by Frank James
The Bernard Madoff affair in which many wealthy people were allegedly scammed in a Ponzi scheme that may have cost investors $50 billion just gets stranger by the day, doesn't it?
Now it turns out a Securities and Exchange official was hooked up with a Madoff niece. In fact, the former SEC lawyer who served at some point as a "senior inspections and examination official" and Madoff's niece, who was a compliance officer at Madoff's security firm, married last year.
Not that there's any evidence of wrongdoing, mind you. But talk about your cozy relationship between a regulator and the regulated.
Here's how The Wall Street Journal explains it:
In an extraordinary admission that the SEC was aware of numerous red flags raised about Bernard L. Madoff Investment Securities LLC, but failed to take them seriously enough, SEC Chairman Christopher Cox ordered a review of the agency's oversight of the New York securities-trading and investment-management firm. The review will include whether relationships between SEC officials and Mr. Madoff or his family members had any impact on the agency's oversight.
"I am gravely concerned" by the agency's regulation of the firm, Mr. Cox said.
Mr. Madoff's niece, Shana Madoff, married a former SEC attorney named Eric Swanson last year. Mr. Swanson worked at the SEC for 10 years, including as a senior inspections and examination official, before leaving in 2006. Ms. Madoff is a compliance lawyer at the securities firm.
Among Mr. Swanson's duties was supervising the SEC's inspection program in charge of trading oversight at stock exchanges and electronic-trading platforms, according to a press release from Bats Trading Inc., an electronic stock exchange that hired Mr. Swanson as general counsel earlier this year.
Accusatory eyes have been cast at not only President Bush's SEC but also President Clinton's.
Arthur Levitt chaired the SEC during the Clinton years and some critics have said that perhaps Levitt was too close to Madoff, a charge Levitt has rejected.
According to the NY Post:
Ex-Securities and Exchange Commission boss Arthur Levitt yesterday fired back at critics trying to lay at his feet some of the blame for the Bernie Madoff scandal, saying he wasn't asleep at the switch.
"At this point, I don't see any evidence that the SEC dropped the ball," Levitt, who's now an adviser to private-equity shop Carlyle Group, told The Post.
The 78-year-old Levitt also denied allegations that he had a chummy relationship with Madoff, who last week was arrested on charges of having masterminded a $50 billion Ponzi scheme that has touched everything from hedge funds to charities to European banks.
Some have suggested that Levitt and Madoff were close enough during the eight years that Levitt was SEC chairman that it might have skewed his oversight of the company. Additionally, Levitt said he's never been ,an investor in Madoff's advisory business.
"We were not socially friendly," Levitt said. "I knew Bernie the way I know [former Citigroup CEO] Sandy Weill or [ex-Merrill Lynch chairman Dan] Tully. He received no special breaks from the commission."
(Photo of SEC Chair Cox by Brendan Smialowski/Bloomberg News)
Comments
Yeah, I am sure there will still be snakes shaked out of the Madoff tree for many months to come. We might even get a better glimpse as to how the other side works, if a bright enough light is shown on them.
Posted by: Xcellentform | December 17, 2008 9:15 AM
WhoCanWeSue.com?
Posted by: edwards | December 17, 2008 9:36 AM
Cox should step down right now. Congratulations, guys, you managed to oversee the total collapse of the U.S. financial markets. Get ready for America's version of "The Lost Decade".
Posted by: dt | December 17, 2008 10:18 AM
MADOFF THE WALL STREET FAKIR
(Rudolph the Red Nosed Reindeer)
WilliamBanzai7
You know Vesco and Boesky, and Keating and Milken,
Leeson and Mozer, and Ponzi and Wiggen,
But do you recall, the most famous securities fraudster of all?
Madoff the WALL STREET FAKIR
Had a $50 Billion Dollar PONZI SCHEME,
And if you ever saw it,
You could say it was Wall Street's own worst dream.
All of the other Wall Street operators
Used to laugh and call him names;
They never believed poor Madoff
Made a legitimate Alpha trade,
Then one shaddy Wall Street trading eve,
Madoff spilt his own beans to the SEC
"Madoff oh your scheme's so bright,
Won't you go to jail tonight?"
Then how the Wall Street fraudsters loved him
As they shouted out with glee,
"Madoff the WALL STREET FAKIR,
You’ll go down in securities fraud histoooooory."
Q: Whats the difference between Bernie Madoff and the CEO of a bulge bracket Wall Street investment bank?
A: Madoff is not asking for a bailout.
Posted by: williambanzai7 | December 17, 2008 10:44 AM
That's weird that after years of monitoring our own SEC didn't find anything wrong. The NYT is reporting that a few years ago a European Bank had heard of Maddoff's midas touch and sent a team to New York to do some due diligence and they spotted irregularities right away, said it was very apparent, and decided to black list Madoff's company. Weird, isn't it that they easily found what the SEC couldn't find?
Posted by: Quippy | December 17, 2008 11:46 AM
Unmentioned in the story: Shana Madoff Swanson is an Obama campaign contributor, as well as a frequent contributor to other Democrats.
Posted by: HopeNChange | December 17, 2008 1:09 PM
"Unmentioned in the story: Shana Madoff Swanson is an Obama campaign contributor, as well as a frequent contributor to other Democrats."
Wow, there's your smoking gun right there. (Sarcasm) Another Obama scandal and he hasn't even taken office yet!
Posted by: Quippy | December 17, 2008 2:49 PM
It takes the fleecing of a number of wealthy folks (and unfortunately a lot of charities) for the SEC to wake up and realize how negligent it has been. Whenever the rest of us complained, Bush and company told us how 'the free markets police themselves.'
Posted by: Flo | December 17, 2008 3:29 PM
Looks like he Madoff with all the clients' money.
Posted by: ornery | December 17, 2008 8:19 PM
This makes the Neil Bush savings nd loan scandal that everyone has forgotten about seem like dhilds play. I cant wait to see what the bush connection is here...
Posted by: Eileen Frances | December 18, 2008 7:53 AM