Q&A on the Securities and Exchange Commission

with U.S. Senator Chuck Grassley

Q:        What's the role of the Securities and Exchange Commission?

A:        The SEC was created during the Great Depression, in the wake of the stock market crash of 1929, when the public's faith in capital markets needed to be restored.  The agency is supposed to strengthen investor confidence by providing transparent, reliable information and rules for fair, orderly and efficient markets.  This should help facilitate the capital formation necessary for economic growth and job creation.  When the agency fails to meet its mission, the negative repercussions can impact anyone with investments monitored by the SEC, including investments in pension and other retirement funds.

Q:        How did you get involved in oversight of the SEC?

A:        I'm committed to the work of congressional oversight, and there's a great need for it with the SEC.  Four years ago, based on information from a whistleblower and the work of my investigative staff, I spelled out in a comprehensive report (with then-Senator Arlen Specter) how the SEC Inspector General failed to investigate credible allegations by a former SEC attorney that his supervisor pulled punches in an investigation because of one Wall Street witness' political clout.  The report hit a nerve and, ultimately, the SEC attorney who blew the whistle was vindicated.  Last year, the SEC finally obtained a $28 million settlement from the capital management company in question and paid the attorney years of back pay in a settlement related to his termination.

Adding to that, last March, a new Inspector General of the SEC issued a stinging rebuke of an agency program created more than 20 years ago to help target insider trading and securities fraud by rewarding agency employees who spoke up and shared valuable information.  Last summer, knowing that the SEC missed the biggest Ponzi scheme in U.S. history in the Bernard Madoff case, a colossal mishap that might have been avoided if the SEC had paid attention to whistleblower information, Congress passed legislation I authored to dramatically beef up a whistleblower office inside the SEC.  I'm still working to make sure that office is strengthened as the law calls for, and not weakened by institutional ego.  Every source of information is needed to combat financial fraud.  Both investors and taxpayers are exposed by wrongdoing.  I want to see the SEC embrace whistleblowers because they can help with the mission.  Whistleblowers could help stop another Madoff.

Q:        How can the public have confidence that the SEC isn't too close to the industry it oversees, especially the big players?

A:        A revolving door between agency staff and the investment firms and banks they oversee has led to concerns of coziness and the soft-pedaling of potential criminal cases.  Last year, the SEC Inspector General identified cases where the revolving door appeared to be a factor in staving off enforcement actions and other types of oversight, including cases involving Bear Stearns and the Stanford Ponzi scheme.  I offered an amendment to the 2010 Dodd-Frank financial services reform bill to extend the cooling-off period at financial agencies to two years and to require a list of former agency employees who are representing clients before their former agencies.  Unfortunately, my amendment was blocked by the bill sponsors.  These reforms plus better record-keeping by the SEC are needed to help maintain the regulator's integrity and preserve the public trust in a balanced playing field.

This year, I'm working to make sure the SEC is held accountable for what it does with referrals of suspicious trading activity from one of the biggest and most powerful hedge funds.  How the SEC handled specific referrals will shed light on how the enforcement system works.

I also highlighted the big divide between the stated policy of the SEC and its actual practice of providing information to the securities industry about the criminal law enforcement intentions of the Department of Justice.  The SEC enforcement manual, which was revised after the 2007 Grassley-Specter report, is undermined if the SEC relays to potential targets of investigation exactly what the Justice Department has in store for them.

Separately, I've helped to shed light on the actions of the SEC's former General Counsel David Becker.  After missing the Madoff scam, the top leadership of the SEC let one of its own who profited from a Madoff account craft the commission's position on how to treat Madoff victims.  The agency let this major conflict of interest slide and then tried to cover it up.  After a comprehensive report, the Inspector General has referred Mr. Becker's case to the Justice Department, but the SEC's ethical standards need to be stronger, consistent and uniformly applied from the executive suite to the rank-and-file employees.

Q:        Where else have you scrutinized what's going on inside the SEC?

