Demos Bows Out of Congressional Race

Posted on 31 May 2012

It’s official. The race for the 1st Congressional District will be a rematch.

On Friday, Ronkonkoma attorney George Demos officially dropped out of the race to be the Republican candidate who will attempt to unseat incumbent Congressman Tim Bishop, a Democrat, this fall.

Demos was set to face off against St. James businessman Randy Altschuler in a battle for the Republican seat next month and has sharply criticized both Altschuler and Bishop in campaign literature over the last several months.

In a press release issued Friday, Demos cited his upcoming nuptials to Chrysa Tsakopoulis as the impetus for his decision to withdraw himself from the race.

“Everyone who knows me knows of my deep commitment to public service and to being a strong voice for the conservative cause,” said Demos. “Equally, everyone who knows Chrysa and me, knows of our deep commitment to each other and the joy we are sharing in preparation of our wedding a week from now. These two facts have now come together. Both my impending marriage and my race for Congress are deeply important to me. But our marriage comes first. Therefore, today, I am going to set aside my political aspirations for a while so that I can focus on our family. Both Chrysa and I look forward to reentering the political debate in the near future and fighting for the conservative Republican values we share.”

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10 Responses to “Demos Bows Out of Congressional Race”

  1. Mark says:

    Funny how you Sag Harbor kids never mentioned this about Georgie…

    Long Island Congressional Candidate Cited for Giving Up JPMorgan Whistleblower
    Michael Smallberg and Adam Zagorin
    Politics Daily
    Posted: 01/28/10

    George Demos is a Republican Congressional candidate from Eastern Long Island whose Web site bears the slogan “Fighting for Freedom,” and touts his service as an enforcement lawyer in the New York office of the Securities and Exchange Commission. A bio says that he “handled some of the SEC’s most significant investigations,” including that of Ponzi scheme artist Bernard Madoff, and “worked tirelessly on the cases that never made the headlines.”

    But one case that never made headlines was his own: Demos’ campaign Web site and public statements omit any reference to a report last March of the SEC’s Inspector General (IG), which found he had improperly disclosed protected, nonpublic information about a whistleblower to the counsel for that whistleblower’s employer, a major Wall Street bank, JPMorgan Chase. The IG’s charges of misconduct grew out of an SEC probe that began in 2003 of JPMorgan and other big financial institutions suspected of illegal market practices.

    Demos has denied he did anything improper, and his campaign declined to comment on the matter. But documents obtained by the Project On Government Oversight (POGO) — a non-partisan non-profit based in Washington — confirm that Demos was the staff attorney who was cited in the IG report for violating SEC rules. The IG referred the case to the agency’s management for possible disciplinary action, but the SEC took no action. Soon after that, Demos quietly resigned from his job and launched his bid for a seat in the House of Representatives.

    But the confidential information that Demos disclosed was used by a JPMorgan lawyer against one of the bank’s own employees, a whistleblower who had alerted the SEC to possible wrongdoing by his employer, according to the report and other documents, some released under the Freedom of Information Act.

    The significance of the case goes beyond politics. In response to widespread public anger over Wall Street abuses and a weak economy, the SEC and its latest chairman, Mary Schapiro, have pledged repeatedly to protect whistleblowers and pay more attention to their reports of illegality and market abuse. The Madoff case itself involved a whistleblower whose information the SEC had largely ignored, and a financial analyst at a prominent Wall Street company said last year that he, too, had trouble getting phone calls returned by the SEC after informing the agency his employer might be breaking the law. In response, the SEC has launched a program to cope with the hundreds of thousands of tips it receives every year, but progress has been painfully slow.

    Meanwhile, the SEC also appears to be brushing aside or delaying action on the recommendations of its own IG, and not just in the Demos matter. In response to a recent Freedom of Information Act request submitted by POGO, the SEC has said that since 2007 there have been more than 200 recommendations from its IG on which the agency has either taken no action, or on which action was still pending.

    Demos is a 33-year-old politically wired attorney who attended Fordham Law School. According to his campaign Web site, his donor list includes wealthy Wall Streeters and others, who have given him more than $300,000 since October. His bio includes stints in the District Attorney’s office in Suffolk County, Long Island, and service as enforcement lawyer at the SEC from 2002 to 2009. He was involved in the campaigns of former New York Gov. George Pataki and former Sen. Alfonse D’Amato, and is now in a field of candidates, including Chris Cox, an attorney and the grandson of former President Richard Nixon, who are seeking the GOP nomination in New York’s 1st Congressional District, a swing district. The seat is currently held by Tim Bishop, a Democrat, who is considered vulnerable in November.

