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SEC Evasion On Madoff Infuriates Lawmakers

4:24 P.M.: UPDATED WITH MADOFF INVESTOR RECOVERY:

Investors are starting to get back a little bit of what Bernie Madoff allegedly stole in his confessed $50 billion Ponzi scheme.

Irving Picard, the trustee liquidating Madoff's investment firm, told a federal judge that nearly $950 million in cash and securities has been recovered.

This only leaves about $49 billion to go.

Of the sum recovered so far, $111.4 million is cash.

Investors have until July 2 to place their claims.

Earlier today, members of the House Financial Services committee beat up on SEC officials for a) not catching Madoff and b) invoking a form of executive privilege to refuse to answer why they did not catch Madoff.

Rep. Gary Ackerman (D-N.Y.) delivered the most withering attack.

“The economy is in crisis,” Ackerman said. “We thought the enemy was Mr. Madoff. I think it’s you,” Ackerman said to SEC general counsel Andrew Vollmer.

“Your value to us is useless,” Ackerman said. “Your value to the American people is worthless, your contribution to this proceeding is zero.”

Ackerman and other lawmakers are angry that the SEC officials testifying before them are citing a form of executive privilege to avoid answering all the questions they’re being asked. SEC enforcement director Linda Thomsen said she can’t answer some questions on Madoff because other agencies and enforcement officials have investigations underway.

“Don’t you dare tell anyone that you testified before Congress,” Ackerman screamed at Thomsen. “You’re talking to yourself.”

Ackerman then employed a colorful metaphor to describe how the SEC responded, or did not, to investment-fund manager Harry Markopolos’s investigation of Madoff years ago. Markopolos was the committee's star witness earlier today.

“One guy with a few friends and helpers discovered this thing nearly a decade ago,” Ackerman said. “He led you to this pile of dung that this Bernie Madoff was and stuck your nose in it and you couldn’t figure it out. You couldn’t find your backside with two hands with the lights on.”

Ackerman was just getting warmed up.

“If anyone could make the case better than Mr. Markopolos, and I didn’t think they could, about you people being completely inept, you have made the case better than him,” Ackerman said.

“I am profoundly sorry you feel that way,” Thomsen replied, meekly.

Ackerman, though, reserved his harshest treatment for Vollmer, trying to get him to admit, simply, that the SEC officials are relying on executive privilege to avoid answering some questions — a position Vollmer said the SEC commissioners approved, though without consulting the Justice Department.

“How did you screw up?” Ackerman asked.

“Let’s let the system work that Congress created,” Vollmer said. “There will be some recommendations and time for the committee to look at the facts...”

Ackmerman interrupted: “We wouldn’t be in this mess if it wasn’t for you!”

The two spent the next several minutes talking over each other until Ackerman said, “I’m finished.”

Ackerman wasn’t the only one who got frustrated with the SEC officials and their refusal to answer questions that, they said, are part of investigations into why the SEC failed to catch Madoff.

Here’s an exchange between Thomsen and Rep. Michael Arcuri (D-N.Y.):

Arcuri: “When Mr. Markopolos came to you, did you consider that a credible lead?”

Thomsen: “I can’t answer that. That is the subject of the Inspector General’s investigation.”

Arcuri: “Ma’am, I’ve used that excuse a number of times and I can’t even fathom how it would apply here. When you investigated Mr. Madoff in 2006, did you find any wrongdoing?”

Thomsen: “We did not bring an enforcement action.”

Arcuri: “That’s not what I’m asking.”

Thomsen: “I know but, again, I can’t answer any specifics about the underlying investigation other than to say what is public.”

Arcuri: “Did you make a referrel to another agency?”

Thomsen: “I can’t answer that.”

Earlier, Thomsen took a shot from Rep. Paul Kanjorski (D-Penn.)

"I think I speak for everyone when I say, 'I hate fraud,' " Thomsen said.

"Your job is prevent fraud, not to hate it," Kanjorski shot back.

As the kids would say: Snap!

Thomsen refuted earlier testimony by Markopolos, who repeatedly warned the SEC of Madoff to no avail. Markopolos said the SEC has no incentive to hunt down big fraudsters, as Madoff is alleged to be.

