A former Securities and Exchange Commission lawyer has told Congress the Wall Street regulator has routinely destroyed records of initial investigations over the past 20 years, obliterating evidence of possible financial crimes by some of the same firms and individuals involved in the 2008 meltdown, Rolling Stone reports.

One top agency official estimated that 18,000 investigations were involved, including two aborted inquiries into the activities of Bernard Madoff, who in 2009 pleaded guilty to a $20 billion Ponzi scheme that sent him to prison for 150 years.

Rolling Stone writes, "By whitewashing the files of some of the nation's worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. ..."

The magazine's Matt Taibbi explains:

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency's records -– "including case files relating to preliminary investigations" –- are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term "Orwellian," devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases -– known as MUIs, or "Matters Under Inquiry" -– was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission's internal website. "After you have closed a MUI that has not become an investigation," the site advised staffers, "you should dispose of any documents obtained in connection with the MUI." Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The whistle-blower is identified as Darcy Flynn, an agency lawyer for 13 years who in July alerted Congress. He was responsible for helping manage the records and said the destruction of preliminary investigations had been happening since at least 1993. He said senior SEC staff have scrambled to hide the agency's actions.

Read the entire RS piece here.

Wednesday, in response to the article, Sen. Chuck Grassley of Iowa, the ranking Republican on the Judiciary Committee, wrote to SEC Chair Mary Shapiro asking for a response to the allegations.

Last week, the agency announced a new whistle-blower program to report violations and collect rewards.