Missing the mark on Madoff at the SEC

Washington Post:

The nation's chief securities regulator said yesterday it was "deeply troubling" that his agency had failed to catch perhaps the largest Ponzi scheme in history despite "credible and specific allegations . . . repeatedly brought to the attention of SEC staff" regarding the activities of Bernard L. Madoff.

In making this unusually frank statement, Securities and Exchange Commission Chairman Christopher Cox announced he had ordered an internal investigation.

His remarks followed a day of growing demands for the agency to explain how it missed Madoff's alleged $50 billion fraud, including the apparent failure of regulators to spot numerous and massive inconsistencies during an investigation of his company that ended quietly in 2007.

Cox offered the beginnings of answers. He said the agency inappropriately discounted allegations, that staff did not relay concerns to the agency's leadership and that examiners relied on documents volunteered by Madoff rather than seeking subpoenas to obtain critical information. And Cox said the agency's inspector general would investigate whether personal relationships between Madoff's family and SEC staff played a role in the failed oversight.

"Our initial findings have been deeply troubling," Cox said. "I am gravely concerned by the apparent failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them."

The statement came as criticism of the SEC grew from legislators and former regulators for failing to check a number of Wall Street frauds and excesses that have been exposed by the economic slowdown.

Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, was among those demanding a fuller accounting yesterday.

...

Dodd, who is yet to account for his friendly loan from Countrywide Mortgage is in no position to have credibility on accountability.

However, what is troubling about the Madoff deal is that he was able to get away with filing false reports over a lengthy period of time. So far, I have seen no mention of his accounting firm, but they should have uncovered this scam.