Thomsen said her investigators enjoy bringing in fraud cases and, if the case is "against someone of notoriety or fame, that makes them happier still," she said.

Kanjorski went on to pepper Thomsen about why SEC investigations take so long. He is pushed for a 180-day closure to cases. How long should investigations take, Kanjorski asked. Months? Years?

"I don't know," Thomsen said.

MARKOPOLOS VOLUNTEERED TO GO UNDERCOVER TO CATCH MADOFF, SEC DECLINED OFFER

11:29 A.M. Markopolos seems to have a bit of a "Mission: Impossible" complex.

He just told the committee that, in 2001 after investigating Madoff, he "offered to go undercover for the SEC under their command and control" to try to catch Madoff.

"I would have assumed a disguise as I was trained to do in the Army," Markopolos said, telling only his wife about his mission, "and led a team" that would have caught Madoff.

Earlier, Markopolos told committee members that at one point he had handed over copies of his report on Madoff to New York officials in such as way as to make sure his fingerprints were not on the documents.

MARKOPOLOS: SEC FAILED WITH MADOFF, NEEDS RADICAL OVERHAUL

10:40 A.M.: Markopolos may end up having as much influence over the remaking of a federal agency as one government outsider can have.

Markopolos, testifying before a very receptive House Financial Services Committee right now, is hammering the Securities and Exchange Commission for missing Madoff and advocating sweeping changes to the agency.

Markopolos said that Congress should combine financial services regulators into one super-regulator and urged regulation of over-the-counter derivatives, because "criminals tend to congregate in the dark."

He said SEC investigators should receive bonuses for investigating and landing big fish like Madoff because "there's no incentive, no reward fro bringing those big cases in the door," Markopolos said.

He said there are too many "20-somethings" in the SEC who have no experience in investment fraud investigation.

Markopolos said he is preparing a list of what one congressman called "mini- and medium-sized Madoffs" to hand over to the SEC. "I hope this time they will actually listen to me," Markopolos said.

"Oh, I think they will," Rep. Brad Sherman (D-Calif.) said.

-- Frank Ahrens
The Ticker is Twittering!

By Frank Ahrens  |  February 4, 2009; 2:31 PM ET
Categories:  The Ticker  | Tags: Harry Markopolos, Madoff, SEC  
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Comments

he is right about 20 somethings.

he could go on to 30s something 40 somethings 50 somethings

who were in the game to get a paycheck.

how are they any different than the SS troops? how

they destroyed a country of 300 million

and joined with their comrades around the world.

Posted by: JohnAdams1 | February 4, 2009 11:47 AM | Report abuse

The premeditated misdeeds committed by Local/State and Federal government(s) employees throughout the Bush administration must not be ignored. Too many people from all walks of life, especially the poor, have suffered. The SEC, DOJ and many government agencies have been given information about misdeeds and crimes under the color of law, including “judges” on the bench… and the authorities ignored the warning for political/personal gains. As one said: "I am sure you agree that it is crucial that citizens have the utmost confidence in the impartiality and professionalism of all employees of the Department of Justice.... Given the many examples of misconduct and excess over the last few years at the Justice Department, it is clear that such confidence has been shaken and considerable work needs to be done."
It’s time to take charge of our lives and bring them to justice. Demand it.

Posted by: Shanan1 | February 4, 2009 11:57 AM | Report abuse

Why isn't Chris Cox, former SEC head, indicted for what happened on his watch?

Posted by: hairguy01 | February 4, 2009 12:09 PM | Report abuse

markopolos should be appointed head of sec.

Posted by: mycomment | February 4, 2009 1:15 PM | Report abuse

That Madoff was cozy with SEC officials should have signaled that there was a good reason to suspect alterior motives behind his schmoozing with them.

Posted by: vicsoir | February 4, 2009 1:20 PM | Report abuse

I sure would like to know what happened to the CPAs in all this! General Accounting Principles have certainly not been observed and definitely not audited to a degree of efficiency for tax purposes. Did Maddoff and associates ever file returns and why didn't the IRS flag the audit at some point? Sounds like collusion and conspiracy to defraud banks, regulators, SEC, FCC, IRS, etc, on so many levels; it isn't even funny and certainly criminal. Where are all the associates? Certainly, this level of conspiracy stems to nearly the entire staff. Any one of whom would have been able to pull a brokerage statement. Were 1099's or W-2's given to any recipients of disbursements? May the MAddoff scandal blow the entire lid off Wall Street and their 'credit swapping' ways. 800 Trillion in worldwide derivatives would definitely need to be addressed to usher in the 'New World Order'. Let God sort them all out after the Rapture!

