Breaking: Chairman Cox States SEC Received Credible, Specific Allegations About Madoff But Failed to Thoroughly Investigate

SEC Chairman Christopher Cox stated Tueday evening that he is “deeply troubled” by initial findings that

“credible and specific allegations regarding Mr. Madoff’s financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action. I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them. Moreover, a consequence of the failure to seek a formal order of investigation from the Commission is that subpoena power was not used to obtain information, but rather the staff relied upon information voluntarily produced by Mr. Madoff and his firm.

Cox stated that he has directed the SEC’s Inspector General, H. David Kotz, to conduct a full and immediate review of the past allegations regarding Mr. Madoff and his firm and the reasons they were not found credible.  The review will also cover the internal policies at the SEC governing when allegations such as those in this case should be raised to the Commission level, whether those policies were followed, and whether improvements to those policies are necessary.

Cox further stated that “the investigation should also include all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm.”

Read the statement by SEC Chairman Christopher Cox

7 Comments

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  • RJ Hettler
    Posted January 3, 2009, 3:19 pm 3:19 pm 0Likes

    I have advised both Chair Cox and IG Kotz that the agency “dropped the ball:” on both Madoff and Thomas Petters here in Minnesota-see text of email

    Dear OIG Kotz and Chairman Cox:

    I have called and emailed on several recent occasions Chris Cox in re the above-captioned matters, emailing Chris on 12/21,12/24,12/26, and 12/28- the purpose of said emails was to alert the SEC of the massive swindle by both Bernard Madoff [Madoff] and Thomas Petters [Petters] here in the Minnesota District and to accordingly ask Chris, as a $40+ million creditor of Petters, to initiate a rescission of Polaroid which Petters acquired with $426 million in swindled cash in June of 2005. I understand that Chris will be leaving office soon and therefore forthwith action on this will be in the best interests of the victims, the agency, and Chris personally. US Attorney David Kelley and I alerted the SEC’s New York Regional Office on this in June of 2005, but agency personnel “dropped the ball” with Petters as Chris advised they had with Madoff. If he has already not done so, please have Chris review these email transmissions and do get back to me with a rescission plan strategy or other appropriate expedited remedies which Chris can get done before leaving office [when does he leave office?]. I will call you Monday. The reason I went directly to Chris on this is because Petters has already been indicted on 20 counts of fraud and has been in prison now for 3 months awaiting trial where his co conspirators [all now convicted ] will testify against him. From an investigatory point of view, there is nothing to further investigate and an expedited rescission will offer near-term relief to me personally as well as the many others he has swindled. I have been waiting a return of and on capital on seven promissory notes since 1997 and suffered a stroke in May, 2005 over the stress caused by having to live this way since 1997.

    Thank you for your expedited courtesies.

    Richard Hettler
    Minneapolis
    612 285-8458

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