SEC to Conduct Full Review of Its Ties to Madoff

Only a few days after Bernie Madoff’s $50 billion Ponzi scheme was exposed to the public, the Securities and Exchange Commission Chairman Chris Cox, in a startling admission said that the SEC was aware of numerous red flags raised about Madoff’s influential firm, but failed to take them seriously enough. Mr. Cox added he was “gravely concerned by the apparent multiple failures over at least a decade” by staff to look into these allegations or seek at any point formal authority to investigate them.

The head of the SEC has asked the SEC’s inspector general to conduct a full review of the agency’s handling of the Madoff case. The review will also include whether relationships between SEC officials and Mr. Madoff or his family members had any impact on the agency’s oversight.

From the SEC Statement:

SEC investigators are currently working with the trustee and other law enforcement agencies to review vast amounts of records and information involving Mr. Madoff and his firm.

Since Commissioners were first informed of the Madoff investigation last week, the Commission has met multiple times on an emergency basis to seek answers to the question of how Mr. Madoff’s vast scheme remained undetected by regulators and law enforcement for so long. Our initial findings have been deeply troubling.

The Commission has learned that credible and specific allegations regarding Mr. Madoff’s financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action. I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them. Moreover, a consequence of the failure to seek a formal order of investigation from the Commission is that subpoena power was not used to obtain information, but rather the staff relied upon information voluntarily produced by Mr. Madoff and his firm.

In response, after consultation with the Commission, I have directed a full and immediate review of the past allegations regarding Mr. Madoff and his firm and the reasons they were not found credible, to be led by the SEC’s Inspector General. The review will also cover the internal policies at the SEC governing when allegations such as those in this case should be raised to the Commission level, whether those policies were followed, and whether improvements to those policies are necessary. The investigation should also include all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm.

…I have therefore directed the mandatory recusal from the ongoing investigation of matters related to SEC v. Madoff of any SEC staff who have had more than insubstantial personal contacts with Mr. Madoff or his family, under guidance to be issued by the Office of the Ethics Counsel. These recusals will be in addition to those currently required by SEC rules and federal law.

There is a growing list of major players who have been identified as having lost money in the Madoff’s scam. More victims emerged Tuesday. However, the individual who seems to have lost most in the collapse of Madoff’s $50 billion fraudulent scheme so far is Boston philanthropist, Carl J Shapiro. He has lost over $500 million.

About Ron Haruni 1036 Articles
Ron is the Co-Founder & Editor in Chief of Wall Street Pit. Web Site: Wall Street Pit

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