Posted by: RUSTLERS | February 4, 2009 1:32 PM | Report abuse

I'm beginning to see why this guy wasn't taken seriously by the SEC.

He could have just gone to the FBI and done the same thing and they would have taken him seriously.

He could have gone to Eliot Spitzer, or Bloomberg, and they would have been all over it. Unless you're saying that they were under Madoffs thumb. But in any case Madoff would have not had to worry about having to confess this to his kids.

He's just grandstanding. Madoff simply ran dry. This guy found a big dead fish on the beach and ran up to it and put his line in its mouth. But what should really scare you is this whole thing about paying enforcers bonuses in order to entice them to actually do their jobs. Don't we have enough trouble with police departments paying their expenses with confiscated property?

Posted by: dubya19391 | February 4, 2009 1:36 PM | Report abuse

Congressman Paul Kanjorski
2188 Rayburn HOB
Washington, DC 20515

Dear Mr. Kanjorski:

The Securities and Exchange Commission recently admitted that they do not have an accurate, concise and properly opined financial statement for The Mutual Life Insurance Company of New York and its successors for any time in the last 10 years. They also lied to me about the destruction of documents that I have requested under Freedom of Information. Attached is the letter to Chairman Cox. As a licensed insurance and securities agent I have had all the information contained on the web sites reviewed by both state and government agencies. They did review the information and made no requests for correction.

The SEC knowingly allowed MONY to be taken Public with fraudulent financial statements.... lied to policyholders, destroyed evidence and violated FOI laws to hide their crime. The PONZI policies are still in force and the PONZI is ongoing and MONY/AXA's financial statements are false!

My elected officials ( Joe Barton, Kay Bailey Hutchison, Phil Gramm, John Cornyn, Gov. Rick Perry, AG Alberto Gonzales and former Texas Gov. George W. Bush) were unable to help due to person and financial conflicts.

Can you help resolve this matter? I have the information and documentation on the web sites listed in the letter to Chairman Cox. The www.Gonzalesag.com site has the most complete history of MONY.

Please do not hesitate to contact me with any questions.
R. Dale Abshire
2606 Twelve Oaks Lane
Colleyville, TX 76034

Posted by: rabshire | February 4, 2009 1:44 PM | Report abuse

This is in response to dubya19391:

Markopolos is very credible and he addressed 2 of your points:
A) the FBI would not have taken him seriously unless the SEC first acknowledged that there was potential fraud involved

B) He testified that he did approach the NY Attorney General (where Eliot frequently goes) and handed over his packet of documentation. He doesn't know what was (or was not done with it), but he suspected that Spitzer was an investor (or maybe his family was). He subsequently discovered later that this was true.

My hats off to Markopolos and I wish there were many others like him

Posted by: apolloxyz | February 4, 2009 2:04 PM | Report abuse

Y'see, right there, rabshire's comment illustrates perfectly the difficulties various agencies face when getting information from outsiders: most of them (outsiders supplying "hot info") are crazy.

Throughout that letter (above), you will find EVERY hallmark/checkbox/key indicator of Crazy Person Walkin'hood: "I've written all these other people and they ignore me, they must be in collusion," inappropriate use of capitalization (the above letter is free of the usual 'casual spelling' that afflict most such), references to official documents or possession of documents "clearly showing.."

Yes, some outsiders may have actually uncovered something uniquely wrong at various times, but the bulk of them are wearing tinfoil underpants to keep aliens from seeing their private parts as they repeatedly phone their congresspeople. I know this because I spent time on the Hill as a congressional staffer and have the teeth marks to prove it.

Thank you, godbless.

Posted by: Bush--notrelated | February 4, 2009 2:12 PM | Report abuse

response to bush not related... how long were you with the SEC?

