Members of the House Financial Services subcommittee on capital markets, insurance and government-sponsored enterprises hammered SEC officials today at a hearing looking into the alleged Bernard Madoff Ponzi scheme.
Agency officials declined to comment specifically about how they missed the fraud after being tipped off over a number of years by Harry Markopolos, a fraud investigator who formerly worked for a hedge fund that competed with the Madoff fund.
They said an ongoing investigation by the Securities and Exchange Commission inspector general kept them from commenting.
At one point during the hearing, SEC acting general counsel Andrew Vollmer claimed executive privilege in declining to answer some questions.
Subcommittee chairman Paul Kanjorski, D-Pa., asked Mr. Vollmer if he had obtained executive privilege from the U.S. attorney general.
“No ... this is the position of the agency,” Mr. Vollmer said.
Did the SEC instruct him not to respond to questions? Mr. Kanjorski asked.
The commission supports this position, Mr. Vollmer said, but “the answer is no.”
Mr. Kanjorski asked if Mr. Vollmer was asserting executive privilege on his own.
“No, I wouldn't say that,” Mr. Vollmer said.
SEC spokesman John Heine did not have an immediate response.
Mr. Markopolos, appearing for the first time before a congressional committee, skewered the SEC. He detailed his frustrations in attempting to get the SEC to look into the Madoff operation.
The “financial illiteracy among the SEC’s securities lawyers was pretty much universal with few exceptions,” he said in prepared testimony.