    The SEC IG’s findings did not identify Demos by name when they were included in the watchdog’s semi-annual report to Congress last year. But documents obtained by POGO, including internal SEC materials and related correspondence, make clear that Demos’ conduct lay behind the section of the report on the JPMorgan whistleblower, who worked as a mid-level compliance officer in New York.

    According to a redacted version of the report, the whistleblower, whose name is Peter Sivere, first came to the SEC with what he described as “confidential” evidence of the bank’s alleged failure to disclose material sought in the SEC probe. The SEC was investigating a practice known as market timing, which can be illegal. It typically involves trading that favors short-term buyers and sellers to the detriment of long-term shareholders like retirees.

    After the whistleblower’s initial e-mail contact with the SEC in June 2004, Demos replied to him, confirming, among other things, that the agency’s probe was “confidential.” Several major institutions, such as Bank of America and Alliance Capital Management, later reached settlements in similar SEC inquiries, but JPMorgan was never charged with a violation, and this week had no comment.

    In July 2004, Sivere brought an employment claim against JPMorgan before the Occupational Safety and Health Administration. He contended that the bank began threatening his job after he had gone to the SEC. JPMorgan strongly disputed Sivere’s allegations.

    OSHA issued a preliminary finding in favor of the whistleblower, saying there was “reasonable cause to believe” that he had faced retaliation, and that his “preliminary reinstatement” was warranted. Not long after, Demos informed JPMorgan’s counsel that Sivere had initially sought a cash payment from the SEC for information he was offering the agency, apparently in hopes of benefiting from a well-publicized SEC program to elicit information from tipsters.

    The lawyer for JPMorgan then used Sivere’s confidential request for a bounty to question his whistleblower credentials, and informed OHSA that he had asked for money. Apparently concerned that this had damaged his case, despite the initial finding in his favor, Sivere then dropped his complaint against JPMorgan and settled the case. A well-known Washington securities lawyer who did not want his name used in a discussion of the sensitive case explained that “whistleblowers are often unfairly disparaged for requesting payments, even though U.S. law specifically authorizes rewards to certain informants.” JPMorgan has denied any impropriety. It ultimately fired Sivere in October 2004.

    In October 2008, the SEC’s IG launched its own investigation in response to information from Sivere. Its final report provided a description of what it said was Demos’ improper disclosure, as well as an earlier, internal SEC examination of the matter.

    Demos, when first questioned by an SEC supervisor, “did not admit” to the improper disclosure, the IG report says, though he did concede he might have been responsible, saying he “did not remember.”

    Based on that inconclusive evidence, Demos’ SEC superior drew no definite conclusion about whether Demos had made the disclosure. Even so, he formally “counseled” Demos in late 2005 about the importance of keeping protected information within the agency, the IG said.

    The IG later interviewed Demos’ SEC superior and others at the agency. The IG also contacted lawyers for JPMorgan, including one to whom the disclosure had been made. That lawyer readily identified Demos as the source of his information, according to documents.

    As the IG report concludes, Demos “not only gave . . . JPMorgan permission to use the non-public information about an informant against him [in the OHSA proceeding], but actually encouraged such use.” The IG found that Demos’ disclosure was a violation of SEC rules, which severely restrict the release of confidential information obtained in the course of an investigation.

    The failure of Demos’ campaign to let prospective voters know about any of these events may not be surprising, but only days after he launched his run for Congress on Oct. 13, 2009, candidate Demos sent a two-page letter rebutting charges of ethical misconduct in the SEC matter that had surfaced in another forum: the Departmental Disciplinary Committee of the New York State Supreme Court Appellate Division, which reviews and investigates ethical complaints against lawyers.

    Upset that the SEC was doing nothing in response to its own IG’s disciplinary referral, the New York ethics complaint naming Demos was filed by Sivere, the fired whistleblower. Demos’ letter in response to that complaint argued that it was “entirely without merit.” The complaint has yet to be resolved, but could result in a finding of no wrongdoing or penalties ranging from censure to disbarment.

    In his letter to the Supreme Court’s Disciplinary Committee, Demos concedes that information about the whistleblower may have been released, but only in line with SEC “regulations and policies.” Demos’ statement appears to be at odds with the IG’s finding.

    His letter also attacks the protected status of the whistleblower’s information, arguing that the onetime JPMorgan employee “was owed no duty of confidentiality or loyalty by the Commission [SEC] or me” — another statement that contradicts the IG’s conclusions.

    Michael Smallberg is an investigator at the Project On Government Oversight (POGO). Adam Zagorin is Journalist in Residence at POGO. POGO is a non-partisan, non-profit government watchdog group based in Washington, D.C.

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