SEC investigation report No. 502

7/27/2019 SEC investigation report No. 502

1/47

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2/47

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! iThis dOc.Wnent is sUbject -Io;tbe:provisions oftbe,Privaey:Act f l 9 7 4 , : a n d _ D 1 l l Y ~ : r e d a c t i o r i : b e f u r o , d i 8 c i o s u r c ; t O : -tbird,patties.,No rediCtion lias beenpfi:nmedby:the-Office;()f.InspeclOro=oeraLRec1pKmottIUs report:Sboutdno'ti! - ~ : o F ~ y i t W i t h c ; I 1 J U b c . ~ I o ' ~ " ' f P " O ~

, ,,REPORT OF INVE'STIGATION

/' 1, ,: . UNi'rEnsTATEsSECURITIESANJ)'EXCIlANGE

C 0 1 \ } i 1 U T ~ S O OF " "0'" TlUSIDEl"1TAD G'E 1 l i . 1 T l ' _ : n ~ T,:-" ./.,y,uT;a,l:Q,,1 :,N.', ,FleE ,',F : . J ; . ~ ! , ; " ; - . " : , , ~ ; - ' - _ ~ ~ ~ ~ CaseNo. OIGS02: .

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~ " i u e that 10tmet ...:.....,.:levelofficiaJssueb.8$ Cutl' ':hay, ..-.-ter:acoe.ss.$l(J :inBuene witht.b#- y ~ .. , . , . .. JJt e-:ea-. .. .. ..DiviSIDn f a t d O ~ . .,'

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'The OIGaIso i>Uild tbatThoJilSen did notconsultwitIt DthetBDfil:rcement.stafftbltw ~ ~ ~ a n . ~ ~ . i g , t h e r , o J P . p l a i n t ~ . A " t t 4 0 \ l 8 h t ~ w t ~ ~ B . n U ? ~ ~ on external COtlll.1J.ul1icat1oost 10 om view1 binc1uSioaofo.thet 3 . n G ; ) ~ ~ _a theDeputy DitectorofBnfotcement" 'ill tfie;de1ibetatiYeprocess.and itt.,tlOtnni'Uiiieatiom 'With.- . utU:ha " f " ' " .. . . . ". ~ ~ \Va,' . '., y . e ~ o . ~ tm p p ~ C ' o . U l 1 P . 1 V P t ( $ ' _ ~ m s ~ m . h Q ~ ~ .

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TheOIG a1so round t!?at,1'bolDSeD::and tbQ . p t ~ a l C o u n s e l d i d 1 1 O t oDta.1n'fOrmalCoDnttiSsion approval be1bremakihglJiii critblMtetmiriaUom,about.t:l1e \liabilitYof: f i J t ~ , E ~ 1 n ~ ) l S . ~ w e (tid JlQt M 4 ~ $ C m ~ Q r w 1 i ~ t b . ~ ~ . ~ funnaJ o m m i s s i O n ~ v ~ we'm.n111leD4that1be:citeUmstances:mwbichCommissi'on, .approvaUsreqtrited Should be;clarified SO,:ibat :SBC'semor b d f ~ awareofth6irauthoritywhen";'';:'W"-_ decWO that -'.' fUt: .;; . ' .' ~ ~ . , P$ .. ; ~ y . b i l : ) ( , t u r e C o ~

. \ V ~ f p q n d ~ . B n f O . r ~ ~ s ~ t o , ; J P M Q . I P l d m t ' w ~ ~ y & l o s e d : b . Q t l - p u P ~ : i l l f u ~ n ~ i t e o . n f i t J i : l e d t b a t t h e r e ~ waeongoqm:vestigatk)li$:iQto:BearSte1ln1s. The 010 v ~ i g a t i o i l r e v ~ e d ; t h a t t h e O f l i e e 1 ( i r G ~ C Q u n s " h e ~ e d - m t l

. ~ y ~ t b a t k # ~ ~ . - e it l l : S ~ w ~ , d . i d ' . D , Q . t ' f P l ~ k > s ~ ~ r w ~ Q : p p t p ~ ~ r ' ' ~ , b e c a u s e t b e i t . u I e & aDow furdisctWon in extraonliilary c e s i b t l l O n ; ; p u b 1 i c ; i n f u a u a t i o n ~ i o .

~ b . t H J i S c l o s . e a Howe.ver, there.ate 81$() :SeriOus b i , a b O l i t ~ p i ' o ~ o ~ _ . ~ ~ ~ ~ , v ~ ~ w U p o l . J P P W v a l : o f . ~ C Q ~ u ; _ h i ~ we.bmd: ..lIdtQt~ w i d H ' e $ p e c t . t o t h e a a ~ t u J e l . _ P 1 ~ i ~ : t ~ ' ~ ~ l U 1 " e o f D Q n - p . i b 1 k t ~ n , . W b i c h w o t e O O ~ J e : ~ 1 y ~ ~ '.'

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Seope oflilVeitigatloJl.TheOlO. . . . . ~ btained . . . d ed'fbousand$'. o t " ~ _ . : 9 te 1ev..Qnf .> ' ' .. u w ~ _ nu .. revJew.. .', - SiCsta.$':.. j

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' 1 h ~ ( ' j i G ~ . ~ n d u t e d ~ i D t e t V i e . W i o f t b e . f O J l o W i b g Enfutcemeitt.staItassigpedt() vQus n V : ~ D $ m v o t r i n g B e a . r S t ~ ; . ..' .ENF BC 7(1-) Q1iineh.Chief/'C...1w:o,;. . . . . ~ : 2 6 . 20(0).. . . .. . \ " ~ ' U Q & J . ' - ", . '"ENF BC 8(2) BranCh h i e f ( ~ 2.6;.20(9);

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U r i l ~ o ~ o t d e n ~ l 'bythe o n u ; n i s s . i o . ~ a n m t m a 1 i . n v ~ p t i . v Q p r o e e e 4 ~ g s , 'shall hertDli-public... ItCoP.UQlsll.QD. o . 4 J l ~ a.......o.. -17'cF.8.- ~ ~ 7 3 $ - 3 .', .1I

(b) An=nber 1 ' . ~ y ~ Q ( t h ~ C o r n m q l c ; ) J ; I . ~ J . J Q f . _....(., (7)(i) DM1Jgeto ao,y lliJiui.thorizedpersonor 1 e a s e , i i 1 a d v a n ' C e o f a u t l m i z a t i o n ,furits release.:non ubJic:CO........: ~ ~ f i A _ .......... otany" iii:fiitmatiOn. ' . ; ..... ~ '. P. . ~ ~ .. ~ ~ .... ' . .'. ~ J i t a i n e d ' 1 I 1 any such40:cvmeotor n y ~ n f i 4 e n t i a l ; i n t b . ~ n : (A):in cnntra'V:entionofthe U 1 e s . t m d ~ o t _ C d _ s s l G . 1 l ptnw.uJgatedUDders t I ~ s . . C . '552; 5'S2a.ana552b;olt(B) in cltcuiDstanee& w l u : : t e t b o ~ C < i i i m f i s s i o n . h a s d e t e m U n e d : to. ac.en.fd: such' i n f u ~ n . ~ ttiWttI!lQf, . I'

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V ~ 1 , f $ ' SEC ~ p r o b . I ' b . i t ' d h J ~ l o ~ ' Q l ~ o t t l ~ a r u l , ~ ) ' . ' ( ) t irimrmationand:dO'cu.n1enis.otother11DJl"pllblfc.Te.c.01'ds:ofthe:SECobfamed;ufthecoutseofan, exartrina&t:l& QrmveBtjg.oons,. ' t b c , $ B C o . ~ ~ o . r ~ ~ Y Q ~ 4 ~ e . o f ~ , j o f b . ~ q . r docwnentJ., tu certain ~ ~ . 1 1 O w e v t : : t h e SECbas authorized;its;gfafffu'd i s ~ and.gtcuit ~ . t o , : m a t e r l a J S itt its examina&n:811d e n f o r ~ :61


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.Tbi$4Qc'-.'f. .:is....1;, :M:tI . - ,..;..in ftbep..: A .... o t 1 9 ' 7 4 - ~ . i ' "w .-.A_if"'. L"'""->a: ....t .. .... :.:r.:..d'. . ....._ ... __" HJ' "'" '" r ~ ' _ n s . : o . . . . . v a c y ~ ~ .... I ' . l I I I l \ I , 1 P a Y ~ . e , , _ ~ ~ ~ Q ~ . 1 I U : _ .. ,pattlOs. No redaetionbasbeeaperfunued by. theOftk:eofli1spectorG.enetat ReciPientsofttaiS:reportBboutdDotdlSsem1nate: i or:copyilwitbouttJie1JiSpectorGeneral's,sPProvaL ..

.im.v-Hfta+. I i fP t ('.tiHooita!M .ement. In ....r2Q08 4.1o.. f t A ~ , . 810'.With~ ~ ~ Q . ~ ~ . . , , ~ . . . . ~ , , - " .. ~ r - ~ . QI . .teCOll1IneDded bem p m ~ was Q s . t e c t o n J ~ n f b r ~ e o t ' & iDtranetweb.,page" lU1Ubitl;On 'OCtober 6t .2008, Enmtcement issuea:theJmilicement ~ ' W h i c l i ~ .;.;:\, ~ l ) B o t b e r ~ ; t h e ~ ~ P Q l i c y una ~ p r a e t l ~ , p n ~ ~ l J " o ~ ' J betWec2l ,senior D . f u r ~ o'fficia& aiid:pe.rSbDSoutside. theCotriJt1i.9sioninvolved in. m v ~ 1 i S . ~ X b i b i t 2 at 37-40 (3.:1.1).

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'" .06'i.- ...._-#_ .......1......... ' .. :1..1:.1.. ~ 1 . A " . Ji ... f t ~ - .1 ..... 4.1.... . . . Om...lft1 . . . ~ .....Wh_en . ~ i ' t ~ - u . ~ u n i i l . Q 1Jre1lOt a Y ~ ~ "",.po ~ Y l l " ' e s ~ w . 9 ~ r _ ~ ~ " weigh sever8l.mctors to'oetetiiiilie whethet;W-have the t.OtiiDiU:Dicatioii, iDcludmg,wh@ef, : ' '0 ' 18 " . ' . . '.' ,e .sub'ector , .' .. o l e> .U l e . . ~ ( . ~ W .., ~ w j t . h . ~ ~ Ul. . 9 _. .. ~ qQJllINI : a t ~ n , . whethetthemvestigativeteam is'aWB the outsid:person.plarmt!f:fto initiate ,

: t ~ ~ = ~ ~ ~ = - t ~ : e = ; : = ' : L _ b a a . been.bi'iefedaut thepo.tnm1inieatioD, and:whether the. communication- ittwltvlxta ttilitter'c i f u r ' B e n c , y ~ ~ u ' O ~ ~ , o r ' J : ; W O T e < ; Q m P ~ ~ ~ , i i l w b i @ ~ . o ~ ~ ~ ~ ~ $ e d d n g ~ t or te.PresentaUon.ld::a t3 '1-38.

t.,,A C C Q ~ t o ~ p o J 1 c y ~ ltJ."e.rUPr $ c i a l ~ . e . r . t a i n ~ , . ~ ~ n . w i t b o u t t h e ~ D Q r . ~ : o f . o t h e r s t a l f ~ 1he:seoiot o6.idal8bo'Qld1(I).indicate 'his Other :entertaiDiiig thccoitJDiimieatibiidoesmt i m p 1 t q m ~ (),r'a ~ (2)jri4tcate:tAey e ' J i q t in..;-'.P-PJlUon,(Qtea.c.h-an Q n n a k e a .t ~ i Q a ~ u t t h e t h e t i i l V ~ t e 8 l i l c l l . ' l e m b e t ' S ; ( 3 ) W i t h i n ~.:mOfl::,:,': ~ m a t e r i 8 1 _ c m ~ ~ l i i U ~ ~ . ~ . ~ ~ ~ . . deJ.:Ans, . . f . .. J . S S 1 P e l ~ h t ~ ~ ( . ) . n ~ _ ~ .. . * " ~ . ~ preserve b e . ~ ( ) f t h e Divisibn in o ~ it$:fiU:t;..fintliugfbnttionand.pmtt#.thepro.prlety, fiiirtless aDdobjectMty *r"ttsilwesuSa.ti


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A. 'The SEC SWI'smtemal8lidExtetuaI Co.nnnUnlc.atlODl ~ . , J P Mo, " ; , 'for', ' 1 e 1 a ~ _ . . i i ,to: 'it .m "' .........+:&'BI. f" .qpm:Jia.q. A . s a r a n ~ ............. ,S . C " , Y ( ' $ ~ Q , O ~ Steam.

