The timing of the Securities and Exchange Commission's case against Goldman Sachs Group Inc. is "suspicious," the federal regulator's watchdog said Wednesday.

The SEC filed civil fraud charges against Goldman in mid-April, the same day it released a damning watchdog report that accused the regulator of mishandling its probe of Allen Stanford's alleged Ponzi scheme.

The report authored by SEC Inspector General David Kotz said the regulator had suspected as early as 1997 that Stanford was running a Ponzi scheme, but did nothing to stop it until late 2005.

The timing "strains credulity," Kotz told a congressional hearing examining how the SEC handled the Stanford investigation.

Kotz's report went largely unnoticed, angering lawmakers and some victims who lost their investments from the alleged Ponzi scheme that Stanford perpetrated.

Stanford is in a Texas jail awaiting trial on 21 criminal charges related to what is now alleged to have been a $7 billion scheme involving the issuance by his Antiguan bank of CDs with improbably high interest rates.

Other Republican lawmakers accused the SEC of filing the Goldman case to help Democrats pass the landmark Wall Street reform bill, which was winding its way through Congress in April.

Kotz is probing whether the SEC was politically motivated to file the Goldman case — a charge the SEC vehemently denies.

At the Senate Banking Committee hearing, the top Republican, Richard Shelby, said the Stanford case represents a "major failure" by the SEC. Shelby also suggested the timing was suspect and seemed intended to draw the least amount of scrutiny.

The SEC filed charges against Stanford in February 2009, accusing the Texas financier and three of his companies of selling billions of dollars of fraudulent certificates of deposit.

The SEC, still recovering from missing Bernard Madoff's $65 billion Ponzi scheme, is under pressure to root out fraud after the U.S. housing collapse and Wall Street's ensuing meltdown.

The Goldman suit, the SEC's highest-profile case stemming from the financial crisis, has put Wall Street on notice that no one is off limits.

The SEC expressed regret at the hearing that they did not do enough to stop Stanford's alleged fraud.

"We deeply regret that the SEC failed to act more quickly to limit the tragic investor losses suffered by Stanford victims," top SEC officials Robert Khuzami and Carlo di Florio said in prepared remarks.

Kotz's report found the SEC's Fort Worth office examined Stanford in 1997, 1998, 2002 and 2004, "concluding in each case that Stanford's CDs were likely a Ponzi scheme or a similar fraudulent scheme."

In 2005, the enforcement arm of the SEC finally agreed to seek a formal order from the commission to investigate Stanford. But Kotz said it failed to conduct due diligence on Stanford's investment portfolio, missing an opportunity to bring action against Stanford Group Co.

Schapiro has said most of Kotz's seven recommendations have been implemented. She also said the SEC would carefully analyze the report and implement any additional reforms as necessary for effective investor protection.

Kotz's report says that, even after SEC examiners identified multiple violations of securities laws by Stanford in 2002, the SEC's enforcement division did not open an investigation.

Kotz has said senior officials in the Fort Worth office perceived they were being judged by the number of cases they brought.

"Novel or complex cases were disfavored," he concluded. "As a result, cases like Stanford, which were not considered 'quick-hit' or 'slam-dunk' cases, were not encouraged."