SEC fumbled 5 Madoff probes, report finds

Reuters on Yahoo ^ | 9/2/09 | Ross Kerber, Jonathan Stempel and Rachelle Younglai

[NormsRevenge]

WASHINGTON (Reuters) – U.S. securities regulators fumbled five probes of Bernard Madoff's operations and missed opportunities to uncover the financier's $65 billion investment fraud, a report by the U.S. Securities and Exchange Commission's inspector general said on Wednesday.

The SEC received more than ample information over the years to warrant a thorough and comprehensive examination or investigation of Madoff and his firm, the report said.

[Slapshot68]

Sounds like some higher-ups within the SEC may have been “clients.”

[E. Pluribus Unum]

Couldn't possibly be they were paid off.

Couldn't possibly.

[Abathar]

“Fumbled?” They flat out were bribed.

[dfwgator]

Damn straight!

[Freddd]

Hmm and the Inspector General couldn’t find this info until now..? No one has ever asked how much money the Obama’s had with madoff, eh?

[wolfcreek]

” Bernard Madoff was not some sort of weird outsider...but rather a key developer of the modern system of electronic trading and a founder and chairman of NASDAQ. Madoff often was called upon to help write the rules on financial regulation and therefore became quite expert at subverting them... At the very time back in 1999 when the SEC was being formally warned that a Madoff scam was under way, Madoff was consulting with then-SEC Chairman Arthur Levitt Jr. on regulatory matters... When Levitt worked for Clinton as head of the SEC, he teamed up with Alan Greenspan, Robert Rubin and Lawrence Summers to destroy what remained of financial service industry regulation...” — Robert Scheer article

http://www.truthdig.com/report/item/20090701_the_root_of_madoffs_evil/

[nathanbedford]

Will someone please explain how this justifies the need for bigger government when the government muffed the case time after time?

In the subprime scandals it was clear that the government failed in its duty to vet these mortgages. In fact government was the prime mover in creating the poisonous subprime mortgages. Government installed incentives which led to the plague of subprime mortgages. Government set up the quasi-government agencies which enabled Democrat apparatchiks to grift tens of millions of dollars off subprime mortgages. They cooked the books.

Yet the lessons we are supposed to take from all of these government misdeeds is that we need more government.

[The_Media_never_lie]

“Fumbled?” They flat out were bribed.

No, Bernie Madoff would never bribe anyone. The SEC would never accept bribes, right?

[NormsRevenge]

half a dozen reports of suspicious activity dating back to 1992.

Uhh,, who was Pres back then? ;-)

[WOBBLY BOB]

no gubermint program is ever a failure, it’s just underfunded.(sarc)

[angkor]

A) I don’t believe the “$65 billion” figure, it seems grossly overstated and I have never seen any authentic source validating that this is an accurate, vetted, or properly audited figure. (Maybe I missed it?)

B) There *is* fairly good documentation that Madoff’s client statements were almost entirely fictional. No securities, no trades, no nothing. Made up entirely out of thin air, with perhaps some bogus red herring trades. How could the SEC could miss that over so many years? A mystery. Also how could his “innocent” family and non-family employees not know that no trading was ever being done?

I don’t think there’s any question that people at the SEC were being bribed.

[angkor]

>>>> Yet the lessons we are supposed to take from all of these government misdeeds is that we need more government. <<<<<

The lesson for me is that the liars, thieves, and sociopaths on Capitol Hill - and that includes both Democrats AND Republicans - are scoundrels who should be ejected from office post haste, and prosecuted.

They are completely over the top and out of control.

[leilani]

Absolutely somebody inside the SEC was on his payroll.

[unixfox]

The SEC fumbled it because they wanted to fumble it.

[KEmom]

Niece’s husband was an SEC investigator from what i’ve read.

[dfwgator]

The SEC football conference could have done a better job.

[Liz]

Dec 26, 2008
The Bernie Madoff I Knew
By Laura Goldman (her first-person account)
http://pajamasmedia.com/blog/the-bernie-madoff-i-knew/

When I heard the news of Bernard Madoff’s arrest, I breathed a sigh of relief. “Thank God, I dodged that bullet” was my first thought. For sure, there was no gloating on my part. Anyone, who has been in the brokerage business for a long time, has been preyed on by con artists more than once.

