SEC Punishes Porn-Surfing Employees

WASHINGTON, April 24, 2010— -- All 33 employees cited in an investigation that found Securities and Exchange Commission (SEC) employees surfing pornography at work have been disciplined or are in the process of being disciplined, including some who already have been fired or suspended, the SEC said.

The agency also said it increased penalties for those who use SEC computers to view pornography.

Although the SEC also said it had taken concrete steps to stop employees from surfing porn in the future, it already had firewalls on its computers that were designed to deny access to offensive websites, but the firewalls didn't always work.

Despite the actions announced Friday, the man behind the investigation told ABC News that the SEC was initially slow to deal with the problem.

"In one case I spoke to someone who is a senior-level person, and I said, 'You know you have to fire this individual, they are looking at porn nonstop.' And they said, 'I can't fire them because they are working on a very important investigation,'" SEC Inspector General David Kotz said. "I said, 'There is no way they are working on an investigation because I know what they are doing all day.'"

Lost productivity due to pornography is not unique to the SEC. In fact, some experts suggest it is something of an epidemic in corporate America.

"I could tell you story after story of major corporations, publicly traded companies, household name companies, who have employees who are doing the same thing," said Nancy Flynn, executive director of the E Policy Institute.

One report suggests that among workers who have Internet access via work computers, as many as almost 30 percent visit adult websites.

By that measure, the SEC problem could have been worse. The serious violators revealed in this investigation represent about 1 percent of the total SEC workforce, but more than half of those offenders were senior officials who had far more important things to be doing.

The Securities and Exchange Commission is the sheriff of the financial industry, looking for crimes such as Bernard Madoff's Ponzi scheme, but a new government report obtained by ABC News has concluded that some senior employees spent hours on the agency's computers looking at sites such as naughty.com, skankwire and youporn as the financial crisis was unfolding.

Less Than 1% of SEC Employees Looked at 'Prurient Material' at Work

"These guys in the middle of a financial crisis are spending their time looking at prurient material on the Internet," said Peter Morici, a professor at the University of Maryland and former director of the Office of Economics at the U.S. International Trade Commission.

"It's reckless, and indicates a contempt for the taxpayer and the taxpayer's interest in monitoring financial markets," Morici said.

The investigation, which was conducted by the SEC's internal watchdog at the request of Sen. Chuck Grassley, R-Iowa, found 31 serious offenders during the past two and a half years. That's less than 1 percent of the agency's 3,500 employees, but 17 of the alleged offenders were senior SEC officers whose salaries ranged from $100,000 to $222,000 per year.

The SEC would not comment on any specific cases, but said it takes inappropriate use of government resources seriously and deals with abuses on a case-by-case basis.

Some of the big offenders are still on the job, according to sources.

An Attorney Spent Eight Hours a Day Spent on Porn Sites

One senior attorney at SEC headquarters in Washington spent up to eight hours a day accessing Internet porn, according to the report, which has yet to be released. When he filled all the space on his government computer with pornographic images, he downloaded more to CDs and DVDs that accumulated in boxes in his offices.

An SEC accountant attempted to access porn websites 1,800 times in a two-week period and had 600 pornographic images on her computer hard drive.

Another SEC accountant used his SEC-issued computer to upload his own sexually explicit videos onto porn websites he joined.

And another SEC accountant attempted to access porn sites 16,000 times in a single month.

In one case, the report noted, an employee tried hundreds of times to access pornographic sites and was denied access. When he used a flash drive, he successfully bypassed the filter to visit a "significant number" of porn sites.

The employee also said he deliberately disabled a filter in Google to access inappropriate sites. After management informed him that he would lose his job, the employee resigned.

Porn Problem Began as Economy Collapsed

A similar SEC report for October 2008 to March 2009 said that a regional supervisor in Los Angeles accessed and attempted to access pornographic and sexually explicit websites up to twice a day from his SEC computer during work hours.

The report concluded that most of the cases began in 2008, just as the financial system began to collapse, and the problem hasn't stopped.

The most recent case cited in the report occurred four weeks ago.

"Trust me, these guys are addicts," said Mike Leahy, author of the book "Porn Nation."

"This isn't going to end until you know someone really puts a stop to it."

ABC's Ki Mae Heussner contributed to this report.