House Sets Hearing to Assess Madoff Ponzi, Reform

The House Committee on Financial Services has scheduled a Full Committee Meeting for Monday, January 5, 2009, at 2:00 p.m., to hear testimony on "Assessing the Madoff Ponzi and the Need for Regulatory Reform."  The names of the witnesses are not yet listed on the Committee's website, but TPMMuckraker reports that according to a press release today, Rep. Paul Kanjorski will call the following witnesses before the House Financial Services committee:

- Mr. H. David Kotz, Inspector General, U.S. Securities and Exchange Commission
- Mr. Stephen P. Harbeck, President, Securities Investor Protection Corporation
- Mr. Harry Markopolos, an independent financial fraud investigator for institutional investors and others seeking forensic accounting expertise, as well as a Chartered - Financial Analyst and Certified Fraud Examiner
- Mr. Allan Goldstein, a retiree and investor with Bernard L. Madoff Investment Securities
- Ms. Tamar Frankel, Professor of Law and Michaels Faculty Research Scholar, Boston University School of Law
- Mr. Leon Metzger, adjunct faculty member at Columbia University, Cornell University, New York University, and Yale University

H. David Kotz, of course, is the SEC's IG, who on Dec. 16 was asked by SEC Chairman Cox to launch "a full and immediate review of the past allegations regarding Mr. Madoff and his firm and the reasons they were not found credible [by SEC investigators].... The review will also cover the internal policies at the SEC governing when allegations such as those in this case should be raised to the Commission level, whether those policies were followed, and whether improvements to those policies are necessary. The investigation should also include all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm."

Markopolis is a securities executive who commenced a long-running campaign back in 1999 to have the SEC investigate Madoff.  In 2005, he wrote to the SEC that "Bernie Madoff's returns aren't real and if they are real, then they would almost certainly have been generated by front-running customer order flow from the broker-dealer arm of Madoff Investment Securities."

Harbeck, the head of SIPC, has for several weeks now been reviewing the records of Madoff's business, and recently stated that his review shows that “we do not seem to be dealing with a traditional Ponzi scheme alone." He said that “this seems to be something of a hybrid,” and added that the potential losses could be far greater than anyone first thought.