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SEC Probes Self In Madoff Scandal

So the SEC is investigating the records of Ponzi-schemer Bernie Madoff and it's investigating itself, trying to figure out why the agency didn't catch Madoff and whether a former SEC official's relationship with Madoff had anything to do with it.

Heading the SEC's internal investigation is David Kotz, the SEC's inspector general. He just wrapped up his testimony before the House Financial Services committee today.

Kotz said his group will interview Harry Markopolos, who, when working at a rival firm, wrote in 1999 that Madoff (in a 19-page letter) was running a Ponzi scheme. Markopolos, Rep. Barney Frank (D-Mass.) said, "Is looking like the hero here."

According to his testimony, Kotz said he will look into: "Allegations of conflicts of interest regarding relationships between any SEC officials or staff and members of the Madoff family, including examining the role of a former SEC official who allegedly had a personal relationship with a Madoff family member that may have played in the examination or other work conducted by the SEC with respect to Bernard Madoff or related entities, and whether such role or such relationship in any way affected the manner in which the SEC conducted its regulatory oversight of Bernard Madoff and any related entities."

The former SEC official is not identified in Kotz's testimony but last month, the SEC said it is probing former SEC lawyer Eric Swanson, who married Madoff's niece, Shana.

According to this article from ABC News, Madoff boasted about his close relationship with SEC regulators at a business roundtable last year, "In fact, my niece even married one."

And, Kotz said, he will try to find out if his agency ignored the numerous red flags about Madoff by Markopolos and others.

-- Frank Ahrens
The Ticker is Twittering!

By Frank Ahrens  |  January 5, 2009; 4:01 PM ET
Categories:  The Ticker  | Tags: Bernie Madoff, SEC  
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Next: Feds: Jail Madoff For Violating Bail

Comments

The Federal govenment is trillions of dollars in debt. But they are somehow giving trillions to huge corporations and banks who are trillions in debt so the banks can "extend credit" to "consumers".... who are in debt. Where is the federal government getting this money? From the Federal Reserve Bank. Where is the Fedral Reserve Bank getting it from? They're printing it!!! One big Ponzi scheme; except they can print money. Mr. Madoff is simply following the status quo minus the printing presses. It's ALL funny money, a house of cards (and I feel a wind coming up). Side note: the Federal Reserve Bank is a conglomeration of PRIVATE banking interests. The Federal Reserve is as "federal" as Federal Express. They print money, decide it's value and LOAN it to the US Federal government at interest. Anyone see the 800 lb gorilla in the living room??

Posted by: gggreenwald | January 5, 2009 7:26 PM | Report abuse

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