Posted by: rabshire | February 4, 2009 2:19 PM | Report abuse

I hear the congressional staffer above - I have some teeth marks too - but this is a pretty serious and easily proven/disproven allegation:

"The SEC knowingly allowed MONY to be taken Public with fraudulent financial statements"

I'd actually like to see an answer on that. Do they have statements or don't they, and if they do, what were the problems with the audits? Auditors can take one look at the unresolved issues and tell you whether they're serious or not.

Just because the man may or may not be crazy doesn't mean he's wrong, in my experience...even paranoid people have enemies.

Posted by: kszimmerman | February 4, 2009 2:27 PM | Report abuse

It is clear, what we need is more tax cuts. That has solved every other problem, hasn't it?

Posted by: realityvision | February 4, 2009 2:49 PM | Report abuse

I respectively submit that all commenters are missing the point. The PONZI scheme should have been discovered by the agency's INSPECTOR GENERAL. They are the ones charged with investigating waste, fraud, and abuse. For that matter where were the Inspectors General at Treasury (banking issues) and, at HUD (housing issues). No doubt the Inspectors General will try and convince anyone that will listen that investigations of this type are not within their respective mandates - don't you believe it. How come we never hear of Inspectors Generals actually taking the lead in uncovering actual waste, fraud, or abuse within their own agencies? Empty suits perhaps?

Posted by: gordonhamel@cox.net | February 4, 2009 2:54 PM | Report abuse

The SEC letters and WSJ story are posted on the www.MONYINTERNATIONAL.com site. The audit is posted on the pwcsucks.com site along with the admission letter of Senator Bill Nelson who investigated and found a 1.3B shortage in the surplus account. If the information was not true, I would not still be licensed in Texas. That info is available at www.TAMUEX.com.

Posted by: rabshire | February 4, 2009 2:56 PM | Report abuse

the guy the SEC sent to investigate, Eric Swanson, ended up marrying Madoff's niece and compliance lawyer Shana Madoff.

a medieval way to buy silence we gather...

Posted by: beastlet | February 4, 2009 3:10 PM | Report abuse

The problem is that whistle-blowers are ostracized and ignored until the perpetrators are caught and, by then, it's too late.

Posted by: msbhong | February 4, 2009 3:18 PM | Report abuse

If the SEC was notified and did nothing then the SEC should be forced to pay back the ones taken by the scheme and all of top management should be fired.

Posted by: askgees | February 4, 2009 3:22 PM | Report abuse

I only saw a few snippets of Markopolos' testimony on MSNBC.
(We have DirecTV and they never heard of C-Span 3.)
From the small bit of testimony I saw, I hope that Congress thoroughly examines all the documentation and what he had to say.
From Day One in 2001, GWB ordered the cessation of regulation in every agency of his administration.
It's no surprise the SEC didn't take any action or even check into it.
I do have to wonder where their minds were.
Did they not understand that one day, this failure to investigate might NOT come to light, as it did today?
This failure to regulate for the last 8 years is coming home to roost.
And I'm proud of the President today.
He is taking the Harry Truman approach: the buck stops at the Oval Office desk.
He's doing everything he can to move Congress to act, to move departments to get the lead out and get with the program of doing their jobs.
As massive as this gravy-train wreck is, it will not be easy to compel compliance, but it must be done.
The SEC and other agencies have had their 8 year vacation.
Time to roll up their sleeves and actually earn their salaries and their positions.
If they want to play games, they can be replaced.
(I'd love to know what the administration thinks of this attempt to play the "executive privilege" card.
Something tells me that doesn't go down well in the Oval Office.)

Posted by: Judy-in-TX | February 4, 2009 3:49 PM | Report abuse

Date: 10/31/2005

Linda Chatman Thomsen
Director, Division of Enforcement
US Securities and Exchange Commission


Dear Ms. Thomsen:

I have noted your promotion of Walter Ricciardi as "Deputy Director of the Division of Enforcement" for the SEC and wanted to verify with you that he in fact is the same Walter Ricciardi that I have featured on the http://www.PWCSUCKS.com/ web site. Mr. Ricciardi is directly responsible for your inability to produce or cause to be produced an accurate, concise and properly opined financial statement for The Mutual Life Insurance Company of New York and its successors for over 20 years. Mr. Ricciardi belongs in jail for his part in this ongoing cabal.

