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Wisdom of Corporate Compliance, Even in Government

This past October, two victims of Bernard Madoff’s Ponzi scheme filed a lawsuit against the Securities and Exchange Commission. Their complaint: shoddy oversight and controls at the SEC let Madoff continue his fraud for years, despite numerous warnings and tips.

They’re not the only unhappy ones out there. After the Madoff debacle, the SEC announced changes to prevent such lapses from happening again. Recent disclosure of insider trading by SEC employees, however, has prompted even more calls for reforms. Given the problems and resulting loss of public confidence, it appears that the best way forward for the SEC would be a better, stricter system of internal controls and compliance at the Commission. Skeptics may wonder whether such a system can be built at a government agency, but we already have one model: the FBI.

I would know. I helped build it.

In 2007, the Justice Department’s Office of the Inspector General...

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