DuriDg'theweekofMatch ' 2 0 0 8 ~ the'SEcrs:'DMsionofTradingmiMatk.,::.1. ... - ". ... .' . . " b .... .'.. , 0' ,'" ' '"'. , "',-' ' , ' " f ' T ~ , Q ~ bad , ~ ~ B e a r ~ ~ . ~ 1 J S t i q ~ , P J . M l o n s c k l ~ . I T ~ nfTestimi>ny'ofE.tikSirt:i"" the t o f T 1 ' a d l r J g : a r i . d Matkets.at.tW4'_ ' ~ i a i ' t 'Pr,l'), A)ril21, 2009,. herc> is Exbi'bit $"at 1'2;,rna Audit Reporl:1lfo.,446.1). $ E C ' ~

~ ~ t g h t ( ) l : J i i v 8 J ~ 4 m U P J d . Re.t4te.1i$n#.1J.":1i.rQ/iir . ) ~ R i 8 k ~ ~ ~ Skdtestiiied t1ud Trading liDdMartcetsknew:thatBeatSteams was itt:tto.uble!lbnveeb:buUmlHtbediine morefucused on the i$me durlng.tb.e-weekb.f,March lO'i '200'8. 8iniTt. ;8 t 12.Then .SEC .DeputyGenetal COUl1$Cl.Andl'cwV


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,At-4:S2 p.tn. on Saturday March 1s, 2008,iCutlersent Thoms.e.n:ap;. m a i l a . s k f u s ifhe

., eould,call:ThomsenaIld .statirig, " I t ~ s u r g e n t . ' ~ Exhibit.:7. Cut1etandTbomsen:had: a doserelatioil$llii?; w b ~ C U t l ~ w$S theJ)n-ectQJ; f B i l f i > r ~ t , h e had 'pri)tnQ.ted Tl16#lSn. t


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.. . . . ~ . ..,This document issubjCctto the provisions oftbePrivacy.Aa.of1974;lII1d t t l a f n : q u i r e : ~ o n . bclbp,;disolosurc;fotbUd. a r l i ~ No redacti


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.. \ , Thisdoeumentis subji:ctto tbe.pmvisionsoftbe PrlVllCyActof1974..mhnayreqt;lire redactionb.cfurc I s c 1 ~ ; t o t l U r d ~ 9 ~ ( , l . h ! l ! l ~ ~ b y t h e : O f f i c e o f ~ : G t m e i a L RecipientsOfthi8'report:shoutd.noHtiSsemiuate,o . t ~ y i ~ ~ I # i h l " 1Jl.tor G e n ~ l ~ O p p t 9 y { l l ~ ."

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$jrQ Also ~ f . e 4 ~ h . ~ W s p o k ~ witI). J w . j i m t U . l C o . ~ aP.lc1 tlu.C91t11M tb! theS E C ~ s . G e t t e t a 1 C o u n s e l , : B t i a i 1 ~ and ~ ~ C O u n s e t Andrew vo1hner."getmvo.1ved.ff 14. Aceording:to S i r r i ~ s e-iDiIil,the.Chairman '\vas. : e o n c . e m e d 'with the#mnt'hat,tlw ~ n e f ' ~ t a k ~ l Q l 4 w ~ t b a t r o n e . f W : Q u l 4 . ~ : t b e . t o r m a l . ~ ' Q f ~ . SEC's:Commissioners.to .1ll.

OttSimdaYi Mittdi 16 '2OQ8at 8"11' ..... ThOmseh ..e.m:Cuttet,. ' ~ ~ b i D J i t ;l i a 1 l l i d . D ! I ! e t Q ~ liJbUH! : i ~ ~ _ b o ' ; ' t M ~ b i : ~ ; o W ~ Jjg,.:,1 A x > t 4 i n g ~ T h o ~ " . d i d OO,t t ~ t l t a t ~ n v . : ~ u : w i t h ~ : l J p t . Q Q Jhe;JpP ....._ a l o i ofpeop1e that day. Thomsen at24,. C u t l e r t ~ ' t h a t h e b.elieved'Wspokewit1tT b Q - ' b . _ e e . n t W Q . : f Q . i b . u r ~ . ~ ~ w ~ o t ~ e 1 i t $ . - 1 - 6 , 2068. t J U _ i " t l . m ~. I' '.'l i ....Atlf:.40;a.m..Ql.1 ~ ~ t 6 ~ iOO8, $ i t d ~ g W ' t f J p ~ ' V o . ~ - . 4 Cartwrigbt Jisthlg u t l e t ~ s requeSts to the. SEC, i n ~ ~

5).Assutatice that the. ,SBC1Votit take [!iltOtceInefitl .aet:-nn Aoa1ndB...... 'C!40.. ~ ..]'. or['..tt''iA'''tlnlnl.igo Q ~ \ ~ . ~ ~ ~ ~ , ; , , " : : 7 _ ' ' ' : ~ ' ' ' ' p '..: ~ i i : ' : " ' , = ~ : . : ~ ~ -,.:._.:....;1~ mCOllU.0iUUn w : ~ , t . ~ s e _ l N . - ~ ~ " ' . W I o l , U t ; l ! o l " atBear [Stearns]. ..


16/47

. ,I.J Thomsen testified tbatSlie didnot believe thaiOttler'$ e s t s \\tete ~ ' o u t t a ~ u s ; , i

' ~ a s I tbfuk:'1 n e d to bintiathe- fkstcaU,;it.l h e ~ weiesome C ( ) J i d u e t 6 ~ W atBear-StearnS'befP.t.e;JP;MQrganc.baseW llIlythingto. cw wftb8 _'Steams,. JPMorgan Chase. acqUites.Beat Stearns ii ipmatt ~ ~ o f ~ g g v ~ ; \ V e . ~ ~ ~ C Q t , ~ ~ DivisiOn d e t e r m i n e $ ~ bashem . i b ~ .k, ofthe securities. laws tbi.t Beat. ~ l e a m s .engagedm:befOm:.,.'i . ~ ~ 1 V A h a 4 ~ t o .oo1'iitb t d ' ~ u t .involvement f . J P M o ~ 8 1 1 Cbase,or anyone.at J.P.Morgan .:..,. Cbase;.1lasedoliDWexpetience :8t.1beDMsiol'1of .I : l t P . i b ~ l . t I J . o . ~ i t ~ e . l y : ~ : ~ ~ D , ~ ~ J e c . O ~ . e n t O r ~ l l l t t i o 4 : l i g _ J P M ~ t g a n ~ . futihiit behaViOr. ,And I1OO:iJgbt ,itunHke1ytbatthe,

~ J : n I D ~ ~ i o n W o W 4 ~ : i U i ~ ~ ~ . ~ .JPMo.rpnCbMeJor that m l Q e t ~ . '.,; ~ x h i b l t : $.0'

CutIet'stequest lot iiomEnmrcementptompted sevetal iiltCrnld discussiOmb e t w ~ ' t b o m s . e n and t h e S . E ~ l o m c . e Q f t h e G ~ C Q ~ e . l i ( ~ ~ . A Q C O ~ t o VQtb.nel:,. ~ w ~ O O C ' s vi$vs ottwhat the' . E c . ' s ~ n . s e . to P . M o I , 8 U t 1 ~ reqp.est;sbo.U1d Vollmer 'ft. at 3,8. VolhnedestifiCd.:thatJiom;tbe.:begiimiDgJ\ve-alltejectedthe ideaoflttbvidiiiB .t h e ~ c . e s t Q ( l t . J P M o r g a n ~ u e s t e d . " 14. a t 4 $ . H e a d 4 ~ 1 T h o m s e . J l l s M l . _ i y ~ w ~ wec.a:n't .do that" Id,'at46, Vo1llDer reiterated tbat h o ~ andOGe agree.d; itwould not11c .. j)rtJdeiltor .adViSable to providwhat JPMorptttequested. VoUinet at ~ ' V o l J n i e t ~ c'1 ro' ..'JI ~ .. eA :t.::.. .',B u t w e ~ ~ t b a U b e ~ e _ a t t a D s a l . J l b . e i b i .discussed thatWas vea, iinporiatd.to:b.Ditio.blilCiCOJlOnt1" . ~ . ~ . 1 i ( ) ~ w ~ W & . ~ ~ e g d : ~ w ~ . s 1 ~ 1 . eontemp1ate ,pt'Ovidmg something that.wallkl tSSiSt the.ttmisatUoiibUtWiihout8.0iDabeyolidbouo.4s'tbai:wc.

.-....t b . o ~ ; Q P P J : ' Q p r l a t c , wlUh Q w a ! ~ ~ 8 S : W ~ . . s : prudential.14. '+'

. ~ on tbeotbei' t e s t i f i e d : t b a f ~ m f t i l i l t y said'she . u e Q i D f b t t a D l ~ .~ ( M 1 e r ~ ~ e t ~ ~ ~ l . ~ . t t ~ I . ~ t ~ ~ ; ' - ~ ~ ~ ~ t ~ e d , t h a t -

I 15-J


17/47

"j" Thi$doCunumtis 1 , l b j ~ ~ t o : t h e p r o v . i S i ~ o.fthe PrivacyAQtot1974janltmteqtlhredatiOnbet'tttrIiici9iOnwere'{optovide reliefthatwouIdbind -:future commissionB'. la.

] ~ 3 2 - : i 3 ~ Ca.nwriabt ibrt&ertestUied that ~ ~ . ~ , 8 ; f b ~ n ~ ( ) f .I. \ ' B n t h t ~ h e b t i l i e v e d , C t J t t e r w o l l 1 d understand, ibis: . e f w o u l i l k " ~ ~ g t Y d i f . J i ~ _ f Q t theCOi}'tttriSSiij.rtto provide. I t l ~ : a t 2 4 . T h e S E C _ S W f ~ eoDsu1ted'Witb.:a1:Jo\lt C u t I e r ~ t t r e q u e s t w e r e a " " a t e o f : t h i ; re1atJo" . ;. :. "..' dUd . Sirdjs, .tes' m" '. ." nst._;i._.:athat . end. ,.... JJSljip e e n : ~ ~ ~ . . ~ , . . ..J l Q . ftQ ~ _ , ~ ~ . . . . weei:..WithOOCand b o m s e n i n c l u d e , t h e m ] k ) w i n g t e & t e n ~ '

'Exhibit 15.; LI


18/47

" ,

T!iis d i : i c u b 1 e l 1 t i s . s u b ~ t o . the pnm$ions f t b e : P r i ~ A i l t O f 1 9 1 4 , ; : a n d m a y . m : ( l U n u e . d a c t i o n b . e f b ~ & s c J l ) $ W to..stiie;g. N ( H ~ . i I , _ been:p"ormd y t J i e . . ~ ~ f ~ f o . t : G e n e r - . l . . ~ p . - o f ~ r e p i ) l t 8 l \ ( ) u I ( h l O t d l ~ i n a t e ~ ~ Y i ~ ' W i ~ ~ ~ ~ ~ . l l p ~ V l d . . ,..:;


19/47

"

T h i $ , d o . c u n l e n t i s , ~ j ~ 1 O , t - c p r o y , i $ 9 Q $ o f ~ ~ ~ , A e t 9 f l 9 1 4 , ~ ~ y ~ ~ ~ t e d i $ . c l ~ ~ ~ ~ , N o ~ P n , _ b e e n ~ ~ y ~ , , < > f R c o t ' J n s ~ ' ~ ~ l . 9 1 t b i l l , ; t q ) O r t ~ a ; p o t " c . ~ p r C : O J i . y . i t w j t l l ( ) ~ t b e ~ t ~ t j t i P P l ' Q y a l .

would go 'to. [lPMorgan] at about 4. T a l k i S a n n o \ J l l ~ o f t h e ~ i o n a t s....n Exhibit19. ' "At 2:36p.m. Thomsen - J I l a i l e d , ~ Vo1lmetaDd Sitri:,UJraftofa lettet'to'Mo (the ' " , iT , . ' . " , :' , . 'oW "JP "', rgan :"Thot1U!en dtalJ ').Exbibit.20. TbJ, h o m s e n d ~ 1Q.C " ~ : ' , ;'

