One of the many times the SEC failed to act on Madoff red flag

July 2, 2009

(ChattahBox) — The Washington Post has an interesting article looking at one of the many chances the Securities and Exchange Commission had to uncover Bernie Madoff’s long running ponzi scheme. At least five times the SEC has investigated Madoff’s business, but it somehow failed to uncover the tremendous fraud. This is despite the supposed fact that Madoff began his Ponzi scheme in 1991, and confessed he had never made any legitimate investments with his clients’ money during this time.  How hard can that be to uncover? Anyway starting in 2004, Genevievette Walker-Lightfoot, a lawyer in the SEC’s Office of Compliance Inspections and Examinations, sent e-mails to a supervisor saying information provided by Madoff during her review didn’t add up and suggested a set of follow-up questions to ask his firm. According to the Post, documents show that several of these questions directly challenged Madoff activities that much later turned out to be elements of his massive fraud.

So why didn’t the SEC follow through? Walker-Lightfoot’s supervisors apparently diverted any follow-up allegedly believing her time would be better spent look for wrongdoing in the mutual fund industry because that was the flavor of the month for the agency to focus on at that time. However it might not be a coincidence that Walker-Lightfoot’s supervisor’s boss, was reportedly Eric Swanson. An assistant director of the department, Swanson later married Madoff’s niece, and their relationship is now under review by the agency’s inspector general, who is examining the SEC’s handling of the Madoff case.  Yeah the same SEC who also turned a blind eye to the collapse of investment banks under its watch, helping fuel the financial crisis.


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One Response to “One of the many times the SEC failed to act on Madoff red flag”

  1. Financial-Management » One of the many times the SEC failed to act on Madoff red flag - Chattahbox.com on July 3rd, 2009 10:39 pm

    […] One of the many times the SEC failed to act on Madoff red flag – Chattahbox.com(ChattahBox) — The Washington Post has an interesting article looking at one of the many chances the Securities and Exchange Commission had to uncover Bernie Madoff’s long running ponzi scheme. At least five times the SEC has investigated Madoff … […]

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