Katie Kieffer
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The SEC’s culture of brownnosing and political gaming is at the heart of many insider trading prosecutions on Wall Street. Recently, there has been a clear shift from relying on whistleblowers to a pugnacious, made-for-Hollywood show and a shady SEC program where bank execs can buy their way out of jail time. The Rajaratnam investigation, for instance, has involved FBI dawn raids and wiretapping no less than 500 individuals.

Rolling Stone reports that the SEC has ignored and even fired major whistle-blowers, and, has repeatedly taken politics into account when recommending cases to the DOJ. For example, the SEC gave quasi-government entities Fannie Mae and Freddie Mac monetary slaps on the hand without jail time in 2003 and 2006 for deceitful activities.

Rolling Stone’s report shows that employees in the SEC, DOJ and on Wall Street are in the habit of moving back and forth and “…constantly switching sides and trading hats.” SEC officials have a shot at lush jobs on Wall Street or as partners in top law firms after their stint at the SEC. So, it is to their advantage to buddy up with Wall Street and regulator impartiality is dubious.

The SEC’s Wall Street “top cop” is the director of enforcement, Robert Khuzami. He has said: "Raj Rajaratnam is not a master of the universe, but rather a master of the Rolodex." Big deal. Most successful people are well connected. The question is whether Rajaratnam committed fraud.

Khuzami has received criticism from well-known whistleblower and former SEC investigator, Gary Aguirre, for rolling out a “cooperative initiative” that he described to Rolling Stone as: “First, the SEC and Wall Street player make an agreement on a fine that the player will pay to the SEC. Then the Justice Department commits itself to pass, so that the player knows he's 'safe.' Third, the player pays the SEC — and fourth, the player gets a pass from the Justice Department."

Will throwing a few high profile people in prison on insider trading charges repair the economy and revitalize ethics? The Guardian reports that many insider prosecutions do little to nothing to stop the practice, and, the trading itself may not be inherently destructive to the market. The New York Times has reported that, “Insider trading does not appear to have any appreciable effect on the markets, at least as measured by the volume of trading that occurs.”

If execs can avoid jail time by negotiating with the SEC, Brahara’s high-profile trials appear to be a circus show for the American public. Media professionals will cast a blind eye as long as they can splash headlines with rich people getting perp-walked. For, these hyped trials send Michael Moore’s favorite message: Wall Street is evil and capitalism causes greed.

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Katie Kieffer

Katie Kieffer is a columnist and political commentator. She runs KatieKieffer.com. Kieffer is the author of the forthcoming book "LET ME BE CLEAR."