Id.Tb.e_uninQe. n ~ ThPlllSen Qra1l relate,(} t p # l e . , " ( j ( J d a y P t ~ Q D l l O ~ p r l o 4 ~ W ~ ,nattowertbahClltlet'$original u e s t .. Vo'llDier'Tt.at25... VolhnettCstmed'that;

!, ;"

, I

!, ,. I

A

it ~ : i : 3 6 p : . n . ' . h f t o r 1 b e " , i s , t h e ~ t d r a , t h h a t t h e Q I G ' ~ ~ , H o . w ~ w . e r / n ~ ~ . $ ; ~ i 1 : , ~ c i r c u J a t e d t b e . ~ 1 i ' a f b ~ ~ r ~ J ; t o i t . " a . ~ ~ d n d l W l : ! l K . t e t ... l b a t _ ' __J I 4 ~ ~ . ~ ~ , = ~ : ' ~ V ( l l Q ~ ~ ~ ) t ~ . ~ ~ . ~ ~ P . ~ ~ _ J ; u . o p ~ ~ r ~ ,

18"

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20/47

, . .. 1 1 U s : d o c u m e n t ~ i s $ U b j e C t ~ 1bc pto\ljsions ottliePriVacy4ct,of1914,ill1,hnliYn;quito ' ~ ~ ( t _ 'parties.Noreeiaction bas pdmned bytbO,Ofi1ceotIilspector General. ~ i C n t s " o f t h i S r q M X t shouichlOtdisSeatiiUa1e; ( ) [ c o p y i t ~ u t t h e ' J l I s p e c t o r G e l l e r a l ' 8 l q ) p 1 O v a L " j .I

:;0.'"" .':'1'

.....,iI" "f

1, . A l ~ C J Q ~ , w h . o at t b n e ~ t t b i s . l n . u I ~ f 4 i Q J . 1 ~ a ~ : G . ~ d ' C o ~ ~ , ~ ' ~ , " h o ~ d r a i t a n d i t e u J a t e d ' a new r a f t : ( ~ ' ~ h r n d t a a n . ) t o : ~ V Q ~ e n d otheirs,'1 at3;32;pttloaSUriday. 'Bxbibit21. T b e , C O h e n d t a f t : ~ , - f r o m t h e T h o ~ : d t a R m t b e { 1 Q J 1 Q w m g ~ t s . F ~ ~ , C 9 l l e . n ~ , w ~ ~ ~ U o . 1 . ' n , b e m g ~ ' 4 ~ b " w , G u t ~ , t q Chainnan:8bd,cEO 1ames Dimon. 111m 1 d d i t i o t h e C o h ~ : d i a f t deleted,tliesetitence st .' ,

":':

" '1 sanenceout:,


21/47

.. . ..T b i & ~ i s S l i b j e c t , t o 1 h e p r o v i s i o i l s : o t t J l c ' P r i v a c y A c t o h 9 7 4 , a n d m q r e q , u l r e r e d a c c i O o : ~ d i s c ~ - t Q , t l i k d parties. Nol'CdactionhasbeCnpcrfbnnedbytbbOftlceofInspectOrGenerat R . e c b r i e n t s - o f 1 b i s ~ r e p o r t s h o u l d n o t d i s s e n i i n a t e

o r , c o p y i t w i t h o u U h d D s p e c t q r G e n : ~ ! I ' - . p p r o V l l 1 ~

, .-. ~ t ~

. 'l}.' ,

... ; ~ ' : .

.....!.

i: .

B8sed onOlU'C\1rr_l1ers.t.andfu&lPaUY t d J e s e iwtODlweigh against '. recommendation J8)mJhe:Divi$ioIi6f~ l 3 9 r ~ ~ l ' ~ . ~ ~ . ~ t l - S _ D ~ directly.or n d k e c t t y ~ , arising.outofstatEme.otsiDadeby

20


22/47

' i b i s d o c u i n e n t I s S U b j e c t 1 o . t b e p r o v i S i o n s o t t b e ~ Y . A c t o t 1 9 1 4 j ; a i i l l : t n a Y , t ~ U i t e : t e d a C t i o i t b C t o t e . d i i C ~ t o i h i t d . ~ p a r . t i e s , No.Rd8ctiOnbas bccnpcrbmed'bytheoft'ice ofInspocfor. GeoInL Recipieucsoft&lsIqXJItsboutdnot diSsemiuatcor oopyit.wichout1he Inspector Generars approval

,i.. "".

,.,,/: . . . . ~ ., ,

.Jsq . ~ . 6() a Y . J . p r i Q r ~ t h e p o b f i c , ~ ~ o f t h e proPQsed acquiSitionbY JPM.:..

'. i. .

,.Id. .; ..

:' ';..i:z

ld.

W h , ~ . t o p . Q 8 0 i n g : i n v ~ t i o ~ t h e b i m o n t e t t e r . i s . t a t ~ [NJotbing.iQ. thi$1.ett'Shou1d. be O ~ M r ~ c . h i n B ~ y ~ n t s to the underlyiDgmet1t&of;anyofthe:matlets.CUitentlytiDder investigation or those,that-maybe

i u : v . ~ e . 4 d n . tbd'gf;m-.,. , .

. ,II. J

... ....,";,

r',... .121


23/47

...1

B. 'Th.e,SECStarsActio. " J . , J P M Q r p n ~ . R e q 1 I _ t o . r ' R ~ l l e f l l e J a t . C l toOther Issues .,. ,.l b e . ~ ~ ~ , _ \ V ~ , n Q ( ~ ' Q Q J y ~ ~ ~ , ~ ... ~ g M . o t g a l 1 . $ Q ~ I # ~ : ~ o t clarification bm the SHe during tbeMareh 15.,16, 2008weekead. Ott Su11ds,y, M a r c : l l ~ ~ 2 0 0 , 8 . ~ :SUrle-mailedThQiiiSen.VolbnetandCartWti8.J1t.aJist:ofCutter.srt:q1iestS.to.theSEC.as :mUows:

. 1 ) B s n e r g e n e y p o . w ~ t o ~ ~ J ; I . : Q l p f . 9 . e a r $ t ~ , I P r o k ~ d e a : f u r s l a s o . f t o m o t m ~ ~ .

~ ~ C f : P 9 W . t Q ~ c ; Q . m Q I Q { ~ ~ " 0" ..... j [investment adViSors).(w:hicl111dl!ise, :8Imtlgother

" t l U i i ~ ~ t e ~ e t e d hiV.esbhent comgames) tOmorrow.j , 3}. t : 4 I p d 4 c i p ~ ~ m ~ f k ) ~ ' W ~ f ) ' ~ , ~ < ':. tbatwe're-:effectinitrafis'acfions,startington1(ill'OW .furBeat steams matJ8gedaceounts.4) , ~ ~ e p p r o v a l o t ~ : o f ~ t 'ExlliPit. ,l,4,l

I n ~ i l s e . t o those requests,:at tbesametitile that the sEc staf[seutthe. Dimonlettet, i tsent JPJdo eral ..t.. Jr;U ..1MiAi:n.. i . . . , ~ _ I ! i f > '.. , ._.........ii. "; . rgun,sev '. 0\11(1' "",eta; "'-:&&:..7""":' ~ i J . ~ . 8 positionon C l i t a u u l J a u e . n l ! C ; : O ~, 1. W i t h . , t h e m e r g ~ . See Exhibit '23. 'Tradibg.andMaiketswrote.am-.Q)ludiefWtet d d r ~ t h e ~ ofJPMorgan's,fiJiDg:ofa FotmBD With tho Ex'hibit.24. The. Jettet's{:ated that "T . 1 ' J I d 1 n g ~ , ~ : W Q ~ ; n Q t . r e c P ~ t n ~ ~ ~ n . ~ t Q t l ' w t i : o i h & o t . < .'J P M ( ) t _ ~ $ 1 i J i n g of.Fontl BD With theQ).n:ttnIs$km. Id.. TbTfadullfand. Matk.1etter .$tatMthat it wolild I;e.icceptabte i f J P M o ~ a n .1i1dcltt ,completed Fom'sn \VitIiinateaSonablO 'lime aier:~ B ~ S t ~ J . P M Q J g ~ merger clQ_ ~ w Q s ~ ~ o : Q ~ ~ c b 1 D : . U .

' .. transaetioh lit. " , '" .t b e ~ . Q f I a v _ M ~ : ~ ~ _ M a b . ~ \ W t e t w o k t l _ tOncemibgissues.arlsii:tg out oftbecbangp J l c o n t m l o f t l l e 1 n ~ ~ j ) . ~ l h a BJarS t ~ ~ . ~ t \ l , n . d ~ , p ~ P J ~ ~ ~ m a ~ n S ~ . ~ j e i O U i : ~ M ( ) ~ p d $ . .assumption.-ofw1rtr01 overBear ~ 8 , - . l V J $ O r y .fl'ea. E . ~ . 2 5 . ... Q n n a n , l l ~ C ' . control.ofthl:tadY.isetwould cause . ~ Y i 1 o r y Q ) t i l r a t t s t o . trnninate;;:and an t n . . ~ n ' O O a n l , ...,< '

: . : : ~ ~ : .;

,.!.,~ . ~ . ;

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24/47

.!..

~ d o e U D 1 l l l \ t 1 s ' s u b J e c t t o 1 l i e p r o v i s i o n s o t t h e P t i v a c y A c t o f i g . 7 4 , 8 D d m a y ' f . e q , u i r e ' r e d a C t i o n b e f u t e d i s c J o . s w : e i t ! J : t h ~ parties. No redactionhas been performedby OfliceofJnspeetorGeoera1. Recipients of1Jllsorepmt sbouJdnotdfssemfuateorcoPY,itWitbolJt b e . J i J l p e c t o r o ~ ' s ~ v a L

,'. . : ~ ~ . ,,

,o t .. Inv9"'e. . e n t o o f t J i ~ ~ . 4 t t . ~ ' C ~ l i j f " ~ D " . .:t

o ,

o (

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. t.

011 Sunday; a t 6 ~ 3 3 p . m 7 Sirri,e-mailed;the.Di'ettor f J n ~ M 8 i U 1 g ~ o A D d r e w D 9 n 0 ~ 1 U l d T h o ~ Q Q P y i Q g o ~ sac ~ ~ ~ 8 h o u 1 d P J Q ~ b ' i Q W l ' A J i ~ ," 2a


25/47

. . '

; ..j' I

. ..{

Co1tlltd$siOnabout the ac6:rities over thepast 24 o ~ ~ ~ . [ : ~ a c . t i ~ n l r e 1 i . e t ~ v i d e c l " :BXJ'iibit 28.Sirrfas1ced that Thomsen and Donohue.pro'rideJUm With laQguage to WmJdem,aii:~ n W l t Q : t h e CPD1Q.1i$Sion @Qut t h ~ r ~ I i e t E n t h ~ t M 4 , l n v ~ t m e . n t . ~ ~ t p 1 l ) v i 4 e c t t.QJPMotgait

At U.:Slp.ltL n S u n d a y , . ~ c h . l { ) , 2 0 0 $ , ; S h ; : r i : ~ . e . d . ~ ~ p h e r Q ~ Q l l d : the othettW'o sittingCommissioners- ,CoJiiDiiSsionets.KatlileenCasey.ii1d PaulAtkins .-.- tIlefullQwi,ns e x p ) a n a f i ~ n o ( W ~ W ~ i r e d Q V ~ t h e . w ~ :

t:_

. .,.

Context.We have.been coordinatfug cJoseIywith tbeFedetal Reaerv.e

ilild T e . - u r Y P ~ t ~ o r . ~ n d t Q 1 b i S : w ~ ) s C Q ~ i 1 1 C Q ~ e n ~ inBe;u- Steams: . " ..

j': J.'.;....

. .J"-:.

