Report: SEC Missed Madoff 'Red Flags'
RENEE MONTAGNE, host:
NPR's business news starts with Bernard Madoff and the SEC.
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MONTAGNE: The Securities and Exchange Commission is one of the country's leading financial watchdogs, but when it came to watching Bernie Madoff, the commission has admitted what most people already suspected: It should've caught the Ponzi scheme years ago. A new report by the SEC's inspector general says the agency missed glaring evidence that Madoff was cheating investors.
NPR's Robert Smith reports.
ROBERT SMITH: Part of the myth of Bernie Madoff is that he was so smooth, so talented, that no one suspected he was committing the largest fraud in history. The inspector general's report destroys that illusion. The SEC started receiving tips in 1992 that Madoff was a big liar. One compliant to the agency in 2005 was entitled, "The World's Largest Hedge Fund is a Fraud." Another informant told the SEC that he was so worried, he was withdrawing all his money from Madoff.
But the new report says that the agency was colorblind to these red flags. Five times, the SEC sent in an investigative team. Five times, they missed the big picture. The IG's report says that even when they caught Bernard Madoff in contradictions and inconsistencies, they just asked the man about them, and he weaseled his way out.
The investigator general, H. David Kotz, did not fully explain why the agency bungled the investigations, but he did note that the SEC teams were inexperienced.
Still, the report concludes that though the SEC was incompetent in this case, it wasn't criminal. Kotz found no evidence that Madoff had collaborated with anyone at the agency, although the SEC may have made the crime worse. Madoff used to brag to nervous investors that he had been examined by the SEC, and they found nothing wrong.
Robert Smith, NPR News, New York.
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