Inspector: SEC botched investigation of Madoff scam (was incompetent but not corrupt)

[sabra]

Source: MarketWatch

Inspector general says agency was incompetent but not corrupt

WASHINGTON (MarketWatch) -- The Securities and Exchange Commission's inspector general on Wednesday released a scathing report finding that the agency failed to follow up on detailed complaints and missed exposing the biggest fraud in the history of the agency, a $50 billion Ponzi scheme perpetrated by Bernard Madoff.

"The (Office of the inspector general) did not find evidence that any SEC personnel who worked on an SEC examination or investigation of Bernard Madoff Investment Securities had any financial or other inappropriate connection with Bernard Madoff or the Madoff family that influenced the conduct of their examination or investigatory work," the report said.

However, Inspector General David Kotz's report found evidence of a failure to follow up on three examinations and six complaints in a "competent" way. The report explained that the majority of a 2005 investigation was performed by a staff attorney who had recently graduated from law school and only joined the SEC 19 months before she was assigned the Madoff investigation. The attorney had never before been the lead staff attorney on any investigation, the report said.

"The OIG investigation did find, however, that the SEC received more than ample information in the form of detailed and substantive complaints over the years to warrant a thorough investigation ... and that despite three examinations and two investigations being conducted, a thorough and competent investigation or examination was never performed."

Read more: http://www.marketwatch.com/story/inspector-secs-madoff-probes-were-incompetent-2009-09-02

[Zenlitened]

1. "Mistakes were made."

Well, case closed, I guess. Tra la la, merrily on our way we go. :eyes:

[tanyev]

2. Recently graduated from which law school?

Liberty? Regent?

[lovuian]

14. the SEC needs to HIRE better lawyers and more of them

I have not heard of an increase in new Hires in the Agency

they need to demote the incompetents and Hire more lawyers

[truebrit71]

16. WRONG. They have far too many lawyers...they need industry experienced people in there..

..the main reason all of these investigations failed was because the examination teams selected were full of lawyers who couldn't tell the difference between common stock and livestock...

[Turbineguy]

3. "Incompetent but not corrupt".

I think that was supposed to be the mission statement of the Bush Administration.

[Jackpine Radical]

4. And every time somebody called Bush an idiot

they were helping to prepare his defense.

Feigned stupidity is a wonderful cover for psychopathic evil.

[Oldtimeralso]

5. K & R and proud to be # 5 n/t

[sendero]

6. Ok, so how many people..

.. have been FIRED? Because if you are incompetent, I don't want to spend my tax dollars on you.

[truebrit71]

17. One of them got promoted specifically because of her work on one of the investigations..

...unreal...

[UpInArms]

7. SEC Official Married into Madoff Family

Madoff Boasted of Close SEC Relationship, "My Niece Even Married One"

http://abcnews.go.com/Blotter/WallStreet/story?id=6471863&page=1

Dec. 16, 2008—


A top Securities and Exchange Commission compliance official who worked for the SEC when it found no problems at Bernard Madoff's firm in 2005, later began to date and married Madoff's niece, who was a compliance lawyer for the company.

A spokesman for Eric Swanson, who has since left the SEC, said Swanson "did not participate in any inquiry of Bernard Madoff Securities or its affiliates while involved in a relationship" with Shana Madoff.

The failure of the SEC to detect the alleged fraud carried out by Madoff, estimated by Madoff himself at $50 billion, has raised questions about the SEC's performance.

"The Securities and Exchange Commission failed the American people," said Senator Charles Grassley (R-IA).

Since 1992, the SEC has at least twice dismissed concerns about Madoff's firm, following complaints.

At a business roundtable meeting last year, Madoff boasted of his "very close" relationship with a SEC regulator, chuckling as he said, "in fact, my niece even married one."

A spokesman for Swanson, the former SEC official who married Madoff's niece and compliance lawyer, said Swanson met the niece "through her trade association work in the industry. Throughout his career, Eric has displayed the highest ethical standards and his reputation has been  and continues to be  above reproach."

Madoff formally registered with the SEC as an investment adviser in 2006, but the SEC failed to conduct the standard review that normally follows such a new registration.