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26/47

..,:. ; , T h i s . d o c u m e n t i s ~ b J ~ to the r o ~ o f t b c J..trivacy Actof1914. n d : m : q ~ tedaction disclOSURi:f(1third = ; ~ = : = = ~ : ~ : ( ) f ~ ~ ' ~ ~ p f t . h i s . r t ~ ~ i l ( ) i ~ ;

to jOin them. In turn, w ~ W = invited to jQm tlieNY FedstafFai tbeitDBiceS toaoaIyzelheinfOrmatioJi.We.weteJil.~ n $ t a . n t ~ n t a c t ' t h r o p g h Q : u . t $ . ~ ~ y 3 n . d , 1 Q ~ ~ with theTteasUiYll the Federat R.esertt.eBoard.. the NYFederat .

a e , s e . I N ~ B ~ tt ~ t b ! ( ~ : Qbsen.tAbUyer o t B ~ . $ t ~ i t . l l J , 1 U I t ~ b a A k . r u p t 9 Y Q n M ( ) , ~ , .MutSpassed, JP Morgan emerged as.the sOle put.cl1aset'.butitwu rducl;W to pw;clulso a . I S ~ ] ibr J, # i ~ of. :j.,,i:...... its . .._.


27/47

,. ~ ~ n o t . r ~ ) U b . a t C o i ! t l l a 4 ~ wbdbef h e Q ~ ~ ~ i Q n e r s S b o u l d l i e :< ..' ~ r m e d o f t 1 i e : a i t u a l l o n , ' ; C a r t w t i g b t T r ~ at 32.Cart.wrlgbtt.e

f r o ~ ~ . ~ c i r C U Q J l ! ~ ~ w l d . ' C o J P W i ~ ! 1 i ~ V a t ~ r e q \ l i r f 4 . ~ w a . ' b e ~'so . t ....", SEC _. . . ..._# . . w ' f,..1-....:.. au' .. ,:,,'iotfu w'tio""""' .... ...;;t:d ..... :-.....:tl..... ftt'a'U'b-u..:I 4 : " ; " _ ~ . ' . LJIl:I,I. . ' ..s.. o r ~ are a: are 0 . U D : l I I : ~ ......r , t l Q . l ; ~ : ~ & I O . ~ _ ~ ',ou"" ",",\1&'CommissionB. 1! D. . OtherEDfOleeuaent ..SfafrAfte..,WwBecome;InvolvtcUD til_Dee_a...f Makbig ProceslD1JDg the Marth:IS-lit 2008 Weebiid

'1'bo.J:IlSeli testifiedtbat sb.edid. ..'t info .' . .. ' . no did 8be '111 . t...... . . . ~ . . ' . ".. . ... .... . . . . . no. .. . w e . n } ' O ~ , 1.'. . . 99__ ~ U ! \ ~ ~ " " ~ ~ ~ i n : ~ t . u t t b e p r o p o s . e d ~ n \ 1 O t i l e A C f t h e J P M q ~ ~ ttatls..adionbad:altea4ytatal lace. Tho1tiSenT at 34' 3.5. TboJDiietltes.tified:shedidliOtteeaJl 1

. j: = = - ~ = = = = ~ ~ . ~ .. '" j.

( __ ~ ~ e . n . ~ ~ ~ Q t . ; ~ ~ ~ t b l . , j Q t m e c l o t ~ ; I Tta:nscriptofP . M Q r g a p I 8 . e a l ' ' $ t e a r n s ~ J l ~ n S u n d a y . e v _ & M a r d 1 1 6 ~ 2 0 0 8 . ;- i . ~ e s t i n l o J 1 y o f A n t o O i a ; C h 1 O : ' 1 ( ~ f t . Jan _ a t t a c ~ h ~ ~ E x l D b i t ~ , at.'S.:.t . ~.1 2 0 0 9 ~,.. ,z = = ~ ~ ~ = l r n : r i s ~ = : ~ ~ ~ , . ~ . , d . t ~ b O t t e c a n J i o m : t h c ; U m t ~ f S t a t e s A t 1 o r i i e t s : O J 1 i ~ ' ~ S A ( F ) ~ e l J' c l i i i i ~ l m v ~ ~ , ' 4 v i s U i & ~ ~ ~ ~ ~ ~ ~ ~ ; ~ d n g t Q ; ~ ~ t ~ t e . y ' o r wotiJdbe bouglt,.aod.that'JPMol'g8l11uJ4-rqchedout to the USA'01o.a.etern1iftewhat was, .."" -;, 2($J

\.. 1


28/47

b6, b7e

this docuntwis t O t b o Ptovisions'oftbePrivacy'ACt of1974.aDd.Dyreqwetedaction Wore . Q l S m w a . s r ~ & l e t t e r t o ~ she wes:thinkin.g, ~ ' D o e s that d() whatwen_ it todb'lDOestbaf:keep ] t ( ) f ~ 1 l r : ( ) p , t i ( ) n s :open'l'JId.at 35-3.6. ButCbiontestffiedtbathet. second callWith1'bo1JiSm.was not IiiUch t . g i v ~ ; q J

~ ~ A v m . a t i o n . 1 . a . 1 ~ $ . .." W I d l O ~ 1 , 1 d i d no.t.thitq:"'. ~ ' M t h ~ . ~ 4 l . l q Q f i b a t w ~ ~ W " ~

R b i a r 4 ~ t h e ' D e , p u t y D i r e c t o t o f [ C C J D e a t a t t 1 J e ; ~ P 4 : s c . o . t t , F r l . ~ . :A$$boiU,' ~ r : i n B n m ~ ~ t h a t - t h e y b . e l i e v e d C h i o n W a l n J ~ p ' p y . t b a . t : * h a d t 1 O tbeeij.~ i i s 1 i l t e d . T _ l i p t o f T ~ Y o f W ~ 1 . U ~ { ~ ~ r . ' ~ f F . ~ ~ ( K 2 0 0 8 , @ t t ~ ~ t Q a s ' E ~ i t $ 2 , at, l Q 1 . ; ' t ~ t o f T ~ n . ) , ' o : f S ~ t t F . t a d ' " F t i e s t a 4 T t ~ r y , . Januatr22,.20og, attadtedheteto liS Exliibit.33t at 1 . 4 . 4 1 ~ ~ d i ~ _ w ~ ~ s" 'ke to : . : " ' o n ~ . i ' ... - ~ - , he"'1 . edtbat riL:.,. t....ateae1Jedotitto Tho . 8:._..'f-..' .....ilP9 . ' . ""myll. o. ~ ~ Y f - . ~ . . . . . . . . . y ~ n . ~ .., . . . . _ ~ g J l ~ y ~

t b o m s e u . " b l ~ h e r o i t " ~ . T t . : d t 1.0h R:itc.iardite.stili.edhe o u 1 d b a V & ; ~ e d With'Chiou b a b v e e k e n d b e c a 9 S e o f h e r $ f O u p ~ s B . e a r S1eam&mvesttgauon. lit, :l.t.81..:$2.

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29/47

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Ricciatditestifiedtbaton u n : d a y ~ ~ c h 16; :Z008., -while heiWas. sittingWith b'is.,WnJiy'wat;.,f,AA ... teleViSion "in1Q ......"rim"",. inNew "Y'ot'" h e . r . e c e i v r ~ acan00 his:eell 'lion' i1iom.a .. ~ ' ~ . . ~ w... p. ~ . repofu,r' indicating tbatJPMorganbadmade..bidfur.n..- . S t ~ Ricc.Uv.'dift. -.t,74,...At9;16 ..p.m. on sunday, RiCciatdi e-mailed Thomsendothefsatthe.SEC describing theJPMoTfJanIBeat steams transaction:. .. ",.' " . . . . . ' . . . ," "' .' , .,"

T 1 . l P . ~ f u : n n e A j a t ~ y ~ Q l ) d e . 4 . tQ ~ . ~ " t ' y ~ : ~ wQmna Ql.J: it . U . : ~ y today,..,WiJl fillyou in tomorrow." I d . R i c c i a r d i ' r e p 1 i ~ askingThoms.eb;: "Didwellromise:that.lPMCw,ould tiOtpiCk 'lIP ;its regulatoryU8bilities'P ld. ~ t e s t i l i e d : b e ~ p . o ~ hiS.q:nesnon:(brtwQ:re&$()D$. R , i c c i a r d i t ~ . ~ t 78. :F.'mt ~ ~ ~ t ; $ m . y ~ ~ ~ ~ ~ n . l l d ~ M d . . ~ ' ate..rtOt aJlow.eato to'tbUd p8l'tiesaboUt:tlte.m,even.mtbe:contextafoneeompatW's.duediligence.relatedto.a.poSSiblequisiti'on..'ld. ~ ~ lUeciaidi ..testitiedtbat:liemewstdltad., c . Q A ~ . m ~ r ~ v t ~ i ~ t e w d . ~ ~ ~ l I l " , T J J Q ~ : ~ ~ m ; ~ , ~ ~ , ~ P t . ;Q_, .,as I sIid.we candiscuss this. tomoaow." Exhibit 34. ~ ~ Tboms.en'l,u;espoase. as'.sipaltbat.shtldidnotwaDt him Bivalved in: i&e sii.1IatiOo. :R.itcliudi '8t75.1Ucciarditestitied: .:badno tUrtbercoJ1'lll1UQic.atinwfth1b.omsentbatwee.kencL Id. ,at8.4.

Rieciar.di .testified tbal.after'Tbomsen eve.ntuatlY' gave hint ~ B : o p y o f t h e Dimon e t t e r ~ ThotnSen $Bid sometliiDStothe,effeCt; Of; ~ 1 k h o w y o u m H m h ~ J } Y w i t h ~ , ~ thiS Ietter.'"14. ~ : t ~ t b a t h e . ~ ~ t o . ~ ~ . ~ '. . ".


30/47

b6, b7c :I

t m s d o ~ i s s u b j e c t t O ~ J ) t o v i s i Q n s o f t h Q P r i \ I J C Y A . e t . o f r 9 ' 1 4 . l U i 4 ~ ~ ~ J 1 b e b ' O d ~ t Q t b i t d partio8. No basbeen perfonnedbythe officeoflilspcetor Geatcrai. Recipieofs ofthis l'q1QttSboJitd notdiSSemia1ateor copy itwithoUtlbcIhspector e o e r a l ' S a p p ~ o Y a l .

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D e p ~ i f I . @1IlJlt inc1u4e4w(lep - e o ~ Up. 19Ji.sJ_:W*through th$D.ld. Riceiatdi emphasized that he was' not critical ofEnmree.tnent's-involvementduriDgtlieweekendittthelPMo ' ". " uisitio butfbat 1. .... : r o ~ ,n'f,DJ .1.":1(_ ..t"'L"':Ve,b..eu. . ' ' ' , , . ~ ~ .. ., ~ , : " y . ~ p" J J I . ' " " , , ~ . ~ h . ~ ~ .' " , .taken ( ) a v o 1 d a n . y ~ c e ' p r o b l e m w i t i r t h e ~ . ~ : 9 6 . d i t ~ : t h a t his. ;exclusion from the,pra.cess th8tWeekend was oneo'ftlio reasons 'heultUnately:le!l thO:8&ettey. M.atHi..' '. - . ,.

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lL ,On o D ~ Y t M a r ~ h 1 7 t ~ 8 ~ ' l ' b . o ~ . W o ~ , : i l " ' ~ m m e n t $ q f t : A b o _ : U a . :'Ey.-. . Qf,the Preerdi..gW.QQ.d .. . ~ e t . with, s . t a f t ~ : t b ~ o . g o i q ; Y " : y ~ t P o ' : f . b _ ~ r S . " " " ' ' ' ' ' . :.. -_.,.., ~ _ , ~ , _ ~ a

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OlE Staff '"~ ' l ' ; I t .. . ~ O $ ~ o f l n t e m e . t E I U b ~ J ~ t b I . . ~ ; Matcli Ri.C8IlM& T b O m s c z . c o ~ : a m e s s a g e . toihe:e:ffect,if)'Ouhave l P 1 y , B ~ $ ~ : ' ' ' ' e d ~ v ~ ~ , ~ t o ~ C b i e f : t o ~ - 8 $ t h q ~ ~ '

longe.r b ~ H I O ~ w . w ~ t Q ' p ~ alQt 0 ' .' . t h e t e ; - 8 n o t ~ g ( ) 1 b & t ( ) ~ a.Beat'Stearns," TtaDscript,ofTestitIJot1:Y0 r .. ) , J a i l _ ' ~ l j 2 0 0 ~ " . i ,auacl1edheteto a s : B x b i b i t 3 S ~ , a t ' 10.,Mer tbesemor staft'JneetiD&athOO M J 1 . . ( ) ~ M'atch 1 , . 2 o p . $ ~ T J . J O ~ ~ . '

c . o m e r e n . c e ~ a i i , l ' a ' s e c i f 4 m e e t i D g itt.het:QDhWiU,I:.n.()fth; ~ . ~ i n v . o 1 V e . 4 ,iIl,leAf'S' ... _,ii.. ~ ~ ChibT.' .... ,. '.ra.... , , ~ ~ . . ; a . 1 W . ~ 1 i . _ ., uld6e ...~ . . A 1 f . ~ . & ~ w . . : J I l V ~ . D S ; . ..... .n- ~ . a t : l . < i , . . . : . . . , ~ ~ . ~ - ~ ' ~ W Q . " , ' , I " " ' - 1 ' A ~ ~ : E r i 1 b n : e l D e G t J 8 t a f f ' a11ced ' I l Y 1 i m h t b a t ~ t b i n Q L t h a t . a n y B e a t : S t e a t D l c a s e s ~ :Q V e t . ~ , T ! , : ~ : 9 . , . T b g _ ~ , 4 f l t w ~ , . , t : i h e ' ~ ~ ~ l ~ ~ w ~ Y J 4 " '

....

