Madoff scandal, SEC role under scrutiny
By MARCY GORDON
Associated Press
January 6, 2009
WASHINGTON (AP) -- Two more months of mortgage payments and retiree Allan Goldstein says he'll be broke, just another victim in what may be the biggest Ponzi scheme in history.
Goldstein, 76, was among the thousands of investors who trusted Wall Street figure Bernard Madoff with their money while counting on federal regulators to protect the investing public from fraud.
"Somewhere inside of me was the thought that this was a regulated industry. It wasn't. The warning flags were just pushed aside," Goldstein told a House panel Monday.
Red flags were raised to the Securities and Exchange Commission over a decade but weren't pursued, and Republican and Democratic House members said that reflected deep, systemic problems at the market watchdog agency.
Goldstein, a retired New York fabrics distributor, was among the witnesses as the House Financial Services Committee looked into why the SEC failed to uncover what may be a swindle amounting to $50 billion.
Goldstein testified that "everything I worked for over a 50-year career is gone." He held an IRA retirement account with Madoff's firm for 21 years.
Now, he says, he's been forced to cash in life insurance policies to cover his mortgage, but "just can't make it" past April. The only choice he says he has is to sell his home -- which he fears he won't be able to do in a housing market that has collapsed.
Thousands of individuals, including ordinary people and Hollywood celebrities as well as big hedge funds, international banks and charities around the globe, lost money investing with Madoff. A prominent French financier who had entrusted his fortune and his clients' money to Madoff was found dead at his office in New York on Dec. 23, an apparent suicide.
The SEC's internal watchdog, Inspector General H. David Kotz, said he is so concerned about the agency's failure to uncover Madoff's alleged Ponzi scheme that he is expanding the inquiry called for last month by SEC Chairman Christopher Cox. Cox had pushed the blame squarely onto the SEC's career staff for the failure to detect what Madoff was doing.
Kotz told the House hearing he will examine the operations of the SEC's enforcement and inspection divisions and will make recommendations, steps beyond what Cox had called for.
It appears that the complaints against Madoff's operations by securities industry executive Harry Markopolos and others were "brought to the right place" within the SEC, Kotz said, and to enough people that action could have been taken.
Among other facets, Kotz's review will delve, as Cox had asked, into all SEC staff contacts and relationships with the Madoff family and the firm -- and the possible impact on staff decisions.
Kotz is examining the relationship between a former SEC attorney, Eric Swanson, and Madoff's niece, Shana, who are now married. As an SEC attorney, Swanson was part of a team that examined Madoff's securities brokerage operation in 1999 and 2004. Neither review resulted in any action against Madoff, a former chairman of the Nasdaq Stock Market who was a member of SEC advisory committees.
>> Continued -- Page 1 2
Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
| 
