC met -with
Einhorn, along with.Fanhotn's counsel and co eague,as well -as Blielonan-on
:
(b)(7)(c) (b)(7)(C) 7C)
(b)()(
N. owing SEC staff were at that meeting with inhorn: (b)(7)(C)
14.010-161- Awardingto Eli inonti he found the` EC-staffto •
"engag -polite
' inquisitive" although tbey had no knowl -
althorn had witli (b)(7)(c) (b)(7)(C) 0 1111Ore$ book at 134 84.204
•
(b)(7) (c)
According testified le gleanedinsiglittrinto Allied .through his reetv
Ofthar ottitpilOids theitafiefeANIVIlt fOribUgr4
gilii he learned a Allied made snecial arraogeements to. deliver
documents.te • " r71:1-Tv - .at thj Tr_ at 4445.
36
'When the ad ask. (b)(7)(C) . . ut-whether OCIE ekarninerhobaye conducted
examinations of kIMIS I are tbearef la • a rceknpnt *a on the m
(b)(7)(C)
:,,ZI ,11141
54
This uutueoeut Atilirett10 th:c!ProviSi000.11h0 1VII*O'.401304 tiOd Inv •**quire cedactio* biro
disclosure to thisil owlet. No rbthiothat has• been poktin:mint by itbio Witco nr4nonctor Contd.. Reciiplegs
.
the P4.0,:ark4 PlItY fillie-t0 fttiMIIIAM 'and lie:Onna%‘POP. cAtaiblel (b)(7)(c) fir,
et Altertueoliag with ET' • -0 1$.fproe 1110Iis rot .sapomog - •
documentsW4S to BLX. Id. at IA .edthey lad a lot:tf lettets from:Binhoto
.
55
- This document is:subject to ihe previsions:orate Privim* Actor. 197 114 ,andrusy require redaction Wore
• .diSelosure to third parties. .No redactiois has heat pertormect 4ftheDificeolinspectorOeiteraL Recipients,
Odds report should uoi.disreMlnnte ot Copy; 'it Viithout the Rupee:tot Cenoiral'iMspprOvel,
(b)(5)
As discussed above, the CommissiQu has not updated guidance b the area of valuation
since 197k sumeugpnai of0.43,1sheli00.thla is 0. t4totiouSty My Me1
Noon for the need to update the guidance, aecordirig to the Senior Official in Investment
Management, is that a lot bas happened in the Wus* •slime 1910 and the industry May not
- . .
believethe SEC is standing behind guidance issued that long ago. ill at:89.
n
(b)(5) p.
settled wag so great relativelo other areas of vvrongdoing. Id. at 104; See also Exhibit 9.
56.
T.14 -40.041eatis sntalf etto tho:proviiialitattlielrfitaeyikttof 074, tigal DUI require redaction bereri'
ilit4foretOthlrd pgrUes. flo. •rofs..1*
401 0* Of
1.trofikilky.t1i40A.r.*.e Orli:vector GeneraL Itteeipiotp
oil& rettorkslaiold tot ittittiikt* ot -oVra *004 the ttiopeiroirititeraes-approvaL
(b)(7)(c) ' . . - •
toi4my Alperviser, .
4 1 . . • - 7....• ). 111Ve the experience, Pd
t oy Catilte tlecountant." Id, (°)(7)(c) tOraeCtilial (b)( )(C) .. e ArstacQuntailtA44301- •
to Iheinvosfigaion, had the expertise to loOkatfi3nfssile. fd: Lie wasn't sure, however,:. - .
whether' the other accountants assigned to the itaiestigation were capable -efinaidug a
detenniation on that issue. Id-- •
( b)(7)(C)
testified he diduortry , _11.4. . S.. _ : 1 : 4 dorte- Id. -..
ed the lie, learned
. • . GSM ..., Ian' duo agre.e viith hei:.cash .
