The Securities and Exchange Commission’s statement about l’Affaire Madoff yesterday is an extraordinarily blunt suggestion that people within the agency were bought off by the giant fraudster. Chairman Cox said the snoozy watchdog will investigate ‘all staff contact and relationships with the Madoff family and firm and their impact, if any, on decisions by staff regarding the firm.’
Given the super-cautious, innocence-presuming rhetoric that usually emanates from these bureaucratic entities, that comes pretty close to a pre-indictment. Of course, if you’re a highly paid bank guard shown to have slept through the last decade, you have some serious explaining to do.
I’ve seen two reports so far—who wants to bet there’ll be more—about questionable links between the Madoff firms and the SEC overseers. One mentions a former SEC employee who then went to work for the Fairfield Greenwich Group, the Connecticut investment agency that is the biggest loser to date, having pissed away $7.5 billion of other people’s money. There’s no accusation involved, just eyebrow-raising.
The other is more blatant: a chief investigator for the SEC turns out to be married to Bernie Madoff’s niece, who is also the daughter of the firm’s internal compliance officer. Yeah, yeah, he didn’t notice the lady until after his official duties were long over, just an unfortunate coincidence.
The world of financiers and the super-rich is famously clubby, so it’s no surprise that these folks know and marry each other. But Cox’s language strongly suggests that the regulatory apparatus was undermined by influence-peddling. Given the now obvious signs of fraud, no other explanation makes sense.
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