How the SEC Failed

Larry Ribstein points us to the SEC’s report on Bernie Madoff and it’s absolutely scathing. Here’s a sample:

The investigation that arose from the most detailed complaint provided to the SEC, which explicitly stated it was “highly likely” that “Madoffwas operating a Ponzi scheme,” never really investigated the possibility of a Ponzi scheme. The relatively inexperienced Enforcement staff failed to appreciate the significance ofthe analysis in the complaint, and almost immediately expressed skepticism and disbelief. Most of their investigation was directed at determining whether Madoff should register as an investment adviser or whether Madoff’s hedge fund investors’ disclosures were adequate.
As with the examinations, the Enforcement staff almost immediately caught Madoff in lies and misrepresentations, but failed to follow up on inconsistencies. They rebuffed offers of additional evidence from the complainant, and were confused about certain critical and fundamental aspects of Madoff’s operations. When Madoff provided evasive or contradictory answers to important questions in testimony, they simply accepted as plausible his explanations.

Ouch! When you see the sheer incompetence of the government, it ought to serve as a great refutation to conspiracy theorists. Yet I have a feeling that logic and facts won’t make a dent in their efforts.
Bonus: Madoffs get $13,800 property tax rebate

Posted by on September 8th, 2009 at 10:09 am


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