Please find a link below to the executive summary of the Inspector General’s report on the SEC’s alleged failure to discover the Madoff Ponzi scheme earlier than it did. The report discusses but quickly dismisses the romantic relationship between SEC Assistant Director Eric Swanson and Bernard Madoff’s niece, Shana Madoff, as a factor in the misfeasance, but does fault, appropriately, the SEC for failing to recognize multiple, obvious signs of the Ponzi scheme. It also sadly notes that even when the SEC decided to take action, it failed to do so for no apparent reason. One has to wonder how many millions of dollars and hundreds of victims would have been spared if the process had worked like it is supposed to. The ultimate irony is that Madoff used the SEC’s failures to take any action against him as marketing materials to convince equivocal investors of the safety of investing with him.
To me, this report proves yet again the potential fallibility of government and institutional investigations. We will see more reports like this as mortgage and bank fraud cases wind through the system and institutional practices of the lenders which avoid knowledge of obvious risk are exposed. I recently gave a lecture on this at the annual meeting of the National Association of Criminal Defense Lawyers in Boston (if anyone is interested in seeing any of the materials, let me know.) Bottom line, next time there is a claim of institutional regularity or that a presumption of governmental competence should apply to a matter, keep in mind the names Madoff, Ameriquest, and Aisenberg.
Until next time,
Todd
