Case No. OIG-509 from the SEC Office of the Inspector General, also known as “Investigation of Failure of the SEC To Uncover Bernard Madoff’s Ponzi Scheme”, is good reading. The public may think the most important part of the document is the section which says that no one at the SEC did anything wrong by aiding and abetting Madoff’s behavior.
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A reader of the final summary of the investigation would have to be impressed by two things. The first was that the most frequent excuse for not looking into complaints about Madoff is that, in almost every case, the SEC staff was too busy doing other things. In one incident, an SEC employee said that the necessary work “takes a ton of time”. The other astonishing thing is how gullible the SEC staff could be. At one point in a brief investigation into Madoff’s activities, an examiner noted: Madoff told them that Christopher Cox was going to be the next Chairman of the SEC a few weeks prior to Cox being officially named. He also told them that Madoff himself “was on the short list” to be the next Chairman of the SEC.
Based on the poor performance of the SEC, Madoff should have been appointed its Chairman. He knew how sophisticated financial frauds worked. He knew how Ponzi schemers could evade detection. He was, in short, the single best qualified person in the world to investigate himself.
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