Madoff Gets Break As Lawmakers Hammer SEC
Bernard Madoff, the alleged Ponzi scheme operator behind one of the largest Wall Street scams in American history, got a reprieve, of sorts, on Capitol Hill today.
Instead of Madoff feeling the brunt of the criticism for the $50 billion scam, which has hit investors, charities, schools and hedge funds around the world, it was the federal Securities and Exchange Commission that was feeling the heat.
Rep. Paul Kanjorski (D-Penn.), the chairman of the House Financial Services Committee, bluntly said at the beginning of the afternoon hearing into the Madoff scandal that regulators "should have detected the Madoff wrongdoing earlier because of the red flags of others."
"Clearly, our regulatory system ... failed miserably and we must rebuild it now," Kanjorski said at the committee hearing.
Rep. Carolyn Maloney (D-N.Y.) said many had "lost confidence in the SEC."
H. David Kotz, the SEC's inspector general, said the Madoff scandal should force the SEC to reevaluate its enforcement division and spark "overarching and comprehensive" reforms.
"It is our opinion that the matters that must be analyzed regarding the SEC and Bernard Madoff may go beyond the specific issues that SEC Chairman Cox has asked us to investigate," Kotz said.
And calling himself a "human face on this tragedy," businessman and Madoff investor Allan Goldstein told the committee that he was a "broken man" since the Madoff scheme was uncovered and said federal regulators "failed us."
"We had considered Madoff Securities not as a get rich quick scheme, but as a buffer against risk," Goldstein said. "We entrusted Mr. Madoff with all we had, and now everything that I worked for over a 50-year career is gone."
The 76-year-old Brooklyn native and fabric merchant gave $2.5 million in savings to Madoff. Over the years, Madoff had reported that Goldstein's invested amount had nearly doubled. But after the scandal broke, Goldstein said he was forced to cash in his life insurance policies to pay his mortgage and is in the process of selling his home.
Today's hearing came as prosecutors asked a federal judge to imprison Madoff before his trial after he allegedly sent $1 million in jewelry to friends and relatives, in violation of an asset freeze order.
Madoff's attorney, Ira Sorkin, said the items were family heirlooms, such as cufflinks and antique watches and not "significant."
But prosecutors said the five items were "very valuable jewelry." It was unclear if any of the items included watches Madoff is said to have purchased from British watch seller George Somlo. Madoff is said to have been an avid collector of vintage timepieces.
By Derek Kravitz |
January 5, 2009; 4:22 PM ET
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