An internal watchdog cleared the Securities and Exchange Commission of improper conduct in its fraud lawsuit against Goldman Sachs, saying there was no evidence the suit's timing was politically motivated.

The 77-page report by SEC Inspector General H. David Kotz lifts a cloud that had hung over the SEC's case against Goldman, with Kotz concluding the SEC wasn't trying to influence Congress's discussion of a financial-regulation bill-an allegation that had been made by the agency's critics.