SEC: Do as We Say, Not as We Do

Then there's the photography business that was run with government resources -- confirming that government work doesn't pay well. Luckily it wasn't sexual photographs; wedding portraits, maybe? The employee was only suspended for two weeks after using agency email, Internet phones and printers for several years to run this business. Either SEC employees are really good at covering their tracks, or their bosses are clueless. Considering all the fraud that is just now being discovered, bet on cluelessness.

Some SEC employees used their positions to bully people, like the time a worker called a family member's broker to make sure the broker was aware he worked for the SEC.

SEC employees falsified records and personnel forms. They even misused the government parking permit.

Even worse, several of the employees, according to the report, hadn't been punished even after the Inspector General recommended doing so. Apparently it's hard to get fired when you're a government worker.

Obama last week chose Mary Shapiro to lead the SEC in his incoming administration. Shapiro is the former head of the National Association of Securities Dealers, which was combined with the regulatory agency of the New York Stock Exchange (NYX) to become FINRA. At least FINRA has consistently pursued broker misdeeds.

The SEC may have missed Madoff's years-long, $50 billion fraud -- but it did manage to snare the CEO of National Lampoon (NLN) Daniel Laikin, who spent $68,000 to boost the price of National Lampoon's shares.

The SEC has also recently targeted Mark Cuban owner of the Dallas Mavericks for insider trading involving Mamma.com, now known as Copernic(CNIC), to avoid losing $750,000. They got Paul Berliner, formerly a trader at Schottenfeld Securities, for spreading rumors and fined him $130,000. And don't forget they famously went after Martha Stewart for her insider trading of ImClone, now owned by Eli Lilly (LLY).