Ackerman Emasculates SEC..............

Discussion in 'Wall St. News' started by flytiger, Feb 4, 2009.

  1. But first............

    Lawmaker says SEC hindering House's Madoff probe

    By MARCY GORDON – 1 hour ago

    WASHINGTON (AP) — House lawmakers on Wednesday accused the Securities and Exchange Commission of impeding their probe into the agency's failure to uncover the alleged $50 billion Bernard Madoff fraud.

    The clash between lawmakers and high-ranking SEC officials at a House Financial Services subcommittee hearing came after the man who waged a decade-long campaign to alert the regulators to problems in Madoff's operations denounced the agency for its inaction. Whistleblower Harry Markopolos also said he had feared for his physical safety and would turn over new evidence that Madoff had not acted alone.

    In loud, angry exchanges, lawmakers threatened to issue subpoenas to SEC officials to compel their testimony in the case.

    Pennsylvania Democrat Paul Kanjorski, the panel's chairman, vented frustration after the SEC's acting general counsel said the five officials appearing at the hearing couldn't answer lawmakers' questions about the Madoff case because it's under investigation. The five SEC commissioners voted earlier to assert a privilege in not having officials answer lawmakers' questions.

    Kanjorski accused the agency of impeding the panel's investigation, calling it a "lack of cooperation" and an "abuse of authority."

    Linda Thomsen, the agency's enforcement director, said the SEC takes the Madoff case very seriously, but asserted there were confidential areas related to the ongoing investigation that could not be publicly discussed.

    The SEC officials said the agency is looking at possible changes in the wake of the scandal, including more frequent examinations of investment advisers and improving its process for assessing risk.

    Because of the SEC's inaction, "I became fearful for the safety of my family," Markopolos said.

    "The SEC is ... captive to the industry it regulates and is afraid" to bring big cases against prominent individuals, Markopolos said. The agency "roars like a lion and bites like a flea" and "is busy protecting the big financial predators from investors."

    While the SEC is incompetent, the securities industry's self-policing organization, the Financial Industry Regulatory Authority, is "very corrupt," Markopolos charged. That organization was headed until December by Mary Schapiro, President Barack Obama's new SEC chief.

    Markopolos discovered additional funds that funneled money to Madoff — whose managers he said willfully turned a blind eye to his improprieties because they were paid generous fees. Markopolos said he will present his findings to the SEC's inspector general. If proven, they would substantiate the assertions of many analysts that the alleged fraud was far too large for Madoff to have conducted alone.

    In New York, a trustee liquidating Madoff's investment firm told a federal judge Wednesday that nearly $950 million in cash and securities has been recovered for investors. Trustee Irving Picard said $111.4 million in cash had been recovered from financial institutions and about $300 million in securities were identified although it was unclear what they were worth.

    JPMorgan Chase & Co. and Bank of New York Mellon Corp. last week said they would transfer a combined $534.9 million from Madoff's investment firm accounts to Picard. Investors have until July 2 to place their claims.

    European investors who feared they lost millions investing with Madoff have a chance to recoup some or all of their money from the banks that marketed the stricken funds, according to lawyers in Europe who are preparing a possible U.S.-style class-action lawsuit.

    Back in Washington, the SEC has been sustaining volleys of criticism from lawmakers and investor advocates over its failure to discover Madoff's alleged $50 billion fraud, which could be the biggest Ponzi scheme ever, despite the credible allegations brought to it over years. Against the backdrop of the worst financial crisis since the 1930s, the SEC is being accused of further eroding investor confidence and lawmakers of both parties are calling for a shake-up of the agency.

    Madoff, a prominent Wall Street figure, was arrested in December after allegedly confessing to bilking investors in what the authorities say was a giant Ponzi scheme, possibly the largest ever. His repeated warnings to SEC staff that Madoff was running a massive pyramid scheme have cast Markopolos as an unheeded prophet in the scandal.

    "The SEC was never capable of catching Mr. Madoff. He could have gone to $100 billion" without being discovered, Markopolos testified. "It took me about five minutes to figure out he was a fraud."

    Markopolos, a former securities industry executive and fraud investigator, brought his allegations to the SEC about improprieties in Madoff's business starting in 2000 after determining there was no way Madoff could have been making the consistent returns he claimed using the trading strategy he touted to prospective investors.

    Markopolos and his team of four investigators fruitlessly pursued the quest through this decade with agency staff from Boston to New York to Washington, raising 29 specific red flags regarding Madoff's operations. But the SEC never acted.

    Now thousands of victims who lost money investing in Madoff's fund, which was separate from his securities brokerage business, have been identified. Among them are ordinary people and Hollywood celebrities — as well as big hedge funds, international banks and charities in the U.S., Europe and Asia. At least one investor apparently was pushed to commit suicide.

