Treasury’s Inspector General Joins News Leak Probe

The Treasury Department’s inspector general has joined the investigation into whether laws were broken by last week’s premature release of the government’s decision to stop selling 30-year bonds.

Meanwhile, Sen. Jon Corzine (D-N.J.) called Monday for an investigation by the Securities and Exchange Commission into the events of last Wednesday, when news the government would stop issuing the bonds sparked the biggest bond rally in 14 years.

On Friday, David Aufhauser, the Treasury Department’s general counsel, told reporters his office was conducting an investigation. On Monday, Treasury Inspector General Jeffrey Rush said his office is now involved.

Rush and Aufhauser said that if a breach of rules is discovered, the case could be referred to the SEC or the Justice Department.

The controversy began when a private consultant attended a press-only briefing in which the government’s financing plans for the quarter were revealed. Reporters at the briefing were required to refrain from publishing or broadcasting the information until the government made its official announcement.

But the consultant, Pete Davis, said he informed clients of the decision while the information was still restricted. He said he expected the clients to honor the embargo.

Corzine, a former chairman of Goldman, Sachs & Co., wants the SEC to investigate what happened, a spokesman said. “If there is any allegation of insider trading, this is something the SEC must get involved in,” Corzine spokesman David Wald said.

The Treasury Department itself had put out information on its financing plans, including the 30-year bond suspension, before the official announcement.

The department posted the financing information on its Web site around 9:50 a.m. EST. Under the embargo, the information was not supposed to be published until 10 a.m.

Treasury spokeswoman Michele Davis called that posting a “careless mistake” resulting from human error. Officials did not say whether this was part of Treasury’s probe.