|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
SEC Didn't Act On Madoff Tips, Regulator Was Warned About Possible Fraud As Early As 1999
Binyamin Appelbaum and David S. Hilzenrath
Washington Post Staff Writers. December 16, 2008
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EXCERPT: The Securities and Exchange Commission learned about what it describes as one of the largest securities frauds in history when Bernard L. Madoff volunteered his confession, raising questions about the agency's ability to police the financial marketplace. The SEC had the authority to investigate Madoff's investment business, which managed billions of dollars for wealthy investors and philanthropies. Financial analysts raised concerns about Madoff's practices repeatedly over the past decade, including a 1999 letter to the SEC that accused Madoff of running a Ponzi scheme. But the agency did not conduct even a routine examination of the investment business until last week. […] Madoff may have avoided scrutiny, regulatory experts said, in part because he simultaneously operated a legitimate, regulated and high-profile business as one of the largest middlemen between the buyers and sellers of stock. In that role, he helped to create Nasdaq, the first electronic stock exchange, and advised the SEC on electronic trading issues. He was a large campaign contributor and a familiar of senior regulators. "Bernie had a good reputation at the SEC with a lot of highly placed people as an innovator as somebody who speaks his mind and knows what's going on in the industry. I think he was seen as a valuable resource to the commission in its deliberations on things like market data," said Donald C. Langevoort, a Georgetown University law professor who specializes in securities regulation and served with Madoff on an SEC advisory committee. At the same time, Madoff's separate investment business operated on the outskirts of regulation, during a period when the government has intentionally allowed private, unregulated transactions. Private investment pools, such as hedge funds, are subject to limited oversight, and Madoff constructed his investment business to avoid most of it. |
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