. DuriDg.thatmeeting ThoDi$ett-re1ayedio, the t a f f t b a t : ~ , b a d p m v i d e d -a.letter to'~ r s ; ~ t n ; ~ a : ~ ~ : , ~ = ~ ~ = ~ ~ - : ~ V ( ~ ' Chiontestified tbit'tho1tJS8l1 describedtbe1ettet , a n ( l b ~ : s 8 i d h , d O e s ; J l O h ' ~ ' c l i i u i # ~ . , ,_ ..11'n... with 'tho' -add' "GO' ulanddo' " , . , ~ . :"r,;; ..to18 ~ " " n ~ e d ...... 1 ~ ' . . . J : J J S e n ~ m& " () .. ,' . _ , ~ m . v e s t i 8 . ~ ~ l ' I & ~ . ~ ' ... ~ . ' , ' . - .. that JPMorgan hadDPtteeeived.any assuratiCe$,81Klsho. co'tliimledto p u . 1 . ' 8 D C - ~ Belir Slearns:!rtVffltigatiOn. It!. 'at , ,

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31/47

b6, b7c

1'his o ! : ~ t i S $ l b ) l t t o , l b e ~ v l s i O n s Q f t b e P r i v 8 C 1 A ~ g n 9 7 4 , _ " ) ' ~ W e ~ b . e f . ~ ' d i s e l ~ J Q ~ .l*tiS. N ( ) ~ 1 i o n h J ! s ~ ~ : b y 1 b , e O f l i c e o f ~ ~ ~ p ~ o f t l U s ~ : $ b b ' U l d J J O t d . i ~ _ Qr e.opyit.With.olit tbe r 1 S .pptoY.8f.

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Thisdocl1llleilt.is. sub'. . ~ .. tto-.oL.'I . 'sons fthePriv.acy.Act..'l97... ".... .., , ~ " , . _ . J , I I " - . , . , ' f . w . ~.....:.....--'_Mlont.d.C._,dj_I_....;.... +. ' . prQVI ..0 .. " " . ~ r n ; l y n ; q w t e . _ Pltitics. Noredacti.on bas tleen-....c-..;.:Ib t l i e ' O f l i C e o t T " ~ G C n c t a t 1)..A /....... .f.m; ..;:;..t.i. .. t ' . . i ! ~ : ...."'..' J I " l M , a ~ " " " 'Y . " ~ _ " " ' . _:.- _ _ 0 lS''''I''''ullJJlU,"""UO . ~ K l ' " 'or copy it without:theInspetlor OeI1era1'npprovat.

'$We J P M o t g a i t . a n . ; m e . m r j b ~ ' ~ ' c O u 1 d p r o v i d e 8 0 f t 9 r a l ~ t 1 t t O t t b!(ueems Wilikelywo'Uld j)J1tSUe.JPM to s . "1;;... .4.4"'; tlxtDb"'9tp., >Oo . o r g ~ r : a e a r , t ~ s t a t e . m . e n t s o n ~ _ l ~ . R ..Jai'.'\" tIL theSEC'. lJU"Uc D i s d o g r e o f t h ~ J ) h n ~ L e t t ~ ,I

A,. On Ta.elday,'M..-eh 18, 2008, the ,SEC Issu._ a Press Release:~ ~ " g Jh" l ) ~ q . t ~ * ! ~ r On 2:00pm J 1 T u e s d a y ~ M a r c h lSi 0 0 ~ , t b . e $BCJssu.,e.d.. p r e s s t ~ @tlt:th.e,$EC's

t o ~ intheJPMorgaiilBeatsteamstiaIiSactiott. S;xhibif40. : I ' h e . t e l ~ ;b1chtdedthe.topiC" ~ . the S B C ~ p ~ y ' ~ Y ~ ~ ' j Q , ' ~ llear t e ~ ~ M ( ) J . ' g 4 n . ~ ~ ~ 1 " ' 1 . 4 ~ ~ ~ ~ ~ 4 i $ ~ .i .... .....,:"'us n ...~ . " ; , , , ......._ too"k' .. l .......... t''''' i. ,... ~ ......M;lO':.:.. S!_l f ;.... ~ : .... ...4,. . . .-*' .,~ " " . "", ,"AI J::d,JJ.UA""",,"":"l\ . . r e ~ ~ ,WIiI I,UU_.\ ,... . ~ - J . ' 110 lJ-"'(i;\,I.

T ~ D i v i S i o i l o r E n f O ~ W i ' C ) t e . a tetter o ~ l n Y ~ ~ and 9 t e l ~ t i a l J \ . m m ~ i Q q W r i ~ : i n . t O c o . 2 ; 1 d . ! ~ ~ ~ ... ~ e m e h t s . by e a r , s t e a m s . b e m r e t h e ' p u b . l i c a i ) J l Q ~ ufthettansaCtiQl1with JPMorgan, in whicl,t itdeclined top x n v i 4 e ~ c . e s . e t x > . \ l t pOsSible ~ r c e m . e . n t actinns. The,Ie.tter8tates that teaching .concIusi.ons :&ut

t h Q s e i n q W r i ~ w p u l d b e : ~ ~ . li;1.theletter; 'the:D' ..' . nfirmed i . . . . . . . _ " ; " , , . - + _ . : : . . t . ~ .' ........4- .' ts. MSJOn QQ . '. . ~ ~ f ; O ~ ~ ~ g o ' ) Y ~ p ; ( I Q t ' ~ ~ ..ai1d g u i d a n c e : b y . t b e S E C ~ t h e s t a f f w o . u I d , f i l v . o I a b I y t a k e int9.a@Untthe o f t b e J P M o t ~ , a c q : u i S i t i O n 9fBe.vSteanJs when.c.o:nsi4. b . e t b e . t . t 9 : ~ ~ en:lbreement.action.aga.in$tJPMorgan arising'o:u.t-of8tiltemeilts made by Bear Steams in the .6() da)S.before.the

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33/47

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. ~ . ~ . t.:.. : l1uuJocUn'lentis sUbi,ectto the provisions of'the PriV!'iCY Actofi9-74.Jli1dInllY r e d a c U o n . b e l b r e d i $ ' c . _ e ~ t h i r i : J parties . Noredacti.oohas beenperfonnedby the f f i c e o r ~ G e n e n I 1 : . Recipienls.of'tbi$ reportshoukl o t ~ orCQpyit i t h o l l t . t h c ' ] i J s ~ . t o r G e n e r a l s l q J J ) R > v a 1 .iI": I'. :' The 010 found no evidence that anyone re:spondecUo O P A ~ s ~ m a l t b e . t o t e the press

t e l ~ e w. iSsUed.o . ..".r.,""

" 'I; T b e ~ ~ : ; ~ ~ o ~ ; : ~ : t h : ~ ~ : ; . : = ~ ;. . . .~ O m b e r & o n bctober:22 20M u ~ . a 1 ! O P y o . f t ; h Q . Dimon1et.ter., ......... ..:1 'fT...........:...... . . ' ' 'M ' . 1-"'" 8 2l\1\l\ ..u.....L...;.jt. . .MeDIOUIUU"Um.O . I U ~ ' I ' o U i i W 0 '. .. . e.mo.. , .lAUe. ,..UU7., ' w . ~ bereto:M Sxbiblt44. " A . ' .. '~ .. . . . ' g S ~ ; $ r e q .. ....... ._ . . et:. pjrect. ~ . J Q b n Nest .. : ... o r ; Q t o . ~ : p . J \ ... enoofimlU'liiCatio' '. . .t to b . ~ .mlWiDiam-8p1:iU12;;.... ce . .. .. ..... : . I l . ~ . : .. AfiiUts, ... : O f : S ~w.ectoro.... ..! .. 1atiVe..aod I i 1 t e r ~ V 1 ..rmJ .. tal ... ;ipOtmitig.them. ..1I; r e q ~ e s t ' B:tdu'bit45. ,henoontae te . ! lRicha.td l ~ As '. c e '. '. C c : > l ; ! I J S ~ 3nd .1 'l'homsen regarding . reques Exhibit 44. H ~ Thomsen' . .;.. to; te1easo

1etterto be.WSf:ed to SECJ$Pub1i9WillE'.. ..... .i1l$eIl pro. . ;.::a,.QPYrJ' o t ~ J e t t . e r i ~ h i . ~ ~ . e . th. ~ : t Q S ~ ~ . ' " Id - . : : '. 5.' that.' ~ $ . . .," " .. ...10..... . ...publisb t1:le,!etterbecaUs#.:Ul part,they1elttbat .....,. w&mCHDOtc detailed thmtheMatch ~ , 2 . 0 0 g p r S $ t e l ~ ~ . liL T h : O l G ' f i l U 4 d ~ e V i d ~ c e t 1 : u l t . C Q ~ i 9 n ~ w e r : involved. intbe decision torelease tbeDhnon e . t t e r ~ orevenintOnnedQf:its ~ l e a s e ; ~ a d , , ~ . r IV. 1'heOlG'.rlndIDgs J A. JPMorgUDid.Not Reeeive the:Assuruces.it Requesled

. ~ , Q I G m . V ' e s t i p t i o n f b u l l ' f ~ evidawetbatThotDSe\ti aav.epmkttb'brOad81idspeclfic.. '. he " ...1.'1."" . '. With. . ,. ~ ~ ... . . . ; f ~ . . . .,::... " t . . ..,~ ... ' O ~ . ~ 1 l l . C Q ~ n ... ; . G Y ' ~ 0 n . J . 9 J q 1 . ~ r . . . . ~ ~ n s Q '.:BW ..,S t e a J , ' . Q $ r ~ J t 4 u c . t . .As ~ ~ ; a b o v ~ ; the,'OIG'(1i4 i n d . ~ ' t b a t 1 b o d . h a 4 / b e n ~

" ' c o ~ r t a b l e ' " giving'CUtler theassurStlCeShe o ~ hemicme o D S U 1 t e d ~ t h e : ~ B a ' : s O B i e ~ f ~ ~ C Q ~ L ~ 'tr.at32..33'. 1:'beOI(lijJSo. tb.uod:tbQtt.6e SEO':tJ(ie.n,dC O ~ l a . n d Deputy GeneralCO,unsel cboseilot to,partieipatemeohvel'S8tiOns'Withcut1twith,the: .Hie' ~ s e olano'"" wmg ''tho' "enthe tIddbilitvto,b'WCe'~ J . " " ~ ' ". ft or41 .. . Seespec .. 'p-n- i lDS. ~ ~ . . . ).V()1hnerTr. l ' 7 ~ ; C a r t w r i g h t T r . a f 5 8 ~ S 9 . a:owever;, Thomse;nand :Qutlettestifl.ec:lthat

'T. i,. ultima.t1yJPM()rganw.asgWenl1Omore assurances,tbattwere:tol1tah1dhthe:DimMllettet.. . i. 1

I ~ T h o m s e n t e s t i t i c d tfiatsbeWinputillto h e ~ ~ m t b o 1 ' l ' 1 e a l l ( l ; ~ T r ; .44-45.3.2'

