The SEC and Whitleblowers

The SEC has been accused of outing a whistleblower.  But as Mark Twain observed in Connecticut Yankee (p. 58):  "This was the report; but probably the facts would have modified it." Some of the facts come from George Canellos, head of the New York Regional Office of the SEC in a letter to the WSJ. 


SEC Did Not Blow Source's Cover

The Securities and Exchange Commission in no way exposed Peter Earle as a whistleblower, and our use of his notebooks in an investigative deposition was neither "inadvertent" nor a "breach" or "gaffe" ("Source's Cover Blown by SEC," Page One, April 25). It was a deliberate decision, which SEC lawyer Daniel Walfish discussed in advance with his supervisor, who was present for the deposition in which the notebooks were exhibited. Nor did the fully authorized use of the notebooks in any way compromise Mr. Earle or the integrity of the SEC's investigation of the Pipeline Trading Systems matter.

Although it was widely known among executives of Pipeline and Milstream Strategy Group that Mr. Earle had approached the SEC after he was terminated from Milstream—a fact volunteered by several witnesses and acknowledged by Mr. Earle long before any use of his notebooks—the SEC declined to confirm his identity and still treated his status as a cooperating witness as confidential. The SEC made sure to obtain all of the notes of the approximately six Milstream traders, and in the SEC's deposition of Gordon Henderson (the supervisor of Mr. Earle and the other traders), the SEC used other traders' notes along with those of Mr. Earle. The use of these traders' notes—highly relevant evidence prepared in the ordinary course of their work at Milstream—in no way revealed whether Mr. Earle or any other trader was or was not cooperating with the SEC.

George S. Canellos


New York Regional Office

U.S. Securities and Exchange Commission

New York

J Robert Brown Jr.