Was Madoff Running a Ponzi Scheme?

Madoff made headlines last week when an unsealed criminal complaint in federal court in New York charged that he has been running a decades long Ponzi scheme that defrauded investors of $50 billion dollars.

A former chairman of NASDAQ, Madoff was an investment advisor who catered to a handful of high net worth clients, one of whom told ABC News that Madoff was so sought after that, as recently as two months ago, he was turning down potential new business. His handful of clients routinely expected -- and received -- double digit returns, up market or down.

...more...

nah - nothing to see here - move along, citizens

[leveymg]

15. Married? You mean, between a man and a woman? Well, that can't be corrupt!

No money ever changes hands that way. :think:

[angrychair]

8. This is absurd

So let me get this straight...Bernie Made-off-with-their-money STEALS BILLIONS of dollars (still UNACCOUNTED for billions of dollars) for over 10 years, NEVER making a trade on ANY stock, making IMPOSSIBLE investment returns for OVER a decade and NO ONE at the SEC thought to look into it in any depth? For that they are characterized as only "incompetent" but not "corrupt"? This is ABSURD! What an insult to our intelligence (at least those of us that still have any claim to any). I swear, if it isn't the INSANITY of the health care debate, its the bald face lying that is going on with respect to Madoff and the whole AIG and Goldman-Sachs (an so on) financial crisis. It can really drive a sane person to the breaking point. So much crazy and so little time.

[FarCenter]

9. If an employee is being paid to do a job, but is doing it incompetently, then either --

the employee is corrupt for concealing their incompentence from the manager,

or the manager is corrupt for keeping on an employee who is not doing the job they are being paid to do.

One or the other is stealing from the taxpayer, who is footing the bill for their salaries.

[Xipe Totec]

10. I'm so relieved!

Glad to hear that our government officials are not corrupt, just FUCKING INCOMPETENT!

Hew! that's a load off my mind... :eyes:

[OwnedByFerrets]

11. Uh huh....and the moon is made of cheese

[burrowowl]

12. Incompetent but not Corrupt!

BULLSHIT and BEARSHIT TOO!

[JackDragna]

13. This is what happens when you eviscerate federal agencies..

..and replace decent personnel with cronies and idiots. The key lesson of politics, if there is a single one, is that people will abuse power if left unregulated. If nobody minds the henhouse, the foxes get the chickens, every time.

[No Elephants]

18. One man went to the SEC at least once and laid out exactly what Madoff was doing and how

he was doing it. All they had to do was give him a couple of calls and ask for guidance--what to look at, what to look for. etc.

Problem is, regulators have indeed become corrupt and, also, regulation become a dirty word, starting with Reagan, who started the policies that got us to TARP.

BTW, the SEC was created in 1934 to stop the kinds of fraudulent investment schemes that helped cause the Great Depression.
"The enforcement authority given by Congress allows the SEC to bring civil enforcement actions against individuals or companies alleged to have committed accounting fraud, provided false information, or engaged in insider trading or other violations of the securities law. The SEC also works with criminal law enforcement agencies to prosecute individuals and companies alike for offenses which include a criminal violation."

<snip>

"President Franklin D. Roosevelt appointed Joseph P. Kennedy, Sr., father of President John F. Kennedy, to serve as the first Chairman of the SEC, along with James M. Landis (one of the architects of the 1934 Act and other New Deal legislation) and Ferdinand Pecora (Chief Counsel to the United States Senate Committee on Banking and Currency during its investigation of Wall Street banking and stock brokerage practices). Other prominent SEC commissioners and chairmen include William O. Douglas (who went on to be a U.S. Supreme Court justice), Jerome Frank (one of the leaders of the legal realism movement) and William J. Casey (who would later head the Central Intelligence Agency under President Ronald Reagan).


http://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commission


Protections put in place from the "trust busting" Presidents, like Roosevelt and Taft (elected when Republicans were still sane) through FDR were systematically dismantled from Reagan forward, leaving us in the mess in which we now find ourselves. Thanks Ronnie, descendants of Prescott Bush, Bill Clinton and the Congresses who served under all of them.