    Markopolos disclosed that he anonymously conveyed a package of documents on Madoff to former New York attorney general Eliot Spitzer, but noted Spitzer took no action. Spitzer's family trust was among the victims that lost money investing with Madoff.

    Markopolos also suggested that senior editors at The Wall Street Journal may have prevented a reporter from pursuing leads he provided because the newspaper "respected and feared" Madoff.

    Madoff, who was at one point chairman of the Nasdaq Stock Market and sat on SEC advisory committees, was "one of the most powerful men on Wall Street and in a position to easily end our careers or worse," Markopolos said.

    Markopolos recommended ways to revamp the SEC, including replacing its senior staff and establishing a central office to receive complaints from whistleblowers.

    In December, Christopher Cox, then the SEC chairman, pinned the blame on the agency's career staff for the failure over a decade to detect what Madoff was doing. He ordered the SEC's inspector general, H. David Kotz, to determine what went wrong. Kotz has expanded his inquiry to examine the operations of the divisions led by Thomsen, who has been the enforcement chief since mid-2005, and Lori Richards, who has headed the inspections division since mid-1995.

    Schapiro has said that because Madoff carried out the scheme through his investment business and FINRA was empowered to inspect only the brokerage operation, it wasn't possible for the organization to discover it.

    SEC Evasion On Madoff Infuriates Lawmakers


    Investors are starting to get back a little bit of what Bernie Madoff allegedly stole in his confessed $50 billion Ponzi scheme.

    Irving Picard, the trustee liquidating Madoff's investment firm, told a federal judge that nearly $950 million in cash and securities has been recovered.

    This only leaves about $49 billion to go.

    Of the sum recovered so far, $111.4 million is cash.

    Investors have until July 2 to place their claims.

    Earlier today, members of the House Financial Services committee beat up on SEC officials for a) not catching Madoff and b) invoking a form of executive privilege to refuse to answer why they did not catch Madoff.

    Rep. Gary Ackerman (D-N.Y.) delivered the most withering attack.

    “The economy is in crisis,” Ackerman said. “We thought the enemy was Mr. Madoff. I think it’s you,” Ackerman said to SEC general counsel Andrew Vollmer.

    “Your value to us is useless,” Ackerman said. “Your value to the American people is worthless, your contribution to this proceeding is zero.”

    Ackerman and other lawmakers are angry that the SEC officials testifying before them are citing a form of executive privilege to avoid answering all the questions they’re being asked. SEC enforcement director Linda Thomsen said she can’t answer some questions on Madoff because other agencies and enforcement officials have investigations underway.

    “Don’t you dare tell anyone that you testified before Congress,” Ackerman screamed at Thomsen. “You’re talking to yourself.”

    Ackerman then employed a colorful metaphor to describe how the SEC responded, or did not, to investment-fund manager Harry Markopolos’s investigation of Madoff years ago. Markopolos was the committee's star witness earlier today.

    “One guy with a few friends and helpers discovered this thing nearly a decade ago,” Ackerman said. “He led you to this pile of dung that this Bernie Madoff was and stuck your nose in it and you couldn’t figure it out. You couldn’t find your backside with two hands with the lights on.”

    Ackerman was just getting warmed up.

    “If anyone could make the case better than Mr. Markopolos, and I didn’t think they could, about you people being completely inept, you have made the case better than him,” Ackerman said.

    “I am profoundly sorry you feel that way,” Thomsen replied, meekly.

    Ackerman, though, reserved his harshest treatment for Vollmer, trying to get him to admit, simply, that the SEC officials are relying on executive privilege to avoid answering some questions — a position Vollmer said the SEC commissioners approved, though without consulting the Justice Department.

    “How did you screw up?” Ackerman asked.

    “Let’s let the system work that Congress created,” Vollmer said. “There will be some recommendations and time for the committee to look at the facts...”

    Ackmerman interrupted: “We wouldn’t be in this mess if it wasn’t for you!”

    The two spent the next several minutes talking over each other until Ackerman said, “I’m finished.”

    Ackerman wasn’t the only one who got frustrated with the SEC officials and their refusal to answer questions that, they said, are part of investigations into why the SEC failed to catch Madoff.

    Here’s an exchange between Thomsen and Rep. Michael Arcuri (D-N.Y.):

    Arcuri: “When Mr. Markopolos came to you, did you consider that a credible lead?”

    Thomsen: “I can’t answer that. That is the subject of the Inspector General’s investigation.”

    Arcuri: “Ma’am, I’ve used that excuse a number of times and I can’t even fathom how it would apply here. When you investigated Mr. Madoff in 2006, did you find any wrongdoing?”

    Thomsen: “We did not bring an enforcement action.”

