SEC watchdog to probe Goldman charges

NEW YORK (CNNMoney.com) -- The Securities and Exchange Commission's internal watchdog said Sunday that he will launch an investigation into the SEC's decision to pursue fraud charges against Goldman Sachs.

In a letter released by Rep. Darrell Issa, R-Calif., SEC Inspector General David Kotz said the probe will examine the "serious allegations" raised by several Republican congressmen regarding the probe.

"We will seek review of documentary evidence, including e-mails between and among the individuals who may have participated in or been aware of the timing of the SEC action brought against Goldman," Kotz wrote.

He also said he will interview current SEC employees, and will seek cooperation of individuals outside the commission.

Kotz said he will inform Issa when the probe is concluded.

Last week, eight members of the House Oversight and Government Reform Committee wrote to SEC chairwoman Mary Schapiro to question the commission's "independence and impartialty" in choosing to file the charges so close to a final vote on Wall Street reform. Their letter prompted a highly unusual response from Schapiro defending the SEC's political independence.

"On a personal level, I am disappointed by the rhetoric," Schapiro said in a written statement. "The fact is that regulatory reform has been pending for over a year. We have brought many cases related to the financial crisis over that period."

On April 16, the SEC charged New York-based Goldman (GS, Fortune 500) and a vice president, Fabrice Tourre, with failing to disclose conflicts of interest in the 2007 sale of a portfolio of securities heavily tied to subprime mortgages. Investors in the portfolio ultimately lost $1 billion, the SEC said.

Legislators are currently debating a possible overhaul of the financial system that aims to avoid another severe breakdown. The House Oversight Commitee's letter asks the SEC to investigate whether its officials may have timed the charges against Goldman in order influence those discussions, and whether agency officials leaked information to the press before the charges were filed.