Madoff Made Off With Everyone’s Dough

Dec. 17 (Bloomberg) — U.S. Securities and Exchange Commission Chairman Christopher Cox said the agency failed to act for almost a decade on “credible and specific allegations” of wrongdoing by Bernard Madoff, who authorities say bilked investors of as much as $50 billion.

Allegations dating back until at least 1999 “were repeatedly brought to the attention of SEC staff, but were never recommended to the commission for action,” Cox, 56, said in a statement yesterday. He announced an internal probe to review the “deeply troubling” revelations.


Original DVD cover.

The SEC, already faulted in connection with the collapse of Bears Stearns Cos. and Lehman Brothers Holdings Inc., now faces criticism for failing to detect what Madoff termed “a giant Ponzi scheme.” Senate Banking Committee Chairman Christopher Dodd yesterday called on the agency to explain how the “massive fraud” went undetected.

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Instead of wielding subpoena power to obtain information, SEC staff “relied upon information voluntarily produced by Mr. Madoff and his firm,” [Duke University securities law professor James] Cox said.

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The internal review will include “all staff contact and relationships with the Madoff family and firm,” he said, and mandate the recusal any SEC employee with more than an “insubstantial personal” contact with Madoff and his family.

Eric Swanson, a former assistant director of compliance and examinations at the SEC, is married to Madoff’s niece, Shana, who was a compliance lawyer at the Madoff firm. Swanson left the SEC in August 2006 and is now the general counsel of Bats Trading Inc., the third-largest U.S. equity exchange by trading volume.

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Cox said a review of the SEC’s records so far has exposed “complicated steps that Mr. Madoff took to deceive investors, the public and regulators.” He said Madoff “kept several sets of books and false documents, and provided false information involving his advisor activities to investors and to regulators.”

The SEC was under fire before Madoff’s fraud came to light. The collapses of investment banks Bear Stearns and Lehman this year tarnished the SEC’s reputation and lawmakers such as Dodd and Senator Charles Grassley, an Iowa Republican, have questioned its vigilance in enforcing securities laws. Cox, a Republican appointed by President George W. Bush, has said he will leave office at the end of the Bush administration. His term officially ends in June 2009.

SEC Inspector General H. David Kotz released reports this year critical of the agency’s conduct.

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The SEC hadn’t inspected Madoff’s investment advisory business since he registered the firm with the agency in September 2006, two people familiar with the matter said. The SEC tries to inspect advisers at least every five years and to scrutinize new firms in their first year of registration, former agency officials and securities lawyers said.

SEC examiners reviewed Madoff’s brokerage business in 2005 after an investment manager, writing to the agency, and press reports questioned the validity of his investment returns. The SEC’s enforcement division completed an investigation involving the company last year without bringing a claim.

19 Comments

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19 responses to “Madoff Made Off With Everyone’s Dough

  1. writechicpress

    Nice work!

  2. thanks, wcp! 🙂
    oh, wait! you didn’t mean bernie, did you?

  3. No, your photoshop is nice work. Bernie is a piece of work.

  4. Anyone who would commit enough of their fortune to just one entity is an idiot.

  5. Friend of the court

    That’s right KZ, I keep mine in the bookshelf. It’s all in different books, though.

  6. Brilliant…

    ” …of all forms of evil, none are more destructive …than betrayal of trust and disloyalty to one’s confiding friends.”

    Suck it, Madoff.

  7. whew! thanks, neon vincent!

  8. karen,
    i think it is the arrogance of the rich. they “know a guy” and they throw all their money at him to make them more money. i don’t feel sorry for any of the rich a$$holes who don’t know enough to diversify, but i hate that the bastard stole from charities. he’ll burn in hell for that, but just in case there is no hell, he needs to go to jail forever, and not one of the cushy country club ones.

  9. fotc,
    same here, but everytime i dust off the bookshelf, all the coins fall out of the books and roll all over the place. 😉

  10. hey saitia!
    have i told you lately that i love your site? i hope all the raisinettes click over there. it’s become a daily stop for me (and often more than once a day).

  11. writechicpress

    No, I meant you, Nonnie. Bernie is A-#1 Pricko.

  12. thanks wcp!
    he is worse than a pricko, even a A-#1 pricko. he’s a selfish, arrogant, narcissistic $hithead who apparently cars about nobody but himself. oops, i mean an alleged selfish, arrogant, narcissistic $hithead. everyone is innocent until proven selfish, arrogant, narcissistic and guilty.

  13. Dusty

    Madoff needs to get a cell with Charlie Manson..both of these guys are pond scum of the worst kind.

    The SEC..werent’ those folks hired by BushCo? That would explain how they missed this gigantic ponzi scheme. 😉

  14. dusty,
    they missed this scheme, and who knows how many others, because they didn’t bother looking. it will be interesting to see where this all winds up. ordinarily, poor and middle class people wind up getting screwed. in this case, rich people were wiped out. i wonder if they’ll get a bailout.

  15. nightowl724

    Well done, nonnie, well done!

    Is there no end to the slime on Wall Street?

  16. nightowl,
    as long as there are people, there will be greed. i was watching the news today, and donald trump was on the phone talking about other people being greedy. talk about surreal!

  17. i thought i would never say something like this – madoff is a perfect reason to keep the death penalty OR maybe there is a place for waterboarding.

  18. dcAp,
    i think a more fitting punishment for madoff would be to serve the poor. make him live in a slum and worry where his next meal is coming from. prison is too good for him. i really don’t care that he stole from rich people. the ones who invested everything they had with madoff did so out of pure greed, so let ’em live in the streets for all i care. however, he stole from charities. that, to me, is the most egregious thing he did. every day, he should be forced to look at kids who are suffering. let him be constantly reminded of the evil he has perpetrated in the name of greed.

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