|
Madoff's net snared SEC official's family members
(China Daily)
Updated: 2009-09-08 08:32 NEW YORK: Family members of a US Securities and Exchange Commission enforcement official, whose unit got a tip in 2005 that Bernard Madoff may be running a Ponzi scheme, entrusted $2 million to the scam, the agency's watchdog said. The anonymous e-mailed tip to the Office of Internet Enforcement was among at least six "substantive complaints" the SEC didn't fully investigate during 16 years, Inspector General H. David Kotz said in a report released before he testifies before the Senate. Investments by two of the official's relatives were disclosed as a footnote in the 457- page report, which doesn't identify him or specify losses. He wasn't part of any Madoff probe, Kotz noted. Kotz's eight-month inquiry offers the most exhaustive look yet at how the agency missed chances since 1992 to detect a $65 billion fraud that burned thousands of investors. The inspector faulted the agency for inadequately pursuing tips, assigning inexperienced staff to conduct reviews and failing to seek trading records that would have revealed the scam.
"It is a failure that we continue to regret, and one that has led us to reform in many ways how we regulate markets and protect investors," SEC Chairman Mary Schapiro said in a statement. "In the coming weeks we will continue to closely review the full report and learn every lesson we can." Though the report describes dozens of contacts between Madoff and senior SEC officials, including former chairmen, it doesn't find that managers improperly influenced or interfered with inquiries. Nor did Kotz find that an SEC employee's romantic relationship with Madoff's niece had any affect on the agency's examinations. Instead, Kotz said the SEC failed to scrutinize Madoff during a 1992 probe of a firm that funneled him money. Years later, employees failed to scrutinize his consistently strong profits, didn't press harder when they caught him in lies and abruptly ended an examination to focus on mutual-fund abuses. The SEC didn't release more than 500 exhibits referenced in the report, including testimony from Madoff in June. Kotz will testify on his findings before the Senate Banking Committee on Thursday. Other witnesses include SEC Enforcement Director Robert Khuzami and Harry Markopolos, a former money manager who repeatedly gave the agency details on Madoff's scheme, according to the panel's website. The anonymous tip to the Internet unit, received in October 2005, claimed to be from a former client at Madoff's New York-based investment advisory business. The informant also added, "After a short period of time, I decided to withdraw all my money (over $5 million)." The Internet enforcement official told Kotz he first became aware of the warning the day Madoff was arrested in December, after asking his staff to search the office's archives for complaints relating to the scam, according to the report. Bloomberg News (China Daily 09/08/2009 page17) |