.. ,ysi.sT • ated tnthe.dividend!ssue. .114.4.50, MIN - . ' ''. • • whether the 'MAO
looked at the: issue. ofAllied's dividends, Zit* 55. B (b)(7)(c) tea. that the dividendissae
was tied to the issue of valuation. because it appeared . fr . .tini. .eiraales
I1 to show thOiriv.4
- I
-dividend issue interrelated ki die ItalnatiplliSnnai Senior Official Tr- 44-99., (b)(7)(C)
teatifiedhe did 400rnecessatily agree Allied-was a Poral4like scheme:he thoiight - 1 i
mixt* rigliidt.ROsitions in later . years the.BDC business model made it inheretitlyiift.
Id...at 51.5i*.
The Senior Official testified the be recalled the:primary focus.of the OCIE exaniittaiiria
of Allied wa.5 their valuation, but that there was an bole of Allied notgenerating enough
-
revenue Or companies to maintain their dividend payment- Senior Official Tr at 77. The
Senier Official did not:recall hOwle learned about the diVidend iksue, but said there were
several issues associated with it; lit at 78-79 Those:45mA included representations in Allied's
registration Statignent$ 'when they ral$4I money from 14vgdO0 abotitly4t1hgy intended to use
. - the Ribcoeds or arid if Allied said theywertiaising money' tn investment tolitivtliey were .
reallydoingSettellitig elan. leL According to the Se4Or-Offuld., One denderttWai. that they
I-
weredninithoffeiins to pay the .14e441 when theirjoimaments were 14 generating enough
. ,
. 57
06010egtissubject Orividsloasiattlie Prbfety Aktijr:15041a.larreqatro0200.0:tfeore. -
iospore to Wok patties, lihirtialattlea has been performed by the 011ie* et. taSpeetat genersiL Recipients
- illst
of thts tportstould oo6liSseialitate areppy it wireliporthoLosoiforGonotIOtorOvid...
(6)(7)(C)
•
According . Wilmeriltdo (b)(7)(C) Lk" tteetieg fto:
discuss theAflied invesvanom ExbibitS8 - fr‘• tit% (b)(7)(C) tatifidd
Ltas likely a. 0 It 1.1
(b)(7)(C)
Tr.:r:1 '
r.11■ il;-1110 4e: :11
(b)(7)(C)
• I
(b)(7)(C)
6
. at 64 ail . t
38
liote:that the Enforeezried Manual does tot :wept-Wells" meetings, only
Wells meetings. EAR& 87. Moreover, the 7.0forceinent Manual states, "A Wells - notice
should bemwntspgwheaposstble.: Iffu We notice is givenorelly; itsliould be
.Proxi1P-4•1WoWeabrmitleAcontrma4on." Id. it appears no **ten notice vies given
to Allied.
.39
•asked if there were Wells.*meetings in the Allied investigatio
40
The "Wells submission" process represents a critical pha:se in Enforcement •
invesfigatioris. Pursuant to the:Securities Act.Releaselito. 5310, Procedures Relating to
the Commencementof Enforcement Proceedings and Termination of Staffinvestigatlons •
.58
(b)(7)(c) 61.(1
C
())C the:RI:it, .P.ithibit.g9.1(b) (7) (c)
(b)(7)(c)
and aaOtber pattgexfntox:Wilmektfal:O•
:represented Alba .•.777Eaaryb'xt
ted, heavilyanned. cb)(7)(c) .r - at43.
ter& ate ted thathe ets bitmght .W11 3 m
Oneo " fd. 0243 (b)(7)(C) 6 ik the :lead fOrEnfOreemetit
the lead for Allied in meting- 14 at At that 'meeting,
accord %hued the frtd: charges $44 ' e
e.company, as Arlpst this one perSOn," re rnngto this (b)(7)(C) •
r. atL .
The 010 obtained a copy of the presentation AiliCtr$ counsel gayer to :EAR/1001e* that
resulted in the settlement Exhibit O. Thiihig that preStektatital., comet for Allied tinkle-6ft
:principal around:List (1) Allied had not overvalued its portfelirk; (2) it had accurately diSelosed
its valuation process; and (3) based. SEC precedent, AlliecPs valuationpractice ilidootjt§titY
-
'them th.enNortunity to Ole a written statement "setting forth their interests and position" -
opportunity to set forth theoasons why thettiffshoUld not pursue salt action before The
Commission brings formal charges.