A:        This year, an enforcement lawyer at the agency wrote to me and outlined what he said was the agency's destruction of least 9,000 files between 1993 and 2010, all related to initial inquiries into possible wrongdoing on Wall Street.  The lawyer said these files were destroyed as a routine matter of internal SEC policy, but that the shredding might have compromised enforcement cases against Madoff, Goldman Sachs, Wells Fargo, Bank of America, Deutsche Bank, Lehman Brothers, and the SAC Capital hedge fund.  I pressed for a full accounting.  In response, the National Archives said the SEC "did not have the authority to dispose of" the records in question under federal law.  And, the SEC directed staff to stop destroying preliminary investigative documents until further notice.  Keeping records is common sense in law enforcement.  You never know what might be valuable information.  Complete records also may help keep the agency honest and inoculate against compromised ethics and biases.

The promises of financial system reform will be empty if the top enforcement agency for free and fair markets is ineffective.  I will continue to work for accountability and necessary reforms of the SEC.

Announces Business and Education Agreements to Further Expand Partnerships, Trade and Investment Between Illinois and China 

SHANGHAI, CHINA - September 22, 2011. Continuing his trade mission in China, Governor Pat Quinn today visited Shanghai where he announced major steps to build upon Illinois' role as a leading competitor in the global marketplace. While in Shanghai the Governor took part in several economic development and education agreements that will help pave the way for continued trade and innovation between Illinois and China.

"I am committed to making sure that Illinois is a top competitor in today's global marketplace, and our trade and education partnerships with China are a vital part of that." Governor Quinn said. "The agreements and programs our two regions are announcing today build upon those efforts to expand our economies, while also boosting innovation and growing technologies."

Among the business agreements Governor Quinn announced today was a $70 million corn products sales agreement between C&D (USA) Inc., an Illinois-based agricultural export company, and Xiamen C&D Inc. Beginning today, C&D (UDA) Inc. will sell 250,000 metric tons of Illinois corn products to China-based Xiamen C&D, Inc. for $70 million.

C&D USA is a subsidiary of Xiamen C&D. This export agreement will further Governor Quinn's aggressive goal of doubling Illinois exports by 2014. China is Illinois' third largest export destination, and is among the top five states exporting agricultural products to China. In 2011, Illinois ethanol plants sold 200,000 metric tons of corn products to C&D USA for approximately $45 million. C&D USA plans to purchase 250,000 metric tons of corn products from Illinois ethanol plants in 2012 for an estimated $56 million.

Governor Quinn participated in the signing of agreements to further strengthen the business, educational and cultural relationship between Illinois and China. The agreements include a sister river agreement between the state of Illinois and the Shanghai Water Association. Under the agreement, the association and the state will work together to share policies and innovative ideas to preserve the Illinois and Huangpu Rivers.

The Governor also participated in the signing of a sister city agreement between Morton, Ill. and Tiantai County in Zhejiang Province, which will provide opportunities to promote economic development, trade, education, science and technology, and cultural exchange and tourism between the two cities. Tianti-based Zhejiang Yinlun Machinery Co, previously selected Morton as the location of its first U.S. headquarters.

An additional agreement signed today between Zhejiang Province and Illinois was the 1,000 School Initiative to enhance educational opportunities between the two regions. Under this sister schools' agreement, the state of Illinois and Zhejiang Province will work together to make sure that students from both areas receive quality educations. The agreement will allow Illinois and Zhejiang Province to partner in training school staff, hosting summer and winter camps for students, and teaching elementary and secondary education students about the history, culture and languages of both parties.

As an economic and business center of China, Shanghai is known for attracting investment from many overseas companies. Its open policy has made it a magnet for foreign investors. Places like "The Bund" and "Pudong," which have evolved rapidly in past few years in Shanghai, have increased the city's role in

international finance, banking and trade. Shanghai has a strong base in manufacturing and technology. With many technology parks and industrial districts, Shanghai is also the leading industrial base of China.

For updates on Governor Quinn's trip, visit www.Illinois.gov or follow him on Twitter at @GovernorQuinn. More information about Illinois trade and business opportunities can be found on the Illinois Department of Commerce and Economic Opportunity's website at www.illinoisbiz.biz.

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Sen. Chuck Grassley of Iowa today made the following comment on the report from the Securities and Exchange Commission inspector general on the agency's former general counsel's actions in the Bernard Madoff fraud case.  Grassley, a long-time watchdog of making sure the agency does its job, earlier this year urged the agency to account for its actions in this matter.

