Madoff Investors Sue SEC for Negligence

CNBC ^ | October 14, 2009 | Mary Thompson

[Liz]

This is so utterly bogus----it's inconceivable that they would not know Madoff (and Stanford) were crooks. Madoff was not even producing trading slips. (Stanford was operating "offshore" for crying out loud). Are these not huge red flags?

I can only conclude that these oversight agencies have been infiltrated. Some of the people there are running a "protection racket" for crooks like Madoff and Stanford---probably getting paid-off to look the other way.

[Freedom4US]

Interesting. They were, however, unconcerned with the SEC when their “investments” were trending upwards. It’s apparent the authorities were notified several times that there was likely fraud going on. What a mess.

[CutePuppy]

WTF has taken so long?

I think they may have been waiting for internal investigation report by SEC IG David Kotz, which was, for the most part, a tough-talk whitewash of how the audits of Madoff's BLM were handled (see post #12). There are some things in the report that may give the suit enough legitimacy to proceed.

While I don't expect much in terms of tangible results coming out from this lawsuit, it may, at the very least, shed some light on the nature and the level of what the report calls "incompetency" and "inexperience" of SEC staffers. That's where the real value of this lawsuit, should it be allowed to proceed, may lie. As a bonus, in the process there may be some information disclosed re many clients of Bernie who were "dial-a-return" scam artists and crooks in on the scheme.

The agencies like SEC and FINRA, supposedly on our behalf, demand the transparency from financial firms they regulate. If this lawsuit will help these agencies became a little more "transparent" themselves to the general public (who rely on them to "protect" them from fraud), and make them lose some of the luster of "tough financial cop on a beat," as they like to portray themselves, it will serve us all well.

BTW, I thought that under Mary Schapiro it was Auntie FINRA, not Unkle, but no matter - she's done such a great job there that she was rewarded by Obama's appointment to become the SEC Chairman. Nice promotion for a job well done, keeping Bernie safe from trouble all these years. And nothing about Madoff's and his clients' political connections and donations in al-media, even late night comedians.

[CutePuppy]

This is so utterly bogus----it's inconceivable that they would not know Madoff (and Stanford) were crooks

Yep! BTW, you might find interesting the contrast regarding clawback policies by SEC :
SEC Fights Stanford Receiver’s Bid to Revive Clawback Lawsuits - BL, 2009 October 14, by Laurel Brubaker Calkins

R. Allen Stanford’s court-appointed receiver should continue to be blocked from suing investors to get back funds they received from an alleged $7 billion Ponzi scheme, U.S. securities regulators told an appeals court.

Ralph Janvey, receiver for the Stanford Financial Group of companies founded by the accused Texas financier, has no legal authority to sue 650 investors for almost $1 billion they retrieved before the collapse of Stanford’s alleged scheme, the U.S. Securities and Exchange Commission said in a filing with the U.S. Court of Appeals in New Orleans.

“Facing certain failure, the receiver has attempted an end run around the governing body of law,” the SEC said in the filing, arguing against Janvey’s bid to reverse a lower-court ruling limiting so-called clawback lawsuits. Janvey overstepped his authority by naming some investors as “relief defendants,” which the SEC claims only it has the power to do.

The SEC filing, posted yesterday on the court’s Web site, marks the third time the agency has opposed Janvey, who was put in charge of Stanford’s assets when the SEC sued the financier in February. With the SEC’s support, a federal judge blocked Janvey on July 31 from pursuing clawback suits seeking the return of principal paid to investors from certificates of deposit at Antigua-based Stanford International Bank Ltd.

‘Further Torment’

“The receiver does not stand in the shoes of the commission,” the SEC said in yesterday’s filing. The agency’s lawyers said allowing Janvey to take investors’ principal in the name of equalizing recovery for all victims “would be sanctioning further torment” of defrauded investors.

The SEC also has opposed Janvey’s fee requests, which it says are too high. .....

SEC has entirely different attitude regarding Irving Picard, a receiver for Madoff's "estate," who is being sued by the the "class" for his high fees. Would be nice to have SEC explain the "policies".