WaPo: SEC Lawyer Issued Specific Warnings About Madoff’s Firm in 2004

Genevievette Walker-Lightfoot, a lawyer in the SEC’s Office of Compliance Inspections and Examinations, warned superiors as far back as 2004 about irregularities at Bernard Madoff’s firm, but she was told to focus on an unrelated matter, the Washington Post reports. The Post reports that Walker-Lightfoot sent e-mails specifically stating that information provided by Madoff during her review didn’t add up and suggesting a set of questions to ask his firm.  Several of these questions directly challenged Madoff activities that much later turned out to be elements of his massive fraud.

Despite her warnings,

with the agency under pressure to look for wrongdoing in the mutual fund industry, she wasn’t able to continue pursuing Madoff, according to documents and two people familiar with the investigation, and her team soon concluded its work on the probe.

Walker-Lightfoot’s supervisors on the case were Mark Donohue, then a branch chief in her department, and his boss, Eric Swanson, an assistant director of the department, said two people familiar with the investigation. Swanson later married Madoff’s niece, and their relationship is now under review by the agency’s inspector general, who is examining the SEC’s handling of the Madoff case.

Among the questions Walker-Lightfoot asked were “Do you hold any other form of brokerage account statements or accounting documents for these accounts?” and “Do you have the prime brokerage or custodial banking agreements for these accounts?”

The Post article notes that if pursued, these questions could have led the SEC to discover the fraud “because Madoff was in fact maintaining personal custody of investors’ assets, unlike the practice followed by many investment companies.”

Read the Washington Post article