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Documents Show Former SEC Official Aided Former Targets

A former regional enforcement official at the Securities and Exchange Commission who was sanctioned in May over alleged conflicts of interest in the multi-billion dollar Allen Stanford Ponzi case has a history of such allegations, according to documents obtained by CNBC.

A former Security and Exchange Commission employee Spencer Barasch, a witness for prosecutors in the Arthur Andersen, trial leaves the federal courts building in Houston, Texas, after testifying 08 May 2002.
James Nielsen | AFP | Getty Images
A former Security and Exchange Commission employee Spencer Barasch, a witness for prosecutors in the Arthur Andersen, trial leaves the federal courts building in Houston, Texas, after testifying 08 May 2002.

Former Associate Regional Director of Enforcement Spencer Barasch became a symbol of the so-called “revolving door” at the SEC — where staffers leave for the private sector and cash in on their contacts — following a 2010 investigation by the SEC Inspector General into the agency’s handling of the Stanford case.

The investigation found Barasch repeatedly derailed inquiries into the Stanford Financial Group while serving as Director of Enforcement in the SEC’s Fort Worth Regional Office. (Read More: SEC Sanctions Former Staffer Accused of Thwarting Stanford Probe.)

Then, after leaving the SEC in 2005 to become a partner at Andrews Kurth in Dallas, Barasch repeatedly sought to represent Stanford, and briefly did — an apparent violation of federal conflict of interest rules. Earlier this year, without admitting guilt, Barasch agreed to a one-year ban on practicing before the SEC (learn more), and paid a $50,000 civil fine to the Department of Justice.

Asked by then-Inspector General H. David Kotz why he was so persistent about representing Stanford, the report says Barasch replied, “Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines.”

It was not the only such case the Barasch sought to get a piece of.

Internal SEC documents obtained by CNBC under the Freedom of Information Act show that soon after leaving the agency for private practice, Barasch began representing the audit committee of Microtune, a Plano, Texas electronic component manufacturer that Barasch had investigated while at the SEC.

Barasch’s advice apparently paid off for Microtune, which settled options backdating charges in 2008 without admitting guilt or paying a fine. The company was later acquired by Zoran Corporation.

In a 2010 report obtained by CNBC, the SEC Inspector General’s office concluded that while Barasch’s investigation of Microtune while at the SEC was unrelated to the options backdating case, he nonetheless violated federal conflict of interest rules by contacting his former colleagues at the SEC without first obtaining written approval.

The report recommended possible disciplinary action against Barasch by the SEC and the state bar associations in Texas and the District of Columbia, but no such action occurred.

Barasch’s attorney defended his client’s actions in the Microtune case, even though Barasch did not notify the SEC of the potential conflict in writing, as the rules require.

“Spencer Barasch promptly informed the SEC by telephone and in person of the representation, and the SEC concluded there was no conflict of interest in continuing the representation,” said attorney Paul Coggins in an email to CNBC.

Having received a verbal okay, Coggins said, Barasch did not follow up in writing.

“The matter was closed by the SEC in 2010,” Coggins said.

CNBC Investigations Inc.
CNBC Investigations Inc.

Barasch’s law firm, Andrews Kurth, did not respond to a request for comment.

Announcing Barasch’s hiring in 2005, the firm noted his “17 years of experience with the SEC.”

“While at the Commission, Barasch directed high profile SEC enforcement activity in all areas of the securities industry, including financial fraud cases, regulatory cases, insider trading caases and securities scams,” the firm said.

Barasch’s one-year ban on practicing before the SEC ends in May, 2013.

—By CNBC's Scott Cohn

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