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34/47

;Do nuDism DlcJ G i v e C u ~ r S Q ~ e C Q P J f o r t ~ ~ t h e o a ~ " f l I O B g o ~ g l J ~ a r S*ms' v ~ . t l o n . ....d,4_ranc.eJ:thatEmotu. . . .t,Would.NotRecommend c t i o J i A . ~ J P M o . n R e J a t e d to Bear: steams., ConilUet:Vw,ingth,A: ~ ) ' s : P . I ' i O . f ' t o d a ~ ' A ~ i f ; l ~

. " As:discussed above. while JPMorgan did not teaelvetheb.lankel a s s u . r a t i c e s ~ f J W .,Enfureemen.t 1iabi1it)'assbciated with Bear Steams: lbat it sought" it'did teeeiye.,:some ;ass.ut8iiee$r . ",..A:"n: (1) its t_...:.. I : A ; . : t : . . . - , ; : ~ t . ",' ." . . . ,f;n..+k-aoil .'St '8 ..11'1'gM&Wl.IQ . ,_, j I Q . ~ J A L ~ - ; Y w ~ .. l.'espec.tto-.o.ogo.m,g t n v ~ ~ __ . . _ earPS , .. 'Ithe o s s ~ ofEilforcemeot opening aninvestiganono.fJPMolpl;:8S fJ;1e ~ t ~ b.ased on t a t ~ b y B . S t ~ ofiics (iurifig'$e O c f a Y $ p r l Q t t Q ~ # C q ~ j ) . . ~ . ~ e o . t t h e l > i J u o l l l e t t e r ~ t h e s e . w o ; ~ i S ~ _ h a t . Q P t l V Q i \ e d _ o ~ " perhaps intentiOnally SQjll buta l e a t ~ s t a t e m e n t o f t b e : t e l i e f t b 1 i t t b e . D'ffgave JP.Motgiin

r ~ t t ~ e ~ ~ . ~ ~ ~ t ~ ~ ~ e a r S ! ~ T ~ ~ 4 ~ : i s . ~ . ~ ~ ..~ . , _ ~ that S . 8Wt Cbainnan . o ~ a n 4 Comnusaxoners.Casey... tldPs. SlftldescrtDed t h e l e l i e f ~ r o V i d e d & fOllows:f : l : ~ ) ~ ~ l t # f , O l M ~ t ~ g . t o f j m d .

. .. . 0 J l S ~ ~ actions ~ Bear as t1J.e.;meatigationswere san ifi:pmcess. ltoftered t1OmfOrl.to:J p M ~ i t ~ Q c l t h e ~ Q . f t b e ~ M 1, ~ n a n d t h a t i t w . Q Q l ~ t b Q ' S Q ~ J I t J S t ~ indecidingwhetbetit wo:wd reoollltt)eOd.aciiDll8g!UDstJ P " f i . ? r , p _ ~ . C ) f ~ . t J ~ ~ ~ t ; b . ~ f i t Y l ~ : . 'lOlikel:Y to reooJ:IlJiiefid actionagainstJPM ariSiDgout ofst8temenls:made;byBeat':in the,60days prior to the publli1

j ~ ~ : o f t b ~ . p r o P Q S f 4 . a . c q u i ~ ~ n ~ y ; m M . . . .\ J


35/47

b6,b7c.:

.' r\.i

~ \ 1 t . e ; J u t w e I W b r c e m ~ i p v . ~ i g a t i o 1 ) ~ I d . $ i t W ~ l y t ~ n Q t e . d t ~ $ ; e c : ~ ~ g t o JPMorgmt's request for:reJiefwas f'an emaordinarilylJIltiSual dOTh'" CartwrigJJt Tr. at, 33.,In ad4.itiQu,Ricciardi noted bow J"nus1J8,1, 'It W'QfOr ;EntOrce.ment ~ P 1 ' Q v i d . ~ any' .,.infutmation aoomanongomg Divestigation.testifY.in& ft enfotcemetltmvestigations.8(e.c p ~ Y ( ) q a r e n o t . ~ o } V ~ to ~ C Q ~ W ; ~ ~ t W J ( ~ l , t i . Q l l S r i b t b i r 4 :parties:"RiCciardi. Tr. .' t' .. R i : . . . . : f t . . A : 4 : ~ 1 . .~ 1 G l ~ . J . w t . U e r 't s ~ IlUVUJ>+,the. ..... u.e..:.....".. ~ of, ' . . .a ./. .:..:....i: ..t.... ' U11,Jq, I1. . . . . ." . . . . . . .- .,COll'iPany::rnergerMd acqUisitIDns,'fJ'he companymayhave. aleg8l6bligatiOnto.discIose. lOa

p o t e n d a 1 : ~ e r . p a r t n e l ' ~ ~ ~ w b o u t : t h o i 1 \ y . ~ t i p t i . o n . :Tbat O ~ 1 l Q t & W e . tQe..staft'the.autbority to remythatinfutmationiothepurd11j:Ui18 o ~ y . ; " Ill. atS9. Ho.wevet,tbe$lff1nvglve4 ..hl ~ ~ i o ~ i : t c > . P J ; Q V i d ~ t b a t t ~ ~ t ~ ~ ~ b d i e v e c l ~ . ~ ~ c l r . ~ oftb.at ~ ~ . W ~ t h f m i 1 e ~ T Y , . 4 1 ; ' V o U m ~ r : T r ; , a t l()?, '

',.co'. The Existblg BearSteanls.mv.,estiptiollSWire.Not m p a . e ~ ~ y . C u t l e r t . CommJUlleatlQ:QJwitllli.iJo.. ..e.D .

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36/47

': 1 b i s : ~ ~ s u l ) j ~ u o t h e p r o ~ O t i s : o ~ t b o ~ v a c y . A d ; o f l 9 7 4 . 8 I I l l : m a y r e q u i r c ; r e d a c d . o A ~ d i s c k m u : e ; t o 1 t U r d parties. No redactiOn hasbeenperfi>rmed by tbe01ficeof1DspectorGenerat.RecipieDt& ottbisreport SbouktDOtdissaninateon:opy:itWitbouhheliJSpoclor Oeneralsapproval. .

' j-!

.... it wasnot IOst.ollpeop1e h a t 1 h e d w i g e d ' ~ ' .. , wetepiiia:'IQ ~ : b o w ~ ~ e ' 9 ~ ~ : ~ u . t ,I w h . ~ ' t o . p 1 ' Q . c C e 4 0 1 ' J X ) t I . m e a n ~ . 4 .wo4idntbavolPhearwm JPMorgan tQlnow tbat theteWen:potditial

\.

i ~ a b o u t b ~ . ~ .. . B e e r $ ~ ~ t l l o s e ~ o e s ... let at 116.'i I n . t b e t e l ~ n o loterView.swe ( ) ~ e d o t o . ~ t i t ~ s . t a f f w o i k i b & - d Beat'Steamstelatedmattets .we.1eamed that JioJ1e f t h 0 8 6 : m : v e s t i g a t i o D n v . e r e : ~ e d D y ~ t h O . e n l ~ 9 9 ~ j Q ~ t b - . w ~ JixDibit.4.1. ~ b W ' Q f S e . o t : " O l Q inves.tigatiOl\ we developed a. tist.otat1.BearSteaais: cues i & l Mar"h.. 0 Q 8 ; w.here.Beat

'3$.. .'


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".i."]

t h i s d o c w n e n t : i s : " b . . i e c t t o t h e p r o v i s i o n s o f t h l t . P r i v a 0 ' A c t . o f 1 9 1 3 f 8 i i C l m a Y ~ ~ b d i i e d i l C l ~ t O l b i r d parties. N o . ~ h a s b e e D perfonnedbytbeOffioooflnspectDrGeueniL .RecipieotaoftbisrepoIt rhouldilOtdiSseminate.or. cOpyitwithout the InspectorGeneml's appt'QV8L.

. S t ~ wasa.direct,Qr r e I a t e 4 p - . r t y ~ t f t o ~ inve.st1ions. Ar;


38/47

,.. .....

. IiI

'. .,!. ,

i.\I.... >

i. )

b6,b7c iI- - - - - ~ - - -

This dQcumentis spbjecUo the pro.visio;nsoftbePrivacyAct of1974. andmayrequil:eredactiQJl bef'e disclosure to thirdparties. No redaction a s ~ n ' p e r f u n n e d by1heOflice ofInspootor Geneml. Recipients oftbis report shouid notdisseminateQI ' copy it without 1he JrisPectorGeneral's approval. .

. b a t y o ~ correctly fucused on" . ''in the report issued about how the Pequot investigation was. mishandled "by theSEC enforcement division." Id.Even Ricciardi shared, to @me extent, that perception. When be .reached out to Thomsenon Sunday," March 16, 2008, and learnecJtbat she bad been talking. to JPMorgau, a l t h o u ~ s h e "didn't say who sheWas Wkingto,(he] thol1ght there,wllS a chance s h e was talking to SteveCutler . . [l>.]ecause Steve was her boss, and Stevegotherpromoted to DeputyDirector," . .Ricciardi Tr,.at 79.Ricciardi testUled that h i l e h e w ~ the Deputy DirectorofEnfbrcemeirt. he ''knew thestaffhad.concemsaboutseDior level:contact.to Id. at 78. RiccianliexpJained ifhad been hispractice when C()ntacted b,y coUnselfor e s U b j ~ t of ~ investigatiQnto&teil totbat person but'never give them guidance:" Id. T h ~ according to R i c c i a r d ~ lie would go taUctothe t ~ working onthe ma.tter andtheywouldcaJl back the attomeytogether. [d. at 79. Ricciardl .testifiedtbat after the peq.uotcontroversy, discussed ~ v e at footnote 4, he Urged t b a t ~ practice be adopted as a fonillil polieyf9rEnfo.fcc:mlent. id.Ricejarflltestified u r t h ~ that " s o m ~ [Enfurcemelit officfuls] resisted i s t ' e c o m n i e n d a t i o ~ but "theChaitman sided with me, ~ weissued a fonnal policy;" Id.McKown also acknowledged that the staffbas ''perceptionsand col1cerns" that "certainDlemberso(the d e t " e n s e . o r o U t s i d ~ ' ~ v e intluence withiilEnforcement. TfanScript ofTestimonyofJoan c K o ~ M a y 4 ~ 2 0 0 9 , attached as'Exhibit 49 (''McKoWn Tr.") 110--11 tMcKowntestifiedthat she did;not believe "there is'truth t9Ithappening,"buttestified"tbatisaperception;' and shediet DOtwant to "dilninisb[]" the stairs concerns. Id.at 111. McKoW1l

~ e s t i f i e d tfuit is,inplUt,thafper@ption was the reason Enforcement issued t 1 i e . e x ~ c m u s l .communications policy. ld. .. The OIG b t a i n e d d u r i Q g i t S , " m v e s t i g a t i o n a n e - m a j . t e x ~ e a J n l ) n g E n i Q r ~ e D . t staffthatfilrtbetevidences peteqJ.tion,tllat ceitain outside individualswie . PI) ueinflPeiiceovertbe outro of ,: .. . : . .. . .

:' ENF Employee C :OnMarch 18,200furwarded. thiS e-mmHo -8 ..... ~ I ' . " .. ,. - " " ', : i t . i m e , 1 3 . ~ t b e ~ ~ :

13 Friestadwas u b s e q l l e D d y : p r o m o t . e d : t o D e p J J t y D i r c c t o r o t ~ but iseurremIyartAssociafeDireCtor inEnforcement. . .37


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This docwnent is subject: to the provisionsofthePrivllCYAct of 1974, aild may require redaction before i i s C l o s ~ t o t h i r d . partieS. No redaction has been perfonnedby the Office oflDspector General. Recipients ofjliis report shouldnot disseminateor copy it without the Inspector Genera) 's approval. .

Id._." ? n ~ again. ?rov.el8Cl snuu:test .. : [flor avoiding anmvestigation agamst ; ~ c t entitYlll!

ENFEmployee A ' esponded:

Id.. Yes. Exactly my point.

.. ..:

Friestadasked:

Id.

You don't think [the other group with the B ~ Stearnsinvestigation is] going to bring a blockbt1Ster case'!?

~ e p l i e d :

Id.

LOLii Read yesterday's release - - Emorcement sentJPMOrgan a letter saying the investigatiOns were essentiallyover!! . .Friestad responded:

'.

l

I wonder what happened behind the scenes tp engineer thattesult.Id.

ENFEmployee A p i n ~ : iuce?

Id.Eriestad added:

sC?