"First, the SEC missed the Madoff scam.  Then, the SEC was tone-deaf to Madoff victims.  It let a top SEC employee who profited from a Madoff account craft the commission's position on how to treat Madoff victims.  It's hard to see how the agency could have let such a major conflict of interest slide.  The SEC needs to reform its ethics polices top to bottom.  The consequences of a haphazard approach are clear.  Public confidence in the agency's ability to do its job of protecting investors is undermined by slipshod work.  The SEC needs to make sure nothing like this happens again."

Agreements Continue Illinois' Global Leadership;
Support Governor's aggressive goal of doubling exports by 2014

BEIJING, CHINA - September 19, 2011. Governor Pat Quinn visited Beijing today during his business and economic trade mission in China, where he announced two business agreements that further strengthen the relationship between Illinois and China. The agreements involving Illinois-based ADM and Xinjiang Goldwind Science and Technology Co., LTD (Goldwind) move the state another step closer to reaching Governor Quinn's aggressive goal of doubling Illinois exports by 2014.

"Illinois is a top competitor in the global economy, and our aggressive plans to double exports and develop innovative new partnerships in emerging technology fields are continuing to advance our growth on the international stage," Governor Quinn said. "Our state has the resources, human capital, and innovative drive to expand our global reach. These agreements represent Illinois' ongoing commitment to continue to compete and grow  in the global marketplace."

During his visit to Beijing today, Governor Quinn announced that Goldwind, one of the largest wind turbine manufacturers in the world, will build a $200 million wind farm in Lee County, Illinois. The company will break ground on the Shady Oaks project later this fall. Once online, the project will provide 109.5 megawatts (MW) of power, and create more than 100 construction and a dozen permanent maintenance jobs in Illinois. According to the American Wind Energy Association, one megawatt of wind energy can provide enough electricity to meet the needs of 225-300 households. Therefore, 109.5 MW can provide the electricity needs of approximately 25,000 homes.

"As the largest and most competitive market in the world, the United States is a key component of Goldwind's international growth. Thanks to visionary leaders like Governor Quinn, Goldwind and other renewable energy companies are able to generate an undeniable economic impact in the U.S. wind industry through job creation and supplier agreements," said Goldwind Chairman and CEO Wu Gang. "Goldwind has generated a competitive global footprint and we are focused on continuing that momentum, continuing to demonstrate our technology advantages and continuing to build-out our global supply chain."

Goldwind USA Inc. is the U.S. subsidiary of Xinjiang Goldwind Science & Technology Co, LTD, based in Urumqi, Xinjiang, China. Goldwind USA established its headquarters in Chicago in 2010 to oversee operations in North and South America.

Governor Quinn also announced that Archer Daniels Midland Company (ADM), a worldwide food production company based in Decatur, Illinois, has entered into a $100 million sales agreement with Jiusan Oils and Seeds. Under the agreement, ADM will supply Jiusan Oils and Seeds, a manufacturer of soy products based in Harbin, Helongjiang, China, with 180,000 metric tons of soybeans by December 2012.

"This agreement connects Illinois soybean farmers with Chinese consumers and reinforces the growing ties between the State of Illinois and China," said David Ragan, product line manager, ADM. "In addition to helping to meet soybean demand and keep costs consistent for Chinese consumers, this partnership also underscores ADM's advancing interests in China and our commitment to serving China's priorities in food security, food safety and food sustainability."

China is the world's largest market for Illinois soybeans, importing more than 104 million bushels of U.S. soybeans in the 2009/2010 marketing year valued at more than $160 million. Illinois is among the top five states in agricultural exports to China. Illinois agriculture exports to China have increased each year since 2007, from $149 million to $424 million in 2010.

China is Illinois' third largest export destination. Illinois' overall exports to China reached $3.18 billion in 2010, up from $2.47 billion in 2009. Nearly 30 Chinese companies have invested in Illinois, employing thousands of Illinois residents.

or follow him on Twitter at @GovernorQuinn. More information about Illinois trade and business opportunities can be found on the Illinois Department of Commerce and Economic Opportunity's website at