Under Freedom of Information I request that you provide me with an accurate, concise and properly opined financial statement for the above referenced company, commonly referred to as MONY, for anytime in the last 10 years that the SEC will stand by. I also request that you provide me with any and all communications between the Securities and Exchange Commission and PricewaterhouseCoopers L.L.P. that relate to the lack of independence by PWC with regard to MONY's financial statements along with communications to and from MONY and AXA.

I also request the information previously requested in the letter enclosed, (Under Freedom of Information I request the names of the 14 companies that were not named in the PWC action by the SEC listed below. ("In the Matter of PricewaterhouseCoopers LLP, and PricewaterhouseCoopers Securities LLC, Exchange Act Release No. 46216 (July 17, 2002) http://www.sec.gov/news/press/2002-105.htm").

I am also attaching a copy of a recent letter to Senator Bill Nelson relating to his part in the perpetrating of this fraud on the public. This is a fraud that was condoned and aided by the Securities and Exchange Commission.

Please do not hesitate to contact me with any questions or clarifications of the requested information. You may also find it easier to simply tell the truth about this matter that has gone on far too long.

Respectfully,

R. Dale Abshire

Posted by: rabshire | February 4, 2009 4:15 PM | Report abuse

GREAT NEWS. There is hope! By being persistent and with the help of friends/fellow Americans… I just received a call from the (new) FBI, informing me that they are going to revisit complaints about a serious case where terrorizing biased food tainting took place at a “well connected” supermarket catering to thousands of people, and terrorizing threats to murder children and women were deliberately ignored by (political) Local/State and Federal (FBI) official, and by politicians and “judge”(s) who for political/personal gains took part in a massive cover up. All were aware of the pending threats upon children, women and the public and the demands for a bribe ($900) made by NYPD in order (for them) to investigate the complaints. Even a NY Post (and other) reporter(s) who expressed interest in the case were pulled off from covering it. The officials/politicians names will be published here (if allowed) and on the web by me and by friends, so you could revaluate as to how concerned they are regarding children’s/women/public safety when you cast your votes. A report is prepared for Washington and a congressional hearing will be sought. Stay tuned. Federal regulators at the SEC, especially during the Bush administration, are not the only FEDS who “overlooked” serious (Madoff/monetary) issues, other FEDS including those within the DOJ, Homeland Security agency and others did the same and place the public at great risk. “CHANGE” HAS COME TO WASHINGTON. BELIEVE IT.

Posted by: Shanan1 | February 4, 2009 4:41 PM | Report abuse

A real nut case.

Posted by: webber7 | February 4, 2009 4:50 PM | Report abuse

I appreciate Congressman Ackerman's comments regarding the SEC. However, I can't get past the fact that the House Financial Services Committee had oversight RESPONSIBILITY for the SEC. We paid those guys good money, lots of it, to keep the SEC straight. There's too much goofing off at the SEC and there's too much goofing off in Congress. Why didn't Markopolos go to the Congressional oversight committee when he couldn't get the SEC to respond? Maybe he didn't know about the possibility or maybe he didn't think it would do any good or maybe he did go to them?

Posted by: KateSaunders | February 4, 2009 5:24 PM | Report abuse

Another Bush gift that keeps on giving.

Posted by: caringmale69 | February 4, 2009 6:12 PM | Report abuse

Just saw these SEC clowns doing their stonewall song and dance on the News Hour. Madoff pocketed (or lost??) about 6-7% of the total amount now being debated for the stimulus package in the Senate. That's a whole lot of money. Why didn't the SEC care? They were obviously being paid not to care, not with bribes, but with pressure not to rock an influential boat. I'm disgusted, and have lost all trust in the US financial system. My mattress is a far more secure and ethical banker.

Posted by: H5N1 | February 4, 2009 7:06 PM | Report abuse

Notice no mention of the 1992 investigation or the 2000 tip that Madoff was running a Ponzi scheme. The template to blame Bush is running strong. When Clinton was the President Madoff's books were good enough to fool Clinton's SEC. When Bush was President, the same books indicate administration incompetence. I would submit that either Madoff was good criminal or both Bush's and Clinton's SEC failed.

