SEC Admits it Failed to Act on Madoff's Past 'Wrongdoings'
WASHINGTON -- Even though Securities and Exchange Commission staffers were aware of specific allegations of "financial wrongdoings" by Bernard L. Madoff's firm going back to 1999, the agency acknowledged yesterday that actions were never taken.
In a Dec. 16 statement, SEC Chairman Christopher Cox said the commission has learned of past "credible and specific allegations" against Bernard L. Madoff Investment Securities LLC, which was charged last week with securities fraud in a $50 billion Ponzi scheme.
"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," Cox said. "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."
The commission's inspector general has directed a full and immediate review of Madoff's past allegations, SEC's internal polices governing those allegations, whether those policies were followed and what improvements are needed.
Cox said he has also directed a mandatory recusal from the ongoing investigation of any SEC staff who "have had more than insubstantial personal contacts with Mr. Madoff or his family."