Madoff claimed to be on 'short list' to chair SEC

Examiners were 'actively discouraged' from pursuing probes of Ponzi-master's firm

Sep 3, 2009 @ 9:54 am

By Dan Jamieson

Admitted fraudster Bernard L. Madoff claimed in 2005 that he was on the “short list” to be named the new SEC chairman.

According to an executive summary of a report released yesterday by the Securities and Exchange Commission's inspector general, Mr. Madoff told SEC examiners in 2005 that he was “on the short list” to become the next SEC chairman, replacing outgoing chairman William Donaldson.

The post was instead filled by Christopher Cox, then a Republican congressman from California.

Although the IG report summary details numerous dropped balls by SEC examiners and enforcement staff that allowed Mr. Madoff to conduct a massive Ponzi scheme over a period of years, his prominence in the securities industry may have helped him avoid scrutiny.

The report said that throughout a 2005 examination of his firm, “Bernard Madoff would drop the names of high-up people in the SEC” to SEC examiners.

When examiners in the SEC's Northeast regional office complained to their assistant director about not getting cooperation from Mr. Madoff, “they received no support and were actively discouraged from forcing the issue,” the IG report said.

When the Northeast regional staff inquired about a similar exam that had been performed earlier by the Washington staff, a senior-level Washington examiner told junior-level examiners in the Northeast office that Mr. Madoff “was a very well-connected, powerful, person,” the report said.

When Northeast office examiners wanted to look beyond the issue of front running at Mr. Madoff's firm, their assistant regional director denied their request, the IG report said.

A request to look into Madoff feeder funds was also denied.

The Northeast office's exam was one of three examinations and two investigations of the Madoff firm going back to 1992. None of them uncovered the fraud.

Inexperience and poor training were key causes of the failure, the report said.

In a statement, SEC Chairman Mary Schapiro said the agency has bolstered its inspection program and started to revamp how it handles tips.

The agency has also “begun to hire new skill sets, increased internal training, and sought more resources to keep pace with financial fraudsters,” she said.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

Adviser marketing: 3 strategies for success

To help advisers sift through the noise and execute a marketing plan that will deliver the most ROI, three executives from Carson Group sit down with Shannon Rosic to deliver some strategies you can implement today.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

T. Rowe Price steps up its game to serve financial advisers

The Baltimore-based mutual fund giant is more aggressively targeting financial advisers with a beefed-up wholesale crew and placement on custodial platforms.

The most important tax changes for 2018

The Internal Revenue Service issued inflation adjustments to more than 50 tax provisions for 2018.

Shift to Roth 401(k)s 'highly likely' part of tax reform: former Treasury official Mark Iwry

Mandated contributions to Roth accounts would likely only be partial, as opposed to having a full repeal of pre-tax accounts.

E*Trade acquiring custodian Trust Company of America

Discount broker buying second-tier custodian for $275 million.

Another thousand Dow points higher, and investors yawn

Market milestones keep falling like dominoes, with 51 records broken so far this year.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print