The news surrounding influential Wall Street money manager and former Nasdaq Stock Market chairman Bernard Madoff keeps getting worse.
Acknowledging that the agency failed, for nearly a decade, to fully investigate allegations against the high-profile money manager now charged with securities fraud in a multi-billion dollar Ponzi scheme, Securities and Exchange Commission chairman Christopher Cox has called for a full probe by the agency’s Inspector General.
In a Dec. 16 statement calling the Commission’s investigative findings “deeply troubling,” Cox said the SEC has learned that "credible and specific allegations” regarding Madoff’s financial wrongdoing, going back to at least to 1999, were “repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action."
Since no formal SEC order of investigation was sought, the SEC staff relied on information voluntarily produced by Madoff and his firm.
Cox said he's “gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them,” and has called for a “full and immediate review,” led by the SEC’s Inspector General, of the past allegations regarding Madoff and his firm, Bernard L. Madoff Investment Securities, and the reasons they weren’t found credible.
The probe will also cover the internal SEC policies governing when allegations should be raised to the Commission level, whether the policies were followed, and whether improvements to those policies are necessary, as well as all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm.
In addition, Cox said any staff who have had “more than insubstantial personal contacts” with Madoff or his family will be recused from the ongoing investigation.
Cox said since the its Dec. 11 emergency action against Madoff and his firm,“every necessary resource at the SEC” has been dedicated to pursuing the investigation, protecting customer assets, and holding Madoff and others who may have been involved accountable. He said the commissioners have met multiple times on an emergency basis since last week.
Meanwhile, SEC investigators are working with the trustee and other law enforcement agencies to review Madoff’s records. Cox said the review indicates that Madoff kept several sets of books and false documents, and provided false information involving his advisory activities to investors and to regulators.