Double standards are going to be the cornerstone for the new hopey changeness.

Posted by: thelaw1 | February 4, 2009 7:35 PM | Report abuse

: thelaw1

You may want to read the Grand Jury letter to Governor-elect George W. Bush that he threw in the waste basket... its at http:www.MONYBUSH.com along with his minion Gonzales.

Posted by: rabshire | February 4, 2009 7:49 PM | Report abuse

Is there anyone with a conscious working for the people? Anyone with ethics, morals?? Madoff needs to be tried and hung in public.
No one person EVER should have that kind of power to deceive.
He will have to face his maker at the end of his life... may he receive the mercy he has shown the people who trusted him.

Posted by: trthskr25 | February 4, 2009 8:50 PM | Report abuse

Remembering Eliot Spitzer.... and William F. Galvin and Richard Blumenthal... showdogs.. www.SPITZERAG.com

Posted by: rabshire | February 4, 2009 9:01 PM | Report abuse

Welcome to: SpitzerAG.com

FBI examines extent of insurance industry fraud
WASHINGTON, May 4 (Reuters) - The FBI has been looking for nearly a year into whether accounting problems and other corporate fraud schemes might present a pervasive problem for the insurance industry, FBI officials said on Wednesday

U.S. Senator Bill Nelson's MONY Investigation

more info @ www.GonzalesAG.com

Subj: SpitzerAG.com / Fraud report
Date: 05/17/2004
To: albany@fbi.gov, Elizabeth.Lara@tdi.state.tx.us, dallas@FBI.gov
CC: dennis.nally@us.pwcglobal.com, CutlerS@sec.gov, Dick.Silver@axa-financial.com
ASamers@ins.state.ny.us, glassmanC@sec.gov, Degenhardth@sec.gov, eliot_spitzer@oag.state.ny.us,, Diane-Koken@ins.state.pa.us, dfw@sec.gov, Barrett.Denum@co.travis.tx.us, , DDopp@oag.state.ny.us, ClarksonJ@sec.gov

SpitzerAG.com

FACT: New York Attorney General Eliot Spitzer knowingly turned his head and looked the other way when he found that the financial statements of the Mutual of New York (MONY) were fraudulent, that the company had been taken public with fraudulent statements and opinion letters that PricewaterhouseCoopers had knowingly falsified and that a massive fraud on the public had

Posted by: rabshire | February 4, 2009 10:13 PM | Report abuse

I can sum this up in a few words, the finacial crisis is far worse than the great depression. This is the great american shake down.

Posted by: julianmccoy | February 4, 2009 10:43 PM | Report abuse


i have wanted to see how much, how deep, how rampant, this incompetence went...but it seems it was intentional from the scope. Which of course would make it a REpublican endeavor - Good Job Cox ! Is there a republican in the house who can prove me wrong. Oh btw Clinton was the best Republican ever elected.
Chris Cox should be hung in public along side the entire Bush Crime Family.

Posted by: Darwin26 | February 5, 2009 12:35 AM | Report abuse

Please realize that you're confused if you're blaming the SEC for not catching on to something that many financially savvy people put their own money into.

The answer isn't superhuman all-knowing regulators, it's transparency. If Madoff had been required to publish his fund's holdings and investment formulas, then investors would have seen through it, and the scheme would collapse.

But Wall Street would fight that with $billions, and it'll never happen by law.

So... just don't invest your money unless you know where it's going. Stay away from complicated investments that don't reflect the market value of underlying stocks, bonds, etc.

Stay diversified. Remember that there's a lot of very smart crooks, and they tend to go where the money is.

Posted by: saunded | February 5, 2009 8:46 PM | Report abuse

We need to know what the Bush Republicans did to regulations in America when they took power.


They are the opposite of patriots.

Posted by: vigor | February 6, 2009 7:49 AM | Report abuse

As Marcopolos said....the whole bunch at the sec should be fired, and replaced with new talent, starting with Marcopolos as head of the SEC! And...the sooner the better!!! They are obviously all lying and trying to hide behind the response of 2 women!! One of which must have used the word "specifics" 100 times...totaly evading the questions. Get the bums out!!!!!

Posted by: gab1934 | February 9, 2009 5:47 AM | Report abuse

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