At first, it looked like the SEC was asleep at the switch. How could Madoff's funds and their problems have avoided detection for so long?
It turns out that the agency and others, did spend time with Madoff but missed what was hiding in plain sight. According to The Wall Street Journal, "Bernard L. Madoff Investment Securities LLC was examined at least eight times in 16 years by the Securities and Exchange Commission and other regulators, who often came armed with suspicions."
What happened? For starters, if appears that federal agencies did not dig deep enough. Some of Madoff's practices were complex enough that uncovering them would have taken time.
But, the real answer may be remarkably simple and, in many ways, more disturbing. Madoff was an especially good liar, adroit at misleading investigators and covering his own tracks.
Federal regulators probably rely, at least to some extent, on the fact that subjects of investigations will not lie to their faces, and do so repeatedly. The penalties of the kind of flagrant fraud are just to terrible. Madoff apparently wasn't concerned about how badly things might go for him and that was the most effective deception device of all.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
1-05-2009 @ 1:20PM
nick said...
You could have fooled me, I thought it was MSNBC.
1-05-2009 @ 2:47PM
BHarrison said...
It comes down to be a matter of due diligence and competent performance of fidicuary responsibilities, which the SEC personnel unequivocally did NOT exercise.
So, per the article, Madoff duped the SEC personnel, not once or twice; but EIGHT TIMES. Even then, the SEC NEVER discovered the FRAUD until the Ponzi scheme was collapsing on its own; then it became too obvious for ANYONE to ignore.
Government incompetence and/or corruption has simply become too pervasive . . . extending from the Fed to the SEC, and many of the other government agencies. Hell, Congress is the biggest CULPRIT in all of this. Congress 1) voted against increased regulation of Fannie, Freddie, the FIs, etc.; 2) allowed many of the previous "token" regulation expire without renewing the regulations; 3) agreed to "relax" even the remaining regulations and oversights.
So, our economic debacle is really based on a BASIC FAILURE of both our government, our regulatory agencies, and the corporate managment. It is all based on the BLATANT LACK of INTEGRITY in all sectors, including the financial audting firms which are a front line "defense" against illegal, corrupt, and unethical business practices.
"People deserve the government that they have . . .." . . . because they have elected the politicians and tolerated their performance. The American people must demand and vote for change. Otherwise, nothing will change. Both the RNC and the DNC must be wrested from the control of the elitists special interests groups.
1-05-2009 @ 4:27PM
bill said...
b harrison hit it right on the money.
1-05-2009 @ 10:55PM
williambanzai7 said...
The SEC has become the regulatory equivalent of the Federal Disaster Relief Agency. One heck of a job Cox!