59
••
• 'Oa 404itieuit 10.14e0 tb5.00sl .iiiees:01 the OrliagY Mt 9004 7 4. Add puitrOttribtella4thik bikre
Itistioute te:thlra.oetttet. .tocIA410-efos 0,10.01ernotO lw the ri-Offl
. W00110000 ,ReAtikals
• prtMs•rePorestioula net-Oselataki4 ottopy ItAtiltrokt ttielotioetortewolirg ivproOt.
oputcousiderstion, watili4p4ve n.pxyamn ?wIth414 ihoy 4kod.
rne.
, .
on the other hand, claimed the ogethertnede the ,
ring a fraud chatge against Alli d the MG that
vided input into the decision to drop
Id at o*
it was decided that EnforeementwOuld not pursue frsod lehaFgea against MI
testified: . •
•••••!•••
AftevoonsidedUgail of the faets4the PaSe urel the atguntents.
•that counsel toade of the fads. and dinZ143141/Z48 including
.
flit 117171TO I :
(b)(7)(C)
abut wrmuld ac cept a beolcs and reends 6440:lee 90. Ift2that-
'41 asging lg,(7) Ogam taut:44)y ohue ploys:4a /.440.1.i. liskoap; .
(b)(7)(c) • • •
60
(b)( 7)(C)
msp on ood ol
- ()(7)(c)
13 special ottalove them
Briribit91.
. • •
Whilethere is In) evidenee her that lied agreed to pay a very similar Ming
• happened hare at the same tithe - - ers,inci (b)(7)(C) offered to have I y
at - •
(b)(7)(C) •
ed tIlatifMiynifàrccmentiva4 -•-
u y overvalued,. Enforcement Vvordd have brought a case that they were
• 3 •
•
•
e. 41 • : - a .has pitvio.u.* investigated Whether former DivisionlYneeko,
(b)(7)(C)
greater access
accessio; and .i1114.16; 94,:efakeelinintinveationtitin* •.!
01 •-
ICKA Itepott of fitirgSfiggiQUV .1\10* 6I0-431 7
t•
61
T.474.000aoleat fa atihiott0414roitioai otilk0iAtocyctoi7oct moloofee.roacttoo
0-440111**thiril!POR* 1•144040. WO' he* 006004 by , thd Oirgebt hispiegtor 0004 Ige00$
4-tlitivrepoiretliO444.,1100 be 4. 0 1 th:0104 ,Ii.1400417 Gellogrs oppona! ,
(b)(7)(C) (b)(7)(C) (b)(7)(C)
materia9y oyerphaf& op: le
• tOrtrioct
AMON investments- were:weli on (b)(7)(C) ITMI WM wo 0 ve- elpod their oase„
31 (b)(7)(C) Ix. at 86 facto ihe 01Q thotAllied argned.
oreeffient n o 1 0 A
Y estnients to show fraud triahat li
e.1 •
• Ehihotwrote oholk his itiew ofthe SEC settler/lent with akd ho• ; "'The
consegitelite of Allied'idllegal notion was the Ughtest tap on the w st with the softest
feathers.' Einhornbook at II& Ile also bellevediheowag a 4gtiOing d[stennece betw.etu the:
findings and the Order. M :Pinhone's counsel told the OTG ahoilthis fiustratIon with the .
settlement tesftf*g, aft was like all thisl)appened but no one was rosponsihle *414 4 ' Einhorn •
Tr.. at 109- EinhOrWS counsel said irwas "quite ;naval to me- that those [Orders] were
potentially nOt extracting any real 'penalty at all inari3i Warrann anybodY2? M at 111.
-
Einhorn'S counsel also complained there was no reference to BLV or to the pretexting. Ici at
10-9 According to Oinhoro, ,theiihtl*plry at the SEC at the time was not to do any ha= to
shatr:hohiqandthat the belie was ifyou punish the ontpanryou punish thu'shateholdem
.
4'4 112,
42.
