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SEC Boss Saw No Conflict In Madoff Acct

From a conflicted Washington Post:

SEC head says she relied on counsel tied to Madoff account to sort out any conflict

By David S. Hilzenrath
Wednesday, March 9, 2011

SEC Chairman Mary L. Schapiro has told lawmakers that she left any ethical questions in former general counsel David M. Becker’s hands when he told her in 2009 that his late mother had an account with Ponzi scheme operator Bernard Madoff.

"I do not recall asking Mr. Becker for or receiving additional information," Schapiro wrote in her first public statements on the matter since congressional Republicans called on her last month to explain how she dealt with Becker’s potential conflicts of interest.

In a pair of letters Tuesday to six Republican members of Congress, Schapiro said she relied on Becker and an agency ethics officer to sort out any potential conflicts involving Becker’s inheritance of the Madoff account.

Was Ms. Schapiro too busy surfing for porn to be bothered with such a minor detail? Still, isn’t it handy to be left on your own to sort our your conflicts of interest?

After all, it’s not like the hard working folks at the SEC are paid to pry into people’s financial investments.

Republican lawmakers have criticized the Securities and Exchange Commission for allowing Becker to help frame the agency’s position on issues affecting investors in Madoff’s Ponzi scheme even though he had a potential personal stake in those matters. They have said the SEC must live by the same ethical standards it demands of others.

Rep. Randy Neugebauer (R-Tex.), chairman of the House Financial Services subcommittee on oversight and investigations, said Wednesday that Schapiro appears to have handled the matter inappropriately and that the SEC seems to have "a very loose process" for addressing such issues.

"If someone comes to you and says, ‘I may have a potential conflict of interest,’ you don’t say, ‘Well, just use your best judgment,’ " Neugebauer said.

But Republicans are notoriously distrustful and generally mean spirited.

Schapiro is likely to face questions about her actions when she testifies Thursday on Capitol Hill about the SEC’s budget and operations. The issue has put her on the spot as she fights to defend the agency’s funding from potential budget cuts.

Schapiro wrote Tuesday that she has asked the SEC’s new ethics counsel to review the agency’s procedures for evaluating conflicts of interest.

"When Mr. Becker initially notified me that his deceased mother had had a Madoff account that had been closed years earlier, the issue did not appear to me to present a conflict of interest," Schapiro said in one of the letters

When Becker’s mother died in 2004, she left a $2 million Madoff account. Becker and his brothers later liquidated the account, and Madoff’s business was subsequently exposed as a fraud in which some investors were paid with other investors’ money.

Schapiro said Becker told her about the matter shortly after he became general counsel of the SEC in 2009.

Note the operative word here is "after." We will assume that Mr. Becker is a Democrat. Who are famous for their openness and transparency.

Becker became one of Schapiro’s top advisers at the SEC shortly after Madoff’s scheme collapsed. The agency faced criticism for not stopping the Ponzi scheme earlier, despite repeated warnings.

Schapiro said she did not ask Becker to recuse himself from work involving Madoff and that when he told her about his mother’s account, she does not recall directing him "to take any other action with regard to the closed Madoff account." Becker sent SEC ethics counsel William Lenox an e-mail in May 2009 asking whether he should participate in SEC work involving the Madoff bankruptcy. Lenox responded about 25 minutes later, giving Becker a green light.

Well, to be fair, it probably took Mr. Lenox 25 minutes to finish up his porn surfing before he could respond to Becker’s email.

Recently, Becker was sued by a trustee involved in the Madoff bankruptcy who demanded that Becker and his family return $1.5 million of payouts they received from the Ponzi scheme.

The SEC has taken at least two positions that had the potential to affect people such as Becker who benefited from the Ponzi scheme. First, it argued that they should not be entitled to the fictitious balances shown on their Madoff account statements – an argument that potentially ran contrary to Becker’s financial interests. Second, it argued that investors should be entitled to an inflation adjustment on the money they deposited with Madoff, not just the amount of money they put into their Madoff accounts minus the amount they withdrew. That position had the potential to benefit people in Becker’s situation.

But surely that is a coincidence.

The Republican staff of the House Committee on Oversight and Government Reform has concluded that SEC officials agreed to endorse the first of those positions before Becker became involved but that he and his office recommended the second of those positions, a member of the committee staff said on the condition of anonymity because the staff member was not authorized to speak publicly.

That’s just another coincidence.

Mind you, if Mr. Becker were a Republican there wouldn’t be any doubt here. And this scandal would already have been the leading headline in the news media for months.

But former SEC enforcement official Stephen J. Crimmins said any gain Becker would reap as a result of the inflation adjustment would be "minuscule" compared with his personal wealth and the $6 million of income that Crimmins estimated Becker, a former law firm partner, gave up to work at the SEC for two years

Money Mr. Becker will soon be able to recoup, after having refreshed his contacts at the SEC.

Becker left the SEC last month

So we are only hearing about this when Mr. Becker is safely out of harm’s way. What another coincidence!

This article was posted by Steve on Thursday, March 10th, 2011. Comments are currently closed.

4 Responses to “SEC Boss Saw No Conflict In Madoff Acct”

  1. tranquil.night says:

    There are no blind coincidences in accounting. It is the science and discipline of proper record keeping. If there is impropreity, it is rarely if ever just a blind mistake and almost always fraud. And the thing is once you cross that ethical barrier, anyone else who notices can just as easily get in on the action by extorting you (unless you’re the Feds, then you don’t fear much).

    I imagine these are the regular mucky practices of the Democrat underground tax-dollar racket.

  2. GetBackJack says:

    Ms. Shapiro, as the great modern poet laureate and thinker of our era, Mr. Bill Cosby said … there are four boxes to use in our political system …. soap, ballot, jury and ammo. You, Madame, are emblematic of the reason we’re very very very close to the fourth choice.

  3. Enthalpy says:

    Those who won’t see or can’t see shouldn’t be in a position to see.

  4. proreason says:

    Well, Madoff cost his suckers 50 billion, and a lot of that has since been recovered.

    Sept / Oct 2008 cost American suckers 7 trillion in stock losses alone. The ultimate cost will be many times that pittance.

    Where was the SEC during a 2-month period when market swings were frequently 5% in a single day, and millions of seniors lives were destroyed? Where were our sacred government watchdogs then?

    Why haven’t we ever heard about the SEC investigation that began in late 2008 on Bush’s watch? Why haven’t there been hundreds of investigations since? It’s only the most significant economic event since 1929…perhaps even more significant than that one…certainly far more significant in terms of total dollar losses.

    These are rhetorical questions, of course. Anybody with a brain knows the answers.


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