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US regulator: We failed to stop Madoff
Robert Lea18.12.08
THE alarm bells in the $50 billion fraud by disgraced American financier Bernard Madoff had been ringing for years but US regulators today admitted they ignored them.
In a stunning admission of "multiple failures", the head of America's Securities and Exchange Commission said it, the country's main financial regulator, had let down investors around the world who have lost fortunes in the scam.
"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," said SEC chairman Christopher Cox.
"I am gravely concerned by the apparent multiple failures over at least a decade to investigate these allegations or at any point seek formal authority to pursue them.
"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." The admission came as more information became available on how regulators had failed to realise that Madoff had pulled off the staggering Ponzi scam in which he had to keep luring in money from new investors to keep paying the 10 per cent returns promised to original investors.
It has been revealed SEC investigators discovered in 2006 Madoff had misled the regulator about how he managed clients money. A rival to Madoff, Boston-based Harry Markopolos, had mounted a decade-long campaign to persuade the SEC that Madoff's investment business was too good to be true.
By 2006, it is alleged, the SEC had evidence of multiple violations which if pursued would have blown wide open Madoff's scam. Despite furnishing the SEC with specific complaints since 1999, Mr Markopolos said the SEC regarded him as "crying wolf". As a result SEC investigators failed to act.
After appearing in court last night, Madoff was electronically tagged. His bail terms mean he cannot leave New York City, and he has a curfew to keep him at his Manhattan penthouse.
Reader views (3)
1) The Federal Government and its employees are immune from any civil liability for acts or or failure to act with regard to regulation.
2) The Bush administration has strenuously endorsed both soft regulation and preemption of private litigation against any company in a supposedly "regulated" industry CF the Food and Drug Administration.
If you are killed or injured by a defective product "regulated" by this administration, their answer is
that you are collateral damage and isn't that just too bad for you.
- Vincent Brannigan, Bethesda USA
Presumably we can now expect resignations at the SEC?
- Jethro Payne, Streatham Common
Following this extraordinarily embarrassing, and frankly inept[?], admission, I wonder if Madoff's 'victims' now have a good chance of pursuing any compensation from the US Government/Regulator through the US courts?
When in doubt, 'Litigate'!
- Dave, cumbria
