SEC ‘disciplines’ eight employees for failure to spot Madoff fraud
12 Nov 2011
The Securities and Exchange Commission (SEC) has 'disciplined' eight employees for their failure to uncover the multi-billion-dollar Ponzi scheme by Bernard Madoff.
The belated action follows a 2009 report by SEC's inspector-general H. David Kotz, which had probed the role of 21 SEC employees and questioned their performance or conduct. According to John Nester, an SEC spokesman, 10 of the 21 employees had already left the commission. Nine were recommended for discipline, but one of them left the agency.
Madoff, a former stockbroker and investor, operated a Ponzi scheme that is believed to be the largest financial fraud in American history. He was arrested in December 2008 and a few months later pleaded guilty to nearly a dozen federal felony charges. He was sentenced to 150 years in prison in June 2009.
The Ponzi scheme, operated by his Bernard L. Madoff Investment Securities, perpetrated the fraud in the 1970s. Estimates of the fraud range from $12 billion to as high as $65 billion.
''The SEC could have uncovered the Ponzi scheme well before Madoff confessed in 2008,'' said the Kotz report. It noted that the agency got about half a dozen warnings about Madoff's fraudulent business over a period of 15 years, but inexperienced staff and delays saw him continue with his racket.
The securities market watchdog has been criticised for its failure to identify the Ponzi scheme as well as for failing to respond to whistleblowers who had alerted it to Madoff's racket.