_. As noted:above; "Eldora's letters to -the SEC often refereneedvioblems.With 13LX,
Allied's largestirivestitient. Eltilterrt also diteussed.13LX at length throughaut his book,
• includingin4icating tat there were convictions against At leasY. 911P;MXof5eial. See,
e.g„ Einhontrslook a.0.11-3S9; In the Jonuory2008 Jotter to the SEC. aihont _noted
;
that the problerliS with EIX were fmallreornintio light and win% "We havesaid for
years that Allied-run entity bus. engaged in gsygematie fiaultatregW at the AJ"
rsihibit •
62
This dbcument is subleato theprovisiOnsof the.Privacrtief of .1974 t au& utny require to:1'1141ton before
disclosure to third indite% Noredetióbas beett.performed.bitheOffice ofInspettOt'Geaerat Recipients .
(b)(5)
Ito the Director of Investment Ivianagement, told the tde: he
thinks thatbtrAttient wanted to b • : • •• • case hut-tboiliear were, not onina ta-ap.tAnnmvi
firm the. 0.rmimik.qine At that g
(b)(7)(c) a I -.14.1 (b)(5)
settlement artier Is se.Oroacti rennyo minx a is
sort of useless," (b)( 7)(c) lint Tr, at 9. 03)(7)(C) Witt 164tifiixl, "it Was a slap on the miSt," but .
added that Enforcement was dealt a bad use of the pressure Allied-can exert given
their political connections as well asihe Coimnissionatthat tithe being tcVory hinds.oft" Id a
- -
-4445. •
As noted aboye,nne ofthe only two elements contained in the settlement order with
Allied w,as thar it conEiniied to emi 1wn CV()M nvArq1ifQ niwertpriv vat/mann rimepee
( )(5)
Exhibit 92.
(b)(5)
(b)(5)
RXhitit$5., fit additiCial (b)M(C) . .....
• :file' sg3'01" 6.tift-WellS7 1'004 PeogritlgesPutibdia.Alliecrteb frinidvas a •
. ' sarrOus tongidetationalot onli for thtoo--duxinibitioef)(c) 35. (b)(5)
(b)(5)
1
1 z•
ecl thatthey didnotts a. he removaanazeplsced,. kJ. at35.
wit i eu than, bigger was to have a thirdTatty oonsultnnt "
433. lie added searied.to stricteriVitlinthere. Inyestmerits Arai
mi. • • •
• 63
(b)(7)(C)
.
SVC 71 some i•41111 1 SAI , I EA, but Olabilild.untlgpthoagrecaileat
have.000 (b)(7)(C) id at 34. ', eitaikoil, "So was there a.coilcoil
-
laws violations.
la at 35-
•
The:Settiot;01Beial testifiatatte retailed. Eaformiltilt 'found oilopolScil.W.40 More
problematic: than Mlle& related !CO Allied gvaluation brio itiveshitentS. Senior Offici al That
98.- He added, "We ihoaghtthererwas an adequate basis tdraile4t4e6ously totsiderliv
charging thatpersakandtor the company pr anybody else with 410-fraud: violations" la at 98-
99 1110$enior Official testified that the natae (b)(7)P Sounded familiar and was likely
that person. Id. at 98:
Allied •o. p.T. . .. asettlement ortkrwitlitito Conamission- (b)(7)(C) I . at 1.2... That tetra
• stated, in 0,4 4—... IrtiliOe That itiged.COntiTle$ to b04 lg.:, , , ..• . cOlnpalWvai 4 irm.iggraca
Os *film 10 001illilir whit tho kit* and spirit ofilie:sactuftslaiNil:" Wait 34. Eiilhoza
- -
•64
(b)(7)(C)
ad weiving.tha: Onion letter 42. AS los
monitoring e - Allied coinplied with the settleanent agree& fined, 'Mete ,
is riorprov.iSiort in "the - settlement order] fornicinitaitg." 4.4o. cd
There is typically not language in settlements that pn:;Vide& the .
details that you Eire, 1 think, asking; no- There are independent.
consultants or monitors that are put in place in cases Where we
believe that's necessary anditiS theirigh tO112ROLK the comittct
and perhaps recommend certainehanges... not Whet was
put here, whawaslequired
t here, forthesettlement And ihatig
lint eetrimon, • •.
