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.
February 4, 2009; 2:31 PM ET
Categories: The Ticker | Tags: Harry Markopolos, Madoff, SEC
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