George Canellos, 48, has one of the Securities and Exchange Commission’s top jobs. The SEC’s new chairman, Mary Jo White, appointed him as co-director of the enforcement division, along with Andrew Ceresney, a former partner of White’s at Debevoise & Plimpton.
But his alleged treatment of Kathleen Furey, 56, a senior SEC lawyer and whistle-blower, who worked in the agency’s New York office while Canellos was in charge, makes me wonder if he’s the right man for the job.
Below is a synopsis of Furey’s story: Furey joined the SEC in September 2004 as a law clerk in the enforcement division, and soon won praise and promotions from her supervisors.
Starting in December 2004, Furey began investigating an investment adviser for violations of the Investment Company Act of 1940 and the Investment Advisors Act of 1940. But by August 2007, after another promotion, Furey was becoming concerned that the case hadn’t advanced quickly enough.
According to her complaint, she decided to go over the head of her boss, Joseph Dever, and to alert George Stepaniuk, the assistant regional director of the New York office. Stepaniuk told her “We don’t do investment-management cases in this group,” according to her complaint.
Furey took the matter to Stepaniuk’s boss, David Rosenfeld, and asked for a transfer.
On Dec. 6, 2007, Mark Schonfeld, offered Furey two choices: She could either drop her claim or she could take the matter up with David Kotz, the agency’s then-inspector general.
In an April 18, 2008, report, Kotz wrote that he found no evidence that SEC officials declined to pursue cases involving investment-management firms, but he did find that the SEC’s New York office supervisors “created an atmosphere of fear.”
By March 31, 2008, Furey had transferred to the SEC’s office of inspections and examinations.
After her supervisor Thomas Biolsi left the SEC, Furey started reporting to James Capezzuto, the acting associate director of the New York office. In December 2009, Capezzuto recommended Furey for a merit-pay increase and told her he had recommended her promotion to Canellos, who had become the head of the New York office in July 2009.
Furey met with Canellos, who told her that the enforcement division was “holding a grudge” against her for going to Kotz.
Still, an independent review of her work in 2011 netted an unequivocal recommendation from the auditor that she be promoted.
But in July 2011 Capezzuto told Furey “he had lied to her over the past year about recommending her promotion to Canellos because … Canellos would never agree to the promotion,” according to the complaint.
One of the more astounding things about Kathleen Furey’s tale is that she filed her complaint against the SEC in January 2012. She amended it on April 17, five days before Mary Jo White promoted Canellos to become the SEC’s co-director of enforcement. Based on these allegations, I have to wonder if it was a good idea to name Canellos without first addressing the issues raised in Furey’s complaint. •
William D. Cohan, the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist.
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