65
wsillokt thot iovutogi ot site .PrOkeY Aztor19741 00 44 toolotodatio6 book
-
dhelosere to thirct potties:. No reffeelkorhos hoot performed by the Otlieeefinepteter Creeetilt 11.040Stit,S.
,
panclusbut
In sil, tbe (AQ'a findings &Ong this investigation raise concerns about bow: riguisiona
, ,
were-made within the SEC with regardto the initialing and glacial► a to exatninat4m and
investigations. Mac we did:tint find any iiiiiidiattONJACific wrongdoing-on the:patt of
. =Etat SEC emptoyeer„ vie found that scrionn uiid crabloallegation ..$Agaiust 0164 Were
•
67
Thisdikumiatis tub:feet th4txtvisiontathePrivaet.A.crili974 kaiid niatkoritiirefethietraitAtaihre
dikkisisie to third piirtiesi,..bioredstedo,nlas:beOn ii.ertkaiiidhlf.thebifigea(tssigetdr Otilerat Aedpionts
01*$ report Shamid not rikse,taipaie Or copy ifire.idiatit the IiispecthrOttiWaNkOr0.41.
not initially ilivestigateth and:in:stead AilicitWasalite;tostteeessfOy lobby thepWto lOok
• intontlegations against its .tival Einhorn without4my sped*: evidence-otwronzloinzi
We also fenttd.thatthete VMS a lack of coriunithication behinien rOCIE and • •
• Enforcement with respect to pending examinations and invittigationa- Morenvel1/4,n:fr.iim-er
Enforcement manager (wild:LW slicks104..e4St pedbrmaace problems he Wastaakedta lettte
• Enforcement) was able to obtain a iitnificant ameuntof.ens itvc information Ilemay have
disclosecito Allied when he became a reejStetee b)(7)(c) _brMlièd tt.YOUragar IggirifiXt40 -
SEC Further, we round concerns with .both the 0 CIE examination ofAllied and thovaulting •
Enforcement investigation; and belleventheteatcpitsicioft abattv the Went to Vilileh Allied
SEC connections and aggreSSiftittlai6StoaY have inftneneed Enfortente:nes,and OCIE's
decisions in thesonatte&
{1.) how exathinntionsond investigations are initiated %tete there are retpleSt.1
froinoittiide liaisons oterititiesiiiiit whether speeifle ellegations
wrongdoing have been. provided, in detertnining-Wheilier to ambience*.
examination or investigation;
• (2) informing ittdiViduSIS arid entities: underinvestigationiliatbey are tiO longer
subjects of an investigation in a iiinelyinanner, as reoired by:theEnforcenient .
Matals4 .
ensuring that other thintitadiiional Wells meetings.ate nit utilized by
aggressive counsel to influence decisions itiEnforcenientactions: .
(4) incorporating pioviSions InfOlibroornentiettletnent agreements *it:ensure
. nAinirementa are adequately toOttitortdritirepniplistiOC
OCIE cotainiterSysteint;
•
(6) Mundt!g that 0ClE. Management:is -not and* influenced by thepresence of
former SEC employes in ticarninatiOns and fliut all Issues identified us
potential federal securities laws violations be carefully considered for referral •
to Enforcement; and
68
iribOtriit#004thieffiditiOtilvig0iig otib. PrAtiml .44.00014, 44-3filoy tookovolactioct6orite -
04eitire to Will Steck No kedhetiewhistkeeit Iserteriaea 0$ the Ogee ethiapektiitiOelietat. Ueeitgeett
Itare.0001-#44--04 AttoSnite 4Yr copy It1.0.00100.44040,0900A0 *00.Atift.
(7) :05gualentingille reasbus slx0164 iSmie.s ,rferted:to raakrAine t
aro titirgaiglit447
•
Submitted: •
a-014) -
•COncur: Date: 16
Approved: Date4 am
f9