38


40/47

II, ,

This dQcument i$subject to the provisions oftb.e Privacy Act of1974, and may e q u i r ~ redactiOIJ before disclosure to thirdparties. Noredaction'lili:s ~ pCrlbnned by theOffice,ofInspector General. Recipients "fthis report should not,disseminate ,or copy it withouUheIiJspector oeneiars approval. '

_ r ~ ~ d ~ ; '. 'j"l That's funny, Soott., We all know how wrong that would be.

Id.

U11d '1Ilginvestigationswerenowgomg 0 ' esg Y'S opp ,that h e , e - m a i l e x c b a n g ~ w:as their speculation that B'earlISa e $ U l t ( ) f ' t b Q m s ~ s cOnversations with Cutler and ilia __. t a l ~ f t l 1 # t "[w]e'all, i knowhowwroM: '', ',be"'impIiedtbat those con ons ' e result were ' '

I inappropriate. 1l . . '" testified that tb.e e-mail excha:ngewas based on their belief"that there was a ,,' , ',' e . llSbip,between ffhomsen] and [Cutlerl t b a t t b a t was probablyan e t to fucilitiIte tbesm:ooth, r a n s i ~ n ofBearto JPMorgan thatweekend.?' Id. '--eStiii.e4 ~ d e r e n c e to "Juce" as the explanation fur "what .~ s c e n ~ ~ result" referred to the relationship between Cutlerand Thomsen. 1d. at 29. 1'.heOIG believes that "Juce" waS a referen.ooto aninfiunous e-mail thatwas ~ e d i n the PeqUQt i i v e s t i g ~ o n and referre


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"'! This dQCwnentis subject to the provisions ofthePrivacyAct of1974, and maY require redaction beforediscIosure to thirdparties; No redaction has been perfunned by the Offii:eofJnSpector General. Recipitmts of this report shotildnot disstmUnateor copy itwithot th.eJnspector General's approval.

. . e s i l l i ~ under oath. t ha . ' d not recall this e-- e erenceto."Juee" m e a n ~ P t ofTestimony ()attached hereto as Exhibit 51 at 20 22 27- ...,..,,0 ' J u c e " was'a reference to';!Po -. estified that:

.I remember' the word ~ j u i c e " became a word that waswidelydisQUSSed 'because everybody I know ~ . thatJt's .

..ridiculous ~ t p e o p l e W0. '.. ..' _. pea.pae g.et specialtreatment. I'vebeenher . . . .. l ' v ~ n e v e r seenanybody get special..trea .. .' . the-DivisionalEnforcement.' Quite the contrary;id; at 24.

. ,

As discussed above, the OIG found no evide.tice'that JPMorganreceived specialCQnsideration due to Cutler's relationshipwith'tholDSen. H o w e v e r ~ Thomsen's fiWui-e to include) . other Enforcement staffin the eveirtspteceding. her sendit;1gthe DiIilon letter contributedto analready existingperceptiOl1withinEnfurcement thatsome indiViduals Outside the SEC wieldUlldueinfluence over the collduct and outcome ofE11fotce1lient investIgations. As Ricc.iaidi":ic1aiowledged. tbat'percei>oonm itselfis sigtuficantconcemMoreover,.das Oiscussedabove, approxiJ:n4tely one month before TholDSeD.'SC01llD1unicatioIJ.SwithCutler, Enforcement40.j

.1


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had adopted a. ibnnal Ii ..,. overnin .CQDltJlUdicatiOi'lS relTQwtfhn mvesti aUonsi'With thUd .. ames. . . ' .... p() 0/8 .. ~ , . , . ~ - ~ g P............ih,. esuIt f 40'1.....40 p& .... _ ~ < 1 . as a '" .. 0 . ~ w n . I ...j.,\ In tigb.t oftbAt per;cepijog, . U 4 ' t . I i Q P . W m ; ~ t : e i ~ n m n p with CUtlet, ,it woUld. bave:been .advisable fur'Thomsen to :have invohtedo.\her t c . e m e n t sta1t; ~ l y Chiou atUi.:pethap$.RiCCiardi, b e f o ~ sendin&the DimOn e t t e t ~ Themclusion ofothet Enforcement stat'fwo'Uld have

s ~ e d . t.he.stated:purpose otthe t p ~ C : Q J t . b a . t t . b P J Q S c ~ ) " h e I 1 e . 1 . f : m q , ~ t ~ . - ' ' ' W ~ . ".,.:'t!Jat:extemat ( ) ~ 0 l f $ b e t w ~ senWt f l i c ~ ( a t ~ A : s s o c l a t e P k ~ r l e v e t ~ ~ v , ) : , ~ ~ I I $ .o.utSide the S : e C ~ h i m d l e d \vith theapproxmate . seositivityand f t a n s p a r e n c y ~ ~

I Exhibit 2 at 1,. ,.I .Eo E n f o r e e m : e D t ' . L e t t e r t o ~ M o r g a n D . l s d 0 8 e d , F a e t oHlllgohlgInV.estIgatiQIlS .lte&:ted:to Bear.S...... ..

..&noted.v;:the . B . C ; . ~ : r u 1 ~ $1d e g u 1 a t i Q n s . l ' ~ ~ J P ~ e o f ~ n ~ p ' ~ l $ .i D f o I I l ' i a t i o n ~ i a l 1 y t t t . e v e n t SEC staffnom 4isclOstng infOrmation:.$lctdo.cuntents.obtained,dUring t s ' i n v : e s t i g ~ o j ) S ~ ~ e Comilii$Sioti ,authorizes itsdis.J11$en t ~ ~ : ~ t O t . ~ ~ ~ v . Q w h i d . l , . ~ ~ . ~ ~ f . .' "'As 'lblaily,invstigationstftomthe Dinlonle.tte.t em e : t ~ u ''liQ1QQbfiti:niiigtba.t ~ ' : $

41." i.'


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;;., ';; . , .. ,: ' ,-

This f Q c ~ ~ ~ l > j c J t o 'tbcPf'Q\'isions J ? r i ~ . A c t o n 9 7 4 , 8lld..-yrequireredactiOti,befOrcfdisdosum toibitdparties. No . ~ ~ bC.eu, ~ r n i e c J . bythe ~ - o f ~ t o t ~ ; : ~ p i @ ~ Q(@$teP.Ort l . 1 . J l 4 ~ 4 i ~ i m l ~ Qr:cqpy: i ~ w i U t o . Q t t 1 t e , : J n 9 p c t o t G ~ $ " ~ v e J . ' "

attmbin atf\ibtt" ThCt.. T at 42 As 10 .:thfr' n:d aboVi' ferenced' t ceoJ. g U1 P ~ . . . , ,msen t. ,." t ' . S ~ . : ~ r e .' eJL ,h Q w e v ~ , h o ~ a d m i U e d , " t .. l V ~ 1 y ~ t clearlY'Si1gg,estSthat them arecmtentinvestigatio1l$." Jd. She: d d ~ , however, that she. dUJ:not be1ieve:tbisWsc1Q$U1'c:viola..ter;f.CoD11Iiisswu,po.licy. 1(}; Thomsen testified that there. was .SOniC debate,within OGe.1iS .(G. wh.ethet.the lc;tter 4 i s c 1 o s e d 1 1 , O n ~ P W l l i c i n f Q l 1 1 1 4 l t i o n , but_ w : a s : ~ ~ ~ t y n o t . M tQ ~ e n ( , l i n g ; i t t():'JPMQtg84." 14. .at4l. When wby t1l.efe was nQ s s Q e ~ ~ g g ~ Jha,t t l l e r e ' w ~ ~ ongoin$mvestigatiOns,into BearSteams to JPMotgan,ThOmsett testified pai11y because.JPMorganab;eadykneW there were ~ ~ i n . V e l i t i g a t i Q ~ I $ ' ~ p l l d l y ' ~ U 8 e ~ ' ~ ' $ t e . a t Q & WOuldSOODbecome part of JPMotgau. Iii. at

~ g h t WiI$,$uch.te$$ l t m d n l i $ ' t ~ n y ; ~ . w . ~ ~ l e t t ~ : d . i $ ~ l o J . Q C J 1 J P P , public mtbrmaiioil and claimaHtwu a c o m p l e x Iegal:issu.e"ofwhether tbe.En1breement.. D ~ o i : ~ 'tlJ.erigl to ~ ~ u - ~ l i c : i n f o ~ n : ~ b a ~ p . - t Y : C8ttWtiaht.Tr.at.49. :When asked ~ t h e first b o v . r e . t ~ @ : $ ' 4 t ~ ~ . w h i e b , ~ 1 q 4 e 4 ~ :fh.rGYinvestigatio:ti$" itdisolosedthat there w.ere o' oing mvestjgatiolll, Cartwright testified" don"iibfuktb# t h ~ i n t e n t i Q J L " : lit,a,t '12. a . : ~ : f a e d , ' 1 d o t . l ~ t 1 1 ~ ~ . t b i $ . i S dtsigneclto.:sa.1 n ~ , one'way or t h ~ , o t b e r about, the.CQl'lWt ,status.of a n . ~ t ; 14; :La.t,er in jhat $$11Ctine:of. ~ o ~ Cartwright responded to: the questions, "Blitis:theteanytlihlg'm. thiS: le.tter1hat ,eoUldbe deeDwd s , . ~ h d Q n m t 1 o n t o third 'party . P . M o J . P n . t b a t ~ s being [Sic] non-pub1ic?"bytestiiYing, "I realiydon't so." I t at .' . , ' .

.. :) Acootdina tQ. VoUmer,3 tOpic o r e Q u v ~ i o p . . i t ' 1 t e t n i i 1 1 Y tbal: weeken(l'Wu, V o ~ 'I ' saying aD}'thin& toJPMorganbecauso theQGC'svie\V is1bat: h e ~ e n e . 0.. not alan.j mv:estigation :is:confidential VoDmet Tr. at 66. 'Headdedtbatthe eftPrt was to :acbiev;eneu.tralityin h e ~ ~ ~ to h e t h e r ~ e were A v ~ . J ; I S . V p _ 1 r ~ a . t ( j ' ~ 1 . Bllt, OQ.cQrdiDg ~

V Q l h . n e J . " ~ t b e r ~ was "anair f l 1 P r ~ t y tQ ,jf." $ i n c e ~ : b e n e v ~ U P M Q r g a D ake.lil4Y;kne.wab.:ol,ltongoing! investigations. 'nto Beat SteiIlm VoUmerTtL at102'.J ,"

IS 'S', . lltas 'ted ,'iiet Qd:ler testmai i "1mdJ1'thave ....-..r..ulat ...-:f_ftA;;.;.. of .."v......;:"..l..:.;; Qt.P W C \ ' . ~ .ll!), .. ~ . , .. " ~ . . , . . . . . . l l I 1 y : e - - ~ . _ ~ , .. . . . . . " . ~ - _ ...i n ~ ~ u t b ' ~ . 2 1 . ,- ..


