Subtle Brain Injury

WASHINGTON (AP) _ A key senator is examining whether a top Securities and Exchange Commission official gave sensitive information to a former colleague working at JPMorgan Chase & Co. when the bank was considering whether to buy Bear Stearns.

Sen. Charles Grassley of Iowa, the senior Republican on the Senate Finance Committee, has asked the SEC for information concerning its investigations of investment bank Bear Stearns & Cos., which nearly collapsed into bankruptcy in March and was purchased by JPMorgan Chase with a $29 billion federal backstop.

Grassley, in a letter to SEC Chairman Christopher Cox dated Tuesday, also requested records of communications between SEC staff and representatives of JPMorgan Chase concerning the investigations.

Grassley’s interest was first reported by The Washington Post in Wednesday’s editions.

He said his inquiry was prompted by an anonymous tip alleging that SEC Enforcement Director Linda Thomsen provided information about the agency’s investigation of Bear Stearns around March to JPMorgan Chase’s general counsel, Stephen Cutler. Cutler was Thomsen’s predecessor as enforcement director, and the two worked together on the prosecution of a number of big companies embroiled in corporate scandals.

According to the anonymous complaint on Oct. 7, the information Cutler obtained from Thomsen could have enabled JPMorgan Chase to make a lower bid for Bear Stearns.

“Such conduct would reinforce the appearance that (SEC) enforcement decisions, and disclosures of information about them, are sometimes based not on the merits but rather on access to senior officials by influential representatives of power brokers on Wall Street,” Grassley said in his letter to Cox.

SEC spokesman Kevin Callahan declined to comment Wednesday.

Joseph Evangelisti, a spokesman for JPMorgan Chase, said allegations that officials of the bank had any improper communications with the SEC “are wholly untrue.”

In March, the agency didn’t rule out legal action over potentially misleading comments about Bear Stearns’ financial health made days before JPMorgan Chase arranged to buy the investment bank.

The SEC enforcement division said its lawyers would “favorably” factor in the circumstances of the Bear Stearns takeover in deciding whether to act against its new owner. The division wrote a letter to JPMorgan Chase that discussed “investigations and potential future inquiries into conduct and statements by Bear Stearns” before the announcement of the takeover, the SEC said in March.