Christopher Cox, trying to protect his own reputation, is now calling for an internal investigation of the SEC to find out how the Madoff Ponzi scheme went undetected for 10 years. Was Cox asleep at the wheel or was he just oblivious to what was going on in his own agency. Did a personal relationship between one an SEC attorney and a Madoff compliance lawyer hamper investigation, as Blogging Stocks Peter Cohen questions?Cox, feeling the heat, ordered a full and immediate review of past allegations against Madoff and his firm. He wants to know why staff didn't act upon them. This investigation will include all staff contact with Madoff family members.
Well maybe we'll find out some of these answers, but even if we do the damage is done to all the individuals and institutions that took a beating while the SEC slept. The SEC admitted as this investigation started that Bernard Madoff and his securities firm had "repeatedly" been under question by the SEC staff since 1999, but staff never recommended action to the commission.
Cox, when starting this investigation said in a written statement,
Since Commissioners were first informed of the Madoff investigation last week, the Commission has met multiple times on an emergency basis to seek answers to the question of how Mr. Madoff's vast scheme remained undetected by regulators and law enforcement for so long. Our initial findings have been deeply troubling. The Commission has learned that credible and specific allegations regarding Mr. Madoff's financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action. I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them. Moreover, a consequence of the failure to seek a formal order of investigation from the Commission is that subpoena power was not used to obtain information, but rather the staff relied upon information voluntarily produced by Mr. Madoff and his firm.Madoff has been charged with securities fraud and let out on $10 million bail. A federal judge moved quickly on Monday to try to help investors swindled.
So who was in charge over at the SEC? The staff or the commissioners?
Lita Epstein has written more that 25 books including "Reading Financial Reports for Dummies."
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Reader Comments (Page 1 of 1)
12-17-2008 @ 1:17PM
BHarrison said...
Well, it is time for "staff" to be fired for failing to do their job diligently and to the fiduciary responsibility of their positions.
And as Chierf of teh SEC, it was Cox's responsibility to ensure that this type of lack of due diligence did not occur . . . Cox should be fired also.