Idaho’s Watchdog Over Securities Fraud Quitting His Aggressive Pursuit Of Violators May Have Cost Job

The state’s veteran securities regulator, who has gained a national reputation for his aggressive pursuit of fraud and other violations, is resigning amid the suggestion that policy is changing under the 10-month-old administration of Gov. Phil Batt.

“The director has every right to make policy decisions and determine what direction the department goes in, and I have no disagreement with that at all,” said Wayne Klein, 39, who has run the Finance Department’s Securities Bureau for the past nine years.”

“With my departure they’ll have an opportunity to make sure the person who is in here can carry out their mission the best way possible,” he said.

Klein, who has been paid $60,000 a year, has one of the most aggressive records against securities violators in the nation. Since he has been charged with regulating the industry in Idaho, his office has brought more than 100 enforcement actions against more than 500 firms or individuals.

Among the most notable was the bureau’s $18 million fraud case against former Republican Congressman George Hansen that preceded Hansen’s indictment and conviction on federal fraud charges. Hansen is serving a four-year sentence at a minimum security prison in Virginia.

Klein was also the head of a multi-state task force that uncovered the multibillion-dollar securities scandal at Prudential Securities Inc. That probe resulted in a Securities and Exchange Commission inquiry that ultimately required the company to repay $8 billion to 330,000 people across the country who had invested in limited partnerships.

Klein declined to comment on a report in The Wall Street Journal that he decided to quit after being stripped of his authority amid grousing from Wall Street executives.

But his boss, acting Finance Director Gavin Gee, sent an open letter to the securities industry last April in which he made it clear that he would be the one setting policy, and he solicited opinions on which existing policies were working and which ones were not.

“My responsibility is to implement the philosophy and policy of Governor Batt,” Gee wrote. “We have a mandate to find ways to reduce regulatory burdens and increase efficiencies.”

Klein, who will leave his job on Dec. 8, worked for First Security Bank in Salt Lake City before become the deputy attorney general for the Securities Bureau in 1983. He was named bureau chief three years later.