The Crash Proof Retirement Show™ Lands Groundbreaking, One-of-a-Kind Interview with SEC Inspector General H. David Kotz

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Watchdog agency's "top cop" tells Phil Cannella that it "may make sense" for retirees to take money out of the stock market in these "turbulent" times

As part of its ongoing mission to bring its listeners the most trenchant perspectives on finance from the most informed guests, The Crash Proof Retirement Show™ on July 28 achieved a major coup when creator and host Phil Cannella sat down with SEC Inspector General H. David Kotz for an hourlong videotaped interview.

"Yes, we're 'paid programming,' " says Cannella, who bristles at the stigma so often attached to the term. “However, our goal is to compete with any serious news show in equipping retirees with what they need to know to make key financial decisions. What's more, we want that information delivered by the most credible sources.” The radio show over the past month has aired interviews with Rep. Mike Fitzpatrick, FBI cyber-crime expert Brian Herrick, and Michael W. Hudson, former Wall Street Journal reporter and author of The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America—and Spawned a Global Crisis.

At the SEC, the Inspector General’s office is analogous to a police department’s “internal affairs” division; Kotz oversees the activities of the massive bureaucracy that itself oversees the operations of Wall Street and the broader financial markets. Since taking the helm in 2007, Kotz has presided over one of the most turbulent and ethically dubious periods in Wall Street history. The interview features hard-hitting questions by Phil Cannella and some stunningly candid answers from Kotz. The audio will be excerpted on the Crash Proof Retirement Show™ in the coming weeks; plans for the full video have not yet been finalized.

Some highlights of the Q&A:

PHIL CANNELLA: You visited Bernie Madoff in jail. Do you think he felt any remorse?
DAVID KOTZ: He did not express a lot of remorse for the victims. There were opportunities that he could do so; he chose not to. … He did talk about…his reputation. He felt that his reputation would suffer as a result of the Ponzi scheme. I think he was correct in that respect.

PHIL CANNELLA: Evidence suggests there were back-dated and falsified documents that supported an ill-fated $557 million lease the SEC entered into. What does it say to the American investor when there’s fraud within the SEC itself?
DAVID KOTZ: We wrote a very strong report, very critical of the actions of the SEC folks. We recommended disciplinary action including termination against several of them. I understand why people are concerned.

PHIL CANNELLA: You yourself say the so-called revolving door is one of the SEC’s biggest problems. How is it that executives come to the SEC to put regulations in place, only to leave days or weeks later to take positions as executives [in the private sector] where they show firms how to navigate around those very regulations?
DAVID KOTZ: I do think there have to be policies and procedures put into place to ensure that information learned in the SEC is not shared with folks outside. In the Stanford [alleged Ponzi scheme] case, we had an SEC attorney who, while he worked here, essentially killed the investigation of Stanford, then when he left the SEC he turned around and…eventually did represent Stanford for a short period of time…. That’s something that’s very dangerous to how the SEC operates.

PHIL CANNELLA: Do you think it’s prudent for people who can no longer go back out and re-accumulate a nest egg to have their nest egg in risky financial instruments?
DAVID KOTZ: We do have a situation today where so much money is in the stock market, where people’s lives are so affected by it, that sometimes it may make sense to take things out in turbulent times to ensure that you’re not living and dying, so to speak, by the Dow Jones going up and down.

PHIL CANNELLA: The SEC apparently had warnings of Bernie Madoff’s crimes going back to 1999. How do you explain that in the most insidious swindle of our generation, the regulators were asleep at the switch?
DAVID KOTZ: Part of what happened was, [SEC investigators] were simply unable to compete with the fraudsters. Bernie Madoff was very effective in ‘playing’ the SEC folks in a variety of ways.

In an eye-opening admission late in the interview, Kotz bemoans the SEC’s general inability to match resources with the private sector in terms of sheer manpower, or when it comes to acquiring the data and other specialized knowledge that enable firms like Goldman Sachs to stay one step ahead of the regulators.

“This is material that people need to hear,” says Cannella, who is also CEO and founder of First Senior Financial Group. “Especially those who are trying to safeguard their irreplaceable nest eggs.”

The Crash Proof Retirement Show™, which debuted in November 2008, today airs in two Saturday time slots in the Philadelphia market: 8-9 a.m. on 990AM (WNTP) and 11 a.m.-1 p.m. on top-rated 1210AM (WPHT). First Senior Financial Group specializes in informing retirees and other seniors on ways to “crash proof” their retirement by achieving asset protection and inflation-beating growth without market risk or ongoing fees. The company holds educational events throughout the Delaware Valley. First Senior’s clients have the potential of double-digit gains in rising markets; its average client realized 7% gains even during the market crash of 2008.

Phil Cannella and/or his company have been featured in numerous publications, including “Newsweek,” “Philadelphia” and the current issue of “Senior Citizens.” Cannella is also a frequent guest on TV shows dealing with financial topics of interest to retirees. Particularly satisfying to him are the major recent studies that validate the crash-proofing methods that he champions and has implemented for years in working with hundreds of retirees. “We’re taking on a huge financial industry that’s stacked against the American consumer,” says Cannella, “but more importantly, we’re teaching people how to take their money off the sea of risk, to the calm shores of safety.”

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Steve Salerno

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