In my last blog, Bernard Madoff: An Epilogue – The SEC Looked but Failed to See (Part I), I touched on a few of the revelations made in the Executive Summary report issued by the SEC’s. The report attempted to summarize how Madoff and his company were able to run such a massive Ponzi Scheme for such a long period of time without being exposed. I would now like to discuss a few more of the eye-openers:
6. After conducting two investigations and three examinations from 1992
onward, relating to the “detailed and credible” complaints
that Madoff was possibly operating a Ponzi scheme, at no time did the
SEC follow the retained expert’s advice and verify Madoff’s
trading with an independent third party, nor did it conduct a Ponzi scheme
examination or investigation of Madoff. The SEC did request records from
the Depository Trust Company (DTC) (an independent third party), but the
record request was made to Madoff. Had the request been made directly
to DTC, there was an “excellent chance” they would have uncovered
Madoff’s Ponzi scheme in 1992.
7, SEC examiners drafted a letter to two different independent third parties
requesting independent trade data, but never sent the letters because
in one case, it would have been “too time consuming” to analyze
the data, had they received it. No reason was given for not mailing the
second letter. Again, if the letters had been sent, they would have provided
information necessary to reveal the Ponzi scheme.
8. When examiners questioned Madoff, they took his evasive and sometimes
inconsistent answers at face value and failed to request verification.
9. As excuses for the investigators’ and examiners’ abysmal
record, the report says examiners were “inexperienced” and
“confused,” failed to follow up inconsistencies, failed to
verify information, disregarded incriminating evidence, gullibly accepted
Madoff’s lies, inconsistencies and misrepresentations as fact, failed
to trace funds and generally ignored almost indisputable proof of the
existence of the grandest of all Ponzi schemes.
Just another example of your tax dollars at work.
To read the entire Executive Summary
click here. For those of you who are detail-oriented with a strong stomach and nothing
better to do, read the entire report by