Missed chances: How SEC let Bernie Madoff off hook with bungled probes going back to 1992
Missed chances: How SEC let Bernie Madoff off hook with bungled probes going back to 1992


Sunday, September 6th 2009, 4:00 AM

Bernard Madoff repeatedly told investigators his success was based entirely on his "gut feel."

The bizarre claim by the $65 billion Ponzi scheme kingpin appeared in a scathing, 477-page report that paints the Securities and Exchange Commission as a confederacy of dunces.

The SEC internal investigation detailed a litany of missed chances to nail Madoff over a period of 16 years - and revealed that one investigator, after a failed probe, was even promoted.

The investigators who failed to sniff out the largest financial scam in U.S. history recalled Madoff as a name-dropping blowhard whose neck veins pulsed when they pressed him for details.

But he was also a "wonderful storyteller." At one point, during a 2005 session, Madoff claimed he was on "the short list" to become head of the SEC - but didn't get the gig.

"He actually even named at one point in the past he was in the running to become commissioner," recalled SEC investigator Peter Lamore.

The report said Lamore - who failed to topple Madoff during the 2005 investigation - was nonetheless promoted a year later, based in part on his probe work.

Even as Madoff lied to their faces, none of the feds was able to bring down the 71-year-old scammer. The "investment guru" repeatedly told investigators his success was based entirely on his "gut feel."

His outlandish claims were routinely taken as gospel rather than drivel, the report said.

Madoff pleaded guilty earlier this year and is serving a 150-year sentence. The report followed an eight-month SEC investigation.

In 2004, another Madoff probe ended with a whimper - as reflected in a pair of e-mails between SEC probers.

"What is that status of that Madoff thingy?" wrote one investigator.

"Dead," came the reply.

The probe also uncovered 25 Madoff investors who placed their money in the Ponzi scheme only after the SEC cleared him in a 1992 probe.

"We gave a big sigh of relief when we read & heard that a government agency called SEC said that there was no fraud," investor 87-year-old Shirley Stone said in an affidavit.

The 1992 probe investigated the accounting firm Avellino & Bienes, which invested more than $400 million with Madoff's brokerage company on behalf of 1,000 clients. Avellino & Bienes promised clients 13% to 14% annual returns.

The SEC never investigated Madoff's role in the scheme, allowing him to continue with his "investment" program. A simple check of bogus records provided by Madoff could have toppled the scam, the report said.

The report detailed half a dozen missed chances to nail Madoff.

An SEC official who later married Madoff's niece admitted he didn't review a complaint carefully enough in 2004.

"I didn't know anything - very little anyway - about hedge funds and mutual funds and how they operated," Eric Swanson said.

Despite the admission, the probe found no evidence that the relationship between Swanson and Madoff's niece, Shana, who married Swanson in 2007, influenced SEC exams.

Madoff, in a jailhouse interview conducted for the report, said even he was surprised that the scam lasted as long as it did. "I was astonished," he said.


Read more: http://www.nydailynews.com/money/2009/09/06/2009-09-06_how_sec_let_bernie_off_hook_bungled_probes_going_back_to_1992.html#ixzz0QTIbWgFi
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