Risk & Compliance

Top Enforcer Leaves SEC

Linda Chatman Thomsen has been under fire from lawmakers asking why the SEC missed Madoff's alleged Ponzi scheme.
Sarah JohnsonFebruary 9, 2009


Linda Chatman Thomsen is leaving the Securities and Exchange Commission after nearly four years as the regulator’s enforcement chief.

She will return to the private sector, the SEC said today. The SEC’s announcement has been largely expected since Mary Schapiro took over as the commission’s chairman last month. Schapiro has promised Congress she would turn the SEC into a tough enforcer following criticism that the commission failed to uncover Bernard Madoff’s alleged $50 billion Ponzi-style scheme. Schapiro vowed during her Senate confirmation hearing that she would “reinvigorate” the enforcement staff.

For her part, Thomsen has been called to testify before Congress at least twice about the SEC’s behavior before the Madoff scheme unfolded. In an unusual statement last week, Schapiro apologized to lawmakers for the SEC staff not being forthcoming in recent testimony. SEC staffers had not directly answered questions posed by a House subcommittee about the Madoff scandal.

To be sure, it’s unclear what Thomsen’s responsibilities were in regards to the investigation of the alleged fraud at Madoff’s firm. Publicly, the SEC believes Thomsen did a great job. Today’s announcement provided a glowing rundown of Thomsen’s career at the commission, including her oversight of enforcement actions against financial institutions accused of aiding in Enron’s collapse, fraudulent hedge funds, stock-option backdating cases, and of 10 high-profile Foreign Corrupt Practices Act cases. She also oversaw several jury trials that resulted in victories for the SEC, such as the commission’s case against a former Waste Management CFO accused of conducting fraud.

Moreover, under Thomsen’s leadership, the SEC’s Division of Enforcement brought hundreds of financial fraud cases, including those against AIG, Fannie Mae, Nortel, and Tyco, and dozens of insider trading cases. “Linda’s achievements have been nothing short of extraordinary, even heroic, in an era of unprecedented challenges in our securities markets,” Schapiro said.

Thomsen joined the SEC as an assistant chief litigation counsel in 1995 after working at the law firm Davis Polk & Wardell. She had also served as an assistant U.S. attorney for the District of Maryland.

When she was deputy SEC enforcement division director in 2005, Thomsen was promoted to head the department to succeed Stephen Cutler. Around the same time, she deflected criticism that the SEC was issuing excessive fines. “We have intentionally tried to make sanctions more meaningful [so] that their deterrent effect in increased,” she told CFO magazine. “It is important that the penalty portion have some sting.”

Thomsen will stay with the SEC “to ensure a smooth transition,” SEC spokesman John Nester told CFO.com. The commission has not named her successor.