44/47

. ,

When asbd about'Wbat al#b>rity tbere. . a . s ~ r tdling .tbiril;P!Irt.Y the $B.C 8 $ ; n o i . ~ t o ~ d t u i . f t " " ' : " ' n . a i o s t i t , V n . . . . _ ~ I ; ~ "I .... ' " ' t t ~ . , . f ' . ~ Butn,:...js .. ~ ag Q ~ . < ""'--" ~ _w 0 ... n y . ~ . . JQ.Ii) .... u r a c k n o W l e < t ~ ( ) r ~ ~ ~ n t i i w ; y ~ . c e s Q i ~ . e e k @ d . ~ ~ ,fd. ' . Hc'..:

. i . ~ ' ~ e i d that h ~ w P u J d ; t i Q r n w i y r . e s ~ thI$. in..t1):ItO,rnW . o ~ . Jt/.. Y Q J M ~ n ~ e \ ' ; U U s testimony.bY saying that hc.tboupl that what,SWTtlid tbatweekend was ' \ % e a t i v ~ a p p t o p r l a t e ;@d,Pt'ofe$siol1altt .iJ,i,the. ~ a n c e $ and did. t ! ~ S ! I ~ ~ : ( ) r ' lega.l ~ ltt e.t1t9-1:20.Daniel 8 l J . a g h e t ~ whO was CounseltCl Chain:i:um eo" 'in:Matcl1'2008 and'madYiSor to the .~ o n ' i $ s p ~ rd.ate4 o E n J P . ~ . ~ l : t l \ a t , to U $ ~ ~ w . ~ l . m v ~ l v ~ . $ g ;

11 t h e . ~ e n f $ of'that weekend.whenJPMorglUlacquh-ed BearSle.arn.s.; ' ~ o f T ~ n y f j f DamelGalIagher, Match 6, 2009; , h e t e t o 8$ EXhibit S4 ( ~ a l l a i b e t . T t . " ) at19-20i. A . c r . o ~ . t o . ~ l b r g h e r , j t ~ that. b o . . ~ n ~ ~ ' W ~ ~ u . ~ ~ V l O " . e -. ottgoiDgEDfbteeoieiit DiveStigatiotiS. ld. at '20. He iUtthet'tes61ied,.tbat"somecinewoiiJdbavegotteitcomf9J:t making SQ.rt f d i s c l q $ ' i J r ~ J.d. ~ 2 1 . Q ~ a d d ~ 'J m l ' . c $ J ~ Y is:itwould nothenQnmu to disclose the x i s t ~ o f ~ 1Q.vemi.tion without$l )De SPit:Q9,PmvalId.at28.R i ~ ' f b m a e . r Depuijr, i r e : c @ r o t : E n j b l ' ~ t ~ e a , b L b i $ v..tbe:DiriJonWterwas n n t ~ ..t,...... 1-"';" . fth Co . . . . .-.1_ . . . . . . . . , ....1 - . o d ' a Fn.tfi 'D: ......: ....M;a....~ . . 1 . .. 4.1."", . .r.>'" - - " . T V l . O ~ v . . e o '. .. mnuS$lOl1.8.. ~ : " " : _ o : e r . . P o l . r " ; a - _ " :"",... : _ U l : A \ U U ~ : . \ U Q ' ,ldterreveak;d < : o n f i d e n t . i a l B n f u r ~ i n v e S t i , p t i p n toa t b i n i ~ a r t t . ~ T ; i ' . atBS.Seco..A kin then: . - -lett .....i.it..iu vailab1e i..ivio1ate4-"-_.1 ... Uml"'''' t I " A " , : ~ : , , _ - -" . . .:a-., -ma.v.g... - ~ n . er ! _ ~ ~ . a '.. .. W O ~ .. ... ~ ~ ~ r " . , . . . . o : ~ ~ n -

'.. public informatiOn, and he:believed thepress'reJease'ifse1fprovided p u . b I i c , i n f i ) r m a t i o m . at . "

: i,,

Aceol'


45/47

was itTetev8mwhat JPMorganlmcw about the m.VtlStigatibilS:becaUse:tb.e. stalIdoesnothavethea'Qthority t(). ~ l l l Y , 1 l Q n . - p \ 1 b 1 i e itdPrmatio.n: fitat:. '8.9..Sunf4s0 a c k q Q w l e d g ~ ~ the 1 I n o n l a t e t . ~ e s t b 4 t , a t l _ ' 6 n e m v e s t i g a t i O t i isongojng. SirdTr._ 57. sirrl added thatgeneridly'i"the. SEC;'waIt:neverJ:Qnfiriitonlenym v ~ m l ' l ~ .

"'""-..:-A_ Co ' ilisA-'116 2008 to" C - theS...... Co 'ttee' " " , , L J l U J ~ . xt. m: ,.' ::l?4' ~ J U l ( l S . ; ~ . n s : "".",m" .. ~ e ', lmtnL ..-.'. on Finance abOut theBearSteamslJPMotgantt8hsaetion.:stated, m u , ~ h , d o e s n o t i d j S ~ l P ~ , ~ ~ ~ c e ' o r : 1 l Q n " Q ~ ( ) f ~ ~ W 9 U . : 9 r . i u f p ~ ~ . : ~ : i J ) . , { l t l f

i n v e s t ~ n unlessmade aJDatterofpubi1


46/47

. .,This document.is ~ j e c t t o the provisiolllfofthcPriwcy Act of l974, n d ' ~ i r e q u h ' r e d a c t i O n be1oa:edisclPmJre,todiml"parties. N o r e d a c t i o n b a s b e c ; n p e r f o n n e d b y t b e O m c e o f l D s p e c t o r . ~ J l e c i p ~ . o f t b i i I e P O r t s b o u 1 d n o t d i s s e m i n a t e or copy it without 1 J 4 ' ~ ' G e n c R I ' $ a p p i ' O Y l l t ~ .'

itdh'rmationtheydid..not y : h . a v e . It t at 31. Md{oWua ~ W d ~ : $ . l . . ~ ~ n todise]odrto n o n - ~ u b n c iriformation. ifitwasdeerned_',"dent in:' ......,:_.,...... , ~ ....+.;...,n. Id..do' 3!2 . . . . .,f......... . a,pauw.UJaI. _MJN,MI . Wo.. .i: '

} ~ , . ,.. F'n!il.$tad testitlecl that ~ e r a U y ~ c a u l l a y v e t Y ~ , i t ~ : ~ u t ~ ; .inve.IJ.t:ig}ltiOD$i tOtbirdparties,.iii1dhe wa,s:liPt sure if.that po1icywuvmu. B . O ~ ~ F.1:i.esta4Tr..at 28. Frlestadsaid there were Jimitedexeeptiondo'thatpalWyandtbiltit iffdeteimiiledonijc a s e - b y ~ e basis whereto. ckaw the line on di$d.osing non..pUblkdnfQn.natlOn. Id.. at 2$.. ; t . , . According to Ftiestad, asapmcticalmattet,hebtllevett the:COttDnissiol1.hadan. epic ornationaldiQSter excq;tiontonQt e l e a s i n g . n o n - P 1 J b 1 i c . i u f Q r o u i o ~ which.bheli(w.ed:w8$ t p p 1 i ~ l e . m . theJPMorganlBear Steanls transactiort ld.. at. ,

Furthetmote,th.ei.'ewas dmagreeiWmtaboutwhether tliCpub1j.c diSclOsut6o:f.tbatletteron' ~ ' C O ~ j o n ~ ~ p:Qbnc e b s l t ~ vk)Jafed C Q ~ Q U ~ s t J i 1 ~ . y t . d i . s l o ~ h . J g l 1 O J . ) . - p l ; J Q A A . inibnnation and whether, and 10 what extent, the COJDitiiSsiOniteeded1o,approvetbat disclOsure.Asdiscussed -OOve;.itwas initially e t ~ ~ thc>lettercam.etoQ.doso.to: : t h a t there wer.e,oDgo.1nginves.tigatJons.1nto Bear-Stean.lS ;a.na,thetelOxe, the e t $ l 1 o \ l 1 d . . l l Q t be .p u 1 ? l l c I Y ' d i s < ; l o s e d ~ T h o m s e n and'othets4isagt:eed with t.bat:view and ultiIuately tbe.1ettet was.publiclY diSek>sed. As.noted .oove, this'\\'$ done withoutCOtnmiSSibnapprovat.and iUsunc1eai't o : ~ p a m ~ w ~ t b a t ~ ~ r e q ~ 'm

And"as. referenced above in the SectID.nDutlii1ingtbeapplicable.. rules ,and regulations.' .. 0\( ..... . release ofnon- ublicinfOnnatio. .therulea and - . . . . 1 ~ . . . : . . ....;Vide: some:discretiOiJ.:tog ~ . . p. . . . . " nJ . .. . .. " " ' o ~ ~ ~ p r o ." ..- . _. ...seniQrofDcl8JS.ana;some4elegated a u t b m i t y t o ; ~ : G e n . e r a l C o ~ e . 1 F o r ~ ~ : ~ : 19..1

S t a t e s ~ in ~ ' T b e p ~ h i b i t i ( ) J i againSt. useofOOJi..ptibJie :iDtOrmatloi1ordocunteaJ.ts witOOut,Specific auUtorlzation ) n ~ p p r o v a l b y t h e . S)S(l'dQes 'PPtyW h ~ ' ~ e o f ~ ~ ~ . @S .; '. b f1. .... stait' . . . . S '" . .. . . ."" ' :10.necessary or:appropnate ry ...~ . e r s 0 . '1;U!jj'. . .UlJlUrswng: Be l 1 1 V ~ f l O n s o t ~ n s ,0t. in $ e : o f o ~ o f i i c i a l ' ~ n s i b i l i t i e s , " There appear to:be no guidelines a s : ~ w b a t this. ~ n 1 l o w ~ . . . . . . ' .. . ,

45' . ~ '


47/47

I. II.~ ~ i t J s U b . , i . . M t o . t h e ' ; ~ : ' : " " " o t A . _ b . l . " ' ' ' , J . - t o f ' 1 ~ 7 4 ' .. ~ . J - r e d a c d .bctb. di8c'----..... .....~ pro," m " : " " " c l ' . y _ Y ~ . . ~ m a y ' ~ _ ~ o n . iRt __ ~ " " . \ W l U panics. No Rdac"oJl has lleen prfbrmed by the Oft1ec.oflnspectol' Geherid. Rectp(entBoflhis reportshouldnOtdisseminate

~ . c o p y ' i t w i t l i o u r d J o , ~ r ~ s Iq)pr.ovaJ. oJ '

We alSo tbUlid that EntOrcement'slettet to JPMorganthat weekend tecbnicaUy discloseCln o ~ p > 1 i c info1'1nMion e c a l l $ ~ i t C O ~ l i a t ~ e , w ~ e . o t 1 S Q ~ i P . v e s t i ~ ~ in,tQ I 3 ' ~ ' Steams. I n a d d i t i o ~ there are also serious questions abQUt t h e . p t o : P r l e t y o t i n a k i o g ~ letter.pubnc.J.y:availablewithout a p p t o v ~ o f t h e _ e : C O ~ D $ i l d i n a e i i e t ~ . w e ~ a ~ ' Q f cl$ityWith reSpect to the.agency. andpide1inesre1atUwtot,hodisclOsurcofnon,-pubUcin1bmllltiQn. TheOIGaJso tbundtbat Thomsea.and.tbe General CbJJOSe1 did Dot,obtain fOrmat

C o 1 1 1 i n i $ s i o 1 l 8 l ' P . 1 ' Q V ~ ~ t . o r o 1 t l l J 1 c j n B ~ d e . t ~ i ' J i p ~ 1 I S a b O ~ ~ b i U t Y o t ~ ,Enf,rcx:ment investigations. Whilewe did, not find anySBCnilooxpolicytbat a n d a t e . c l ~ n n I J t , Commission aq>proYal" we tburidU. there was aIsOa Ja.dcQfclarity of.thecircumstances in whichCoD1iDi$8io*,- ~ t Q v a l i s , ~ . ~ ~ e v d ~ f . r i W o f S a C s e Q . i Q t . ~ 1 Q . ~ e 4 ~ i P n $ thatbiDd tia.n....-...:.....:.,. ,may ' .. " , , ~ n . A ~ ~ .. e a r e r e f e l t i n g t l l i s ; a n a t t . e r t o t l w O l : l i e o . f t h e ~ . d ~ . D J r e c t o t o f ; " n w t c e l n e n t 1 b r a c t i o n s c o n s i s t e n h v ~ h : t h e f b U o ~ . ~ t n i n e I l d a t i O n s : .,(1) 1"'i_":4:-a... ftheCa 'J , .1:..::.... the-disclo ...' f .. u b J ~ " ". . . ~ ~ ~ n o . ... .... .1JQ1l1S,$1Otl S o ~ J Q J . o n . .. ..... . .sute0 l1OUJ) 'IW.

i n . i b r n : m t i o l l t i n o ~ . (Alwbatcoostitutesnon-public mtOnnation.re1atedto t h e . e D t e n c o . ~ ( ' or.infbl'1tJatk)n.about,ErifOrcetnent mvestigatiods'aiJd (8) wlJatardheparametei"StbrCtiScretiOnaryrelei8eb" seniOrstatrof' .. ' b H c i n r o r n J . l l t i o n j ~ a n d , .'. " ,.f '; . . ', . l . 1 Q . l 1 : ~ , . ' . _ ., . t ....'"(2) Clarification f t b e C o I J U D W s i j ) i l ' $ p O J i c i t s ~ : u n d e i " w b a t ~ c e s _ tho staffis'

.. 'ublig_ed toseelUbtilial v a l b e t b r e : m a k i l J g d e c i S i ( ) D S t h a t iiiliybindthe ) ~ n .

D a t e ~. " ..

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SEC investigation report No. 502

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