As a broker, you try your best to avoid them, but there is always one that slips through where your guard is down. Madoff and my paths crossed in Palm Beach over 10 years ago. We were both scouring for clients there, albeit on different rungs of the social and economic ladder.

My office was the lunch counter at Green’s Pharmacy while Bernard’s was the much grander Palm Beach Country Club.

Hearing whispers of his investment prowess, I approached “Uncle Bernie” one day and asked to meet him to discuss referring clients to him. Madoff’s clients bragged that he showed consistent returns of 10-18% each year and rarely had a down month. At the meeting, Bernie----known as the Jewish T-bill-----was very charming and low key. Bernard, the former chairman of the NASDAQ stock exchange, did not want to answer questions about his investment business and strategy.

He only grudgingly admitted that he employed a split conversion strategy that used both put and call options. I did not know what to make of his opacity. I was discomfited by his saying how lucky that I was that he allowed me to invest with him. The structure of Madoff’s investment also concerned me. Similar investments would have been established as a hedge fund with a separate custodian of the assets.

The general partner of a hedge fund takes a management fee and a percent of the profits. Mr. Madoff insisted on keeping the assets in house at his own brokerage firm, but only charged commissions, which meant a lower payout for him. Madoff, always the salesman, assuaged my doubts about the investment structure. “I make up for the lower fees with the additional volume of investments that my fee structure attracts.”

The consistency in returns, the small size of the auditing firm, and the structure of the investment were troubling, but they were not the deal breaker for me.

Since my office had previously been in the same building as the Philadelphia Stock and Options Exchange, I knew many of the employees of the exchange and leading market makers. When I called them, all of them said that they knew Bernie but did not trade with him. Even though he said that he traded his options over the counter, it still seemed strange to me that none of the giants in the tight-knit options world traded with him. After 45 minutes of detective work, I passed on the investment.

Even with the red flags raised on the investment, I struggled with turning down the investment opportunity. I was worried that my cautiousness was causing me to miss a great opportunity to earn lots of money. The product that Bernie Madoff had “created” would have been as easy to sell as ice water on a hot summer day.

After turning down the opportunity, I frequently encountered clients of Bernard Madoff. Most had the lion’s share of their assets invested with him. My suggestions to diversify their assets fell on deaf ears.

Sadly, many Jews believed in Bernie Madoff more than they believed in God and were just as unlikely to forsake him.

Even though the drumbeat of rumors about Bernie’s business eventually grew louder in the financial community, there was nothing that I could do about it.

I could not take on someone with the stature of Bernie without proof in black and white. I wasn’t the only one with doubts. In 2001, Barrons and MAR Hedge Fund Report wrote scathing reviews of Bernie’s investment business.

The title of the MAR article did not pull any punches — “Madoff tops the charts; Skeptics ask how.” Barron’s was also hard-hitting. “The recent MAR Hedge report, for example, cited more than a dozen hedge fund professionals, including current and former Madoff traders, who questioned why no one had been able to duplicate Madoff’s returns using this strategy.

Likewise, three option strategists at major investment banks told Barron’s they couldn’t understand how Madoff churns out such numbers. Adds a former Madoff investor: “Anybody who’s a seasoned hedge-fund investor knows the split-strike conversion is not the whole story. To take it at face value is a bit naïve.” These articles gave me an excuse to contact Madoff’s clients again.

Instead of being thanked for sending them the articles, I was attacked. “How dare you say anything bad about Bernie.” Some dismissed the attacks on Bernie as anti-Semitism.

Several of those who received my mailing asked me questions. Still, even though I planted the seeds of suspicion, they did not grow. Most decided to continue investing with Bernie. They told me that they did not want to give up a good thing. They did not believe that the music would stop and they would be left without a chair.

Now that the music has stopped, many of Madoff’s clients are finally singing my name. Unfortunately, there is nothing that I can do for them now. I wish that I could say that this type of fraud would not happen again, but unfortunately I can’t. Now that Bernie has proved how easy is to do, one can be sure that con artists will be falling over themselves to imitate him.

NOTE: Laura Goldman currently resides, and works, in Israel.