Hey, did you hear about Meaghan Cheung?  It's the age-old SEC tale, one you've probably read about recently in the op-ed section of the New York Times.  Ms. Cheung, you see, was an Enforcement Division branch chief (a mid-level supervisor) in the SEC's New York office who signed off on the decision to close a 2006 SEC investigation into Madoff's operation without taking any enforcement action.  She was a graduate of Yale University and Fordham Law School and worked for years at the SEC to rise up to the level of supervisor.

When the Madoff case came before her, however, she knew of course, how foolish it would be of her to "roil the markets" or to try to "penalize serious corporate and management malfeasance."  Indeed, she "knew in the back of her mind, and in the front too, that if [she] maintain[ed] good relations with Wall Street, [she] might soon be paid huge sums of money to be employed by it."  I mean, that was obvious, right?  So of course she did was best for her and let Madoff have a pass.

And where is she now, three years later?  Well, do you even need to ask?  As is always the case, it seems, she was quickly hired at a staggering annual salary by one of Madoff's cronies at a Wall Street firm who wanted to show his appreciation for her not roiling the markets while at the SEC.  She was last photographed in a lounge chair on the beach in San Tropez using hundred dollar bills to light her Tiki torches. In fact, here is that very photo from the New York Times op-ed that pretty much sums up this whole tale:



OK, back to reality.    The photo is really from an article about Cheung in yesterday's NY Post, and I think it and her actual story further drives home the point I raised in this prior post: The suggestion that lawyers in the SEC's Division of Enforcement are motivated to not pursue securities fraud so that they can go on to be paid huge sums of money by Wall Street is simply wrong.

In Cheung's case, she was an Ivy League-educated attorney who "worked very hard for 10 years to make a career, and a reputation, and that has been destroyed in a month" she told the NY Post. She said that the SEC worked as hard as it could on the Madoff investigation, and she "was not influenced, and I don't believe anyone in the New York office was influenced by any other desire than to find out the truth."

Given her background, years of experience, and the fact that she voluntarily left the SEC and the workforce altogether to stay home with her children prior to the Madoff fraud coming to light, her comments to the Post below strike me as those of someone who did the best she could and with the right intentions:

  • Cheung said she was "shocked" to learn of Madoff's arest and confession to a Ponzi scheme last month and "thinks it's a tragedy."

  • Cheung adamantly denied looking the other way in the Madoff case for future gain in the financial industry. "Any allegations that we were somehow swayed by the prospect of a high-paying job are ridiculous and unfair. . .. Allegations of impropriety and unethical behavior are so unfair and hurtful."

  • She said, "I have never been pressured to walk away from a case by any of the career staff or division of enforcement. I don't believe the New York office has ever walked away from a case based on influence or the reputation of individuals involved. We have investigated fraud and pursued it."

  • As for her future, "I am staying home with two kids now," she said. "I didn't leave for a high-paying job. My reason for leaving was purely personal. I never interviewed for another job."


There is more than enough blame to go around in the Madoff mess.  The SEC's procedures, budgets, competence, skill sets, roles and more must be re-examined.  But in my opinion, based on my experience as a former member and long-time observer of the SEC's Division of Enforcement, the suggestion that the Madoff fraud went uncovered because of a lack of integrity by the people in the Enforcement Division is completely off-the-mark.