    Arcuri: “That’s not what I’m asking.”

    Thomsen: “I know but, again, I can’t answer any specifics about the underlying investigation other than to say what is public.”

    Arcuri: “Did you make a referrel to another agency?”

    Thomsen: “I can’t answer that.”

    Earlier, Thomsen took a shot from Rep. Paul Kanjorski (D-Penn.)

    "I think I speak for everyone when I say, 'I hate fraud,' " Thomsen said.

    "Your job is prevent fraud, not to hate it," Kanjorski shot back.

    As the kids would say: Snap!

    Thomsen refuted earlier testimony by Markopolos, who repeatedly warned the SEC of Madoff to no avail. Markopolos said the SEC has no incentive to hunt down big fraudsters, as Madoff is alleged to be.

    Thomsen said her investigators enjoy bringing in fraud cases and, if the case is "against someone of notoriety or fame, that makes them happier still," she said.

    Kanjorski went on to pepper Thomsen about why SEC investigations take so long. He is pushed for a 180-day closure to cases. How long should investigations take, Kanjorski asked. Months? Years?

    "I don't know," Thomsen said.


    11:29 A.M. Markopolos seems to have a bit of a "Mission: Impossible" complex.

    He just told the committee that, in 2001 after investigating Madoff, he "offered to go undercover for the SEC under their command and control" to try to catch Madoff.

    "I would have assumed a disguise as I was trained to do in the Army," Markopolos said, telling only his wife about his mission, "and led a team" that would have caught Madoff.

    Earlier, Markopolos told committee members that at one point he had handed over copies of his report on Madoff to New York officials in such as way as to make sure his fingerprints were not on the documents.


    10:40 A.M.: Markopolos may end up having as much influence over the remaking of a federal agency as one government outsider can have.

    Markopolos, testifying before a very receptive House Financial Services Committee right now, is hammering the Securities and Exchange Commission for missing Madoff and advocating sweeping changes to the agency.

    Markopolos said that Congress should combine financial services regulators into one super-regulator and urged regulation of over-the-counter derivatives, because "criminals tend to congregate in the dark."

    He said SEC investigators should receive bonuses for investigating and landing big fish like Madoff because "there's no incentive, no reward fro bringing those big cases in the door," Markopolos said.

    He said there are too many "20-somethings" in the SEC who have no experience in investment fraud investigation.

    Markopolos said he is preparing a list of what one congressman called "mini- and medium-sized Madoffs" to hand over to the SEC. "I hope this time they will actually listen to me," Markopolos said.

    "Oh, I think they will," Rep. Brad Sherman (D-Calif.) said.

    -- Frank Ahrens
  3. In any rational organization, senior staff would lose their jobs over a screwup like this. In government, they won't even get a reprimand. It will turn into an "us against them" deal, with the SEC hunkering down against what it will deem unfair criticism directed at hardworking staff attorneys.

    The sad thing is that this isn't even their biggest scandal. They fired an attorney for trying to push an investigation into a well-connected hedge fund. His career was destroyed. Do you think that gives those who were spared a lot of incentive to take on a guy like Madoff, who had the entire Wall Street establishment behind him? Particularly, when they see senior staff who play ball with big law firms waltz out of the SEC to take million dollar a year law partnerships.

    Obama made a big mistake with his pick of Mary Schapiro to head the SEC. Elliot Spitzer would have been a far better choice. Tell me, is paying a call girl really worse than tax evasion or being the front man for buying pardons? Like Eric Holder, Spitzer has "learned from his mistake" and won't make it again.
  4. Has he learned by his mistake in investing in Madoff's funds? So you would have a Madoff victim become SEC chief?
  5. They complain about how much CEO's make yet vote their lazy, incompetent, corrupt asses raises every year.

    I say cap Congress pay until the national debt is paid off.


    Just in case you didn't see Ackerman this afternoon, here it is. It is absolutely the astounding thing I've ever witnessed.

    And CNBC showed Michelle scratching their tits. Whose side are they on? Anyway?

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    If you are truly a trader who plays by the rules, support what we're trying to do. Real men (and real women) want to trade honest markets. As a matter of fact, I've got a 50 some old real woman right here, and I'll trade her for 2 25 year olds right now.

    (just kidding). I hit the jackpot there. Who else would stand by me through all this? Only the best.
  7. Take a deep breath. Relax. Once you think clearly, you'll realize Bernie is a hero. Bernie should get a medal and therefore will never see the inside of a jail cell.
  8. you may be right. He is going to rid us of the SEC.
  9. forget the fundamentals..
    the sheer lack of trust in the "system" is gonna send the market to 6500

    what an ABSOLUTE JOKE this video is
    #10     Feb 4, 2009