Business columns: A watchdog that forgot to bark
Last week’s report by the inspector general of the Securities and Exchange Commission portrays SEC investigators as so intimidated and out of their depth that they failed to ask even the most elementary questions of Bernie Madoff, said
Now we know how Bernie Madoff pulled off a Ponzi scheme for more than 20 years, said Michael Hirsh. “Sheer regulatory incompetence.” Last week’s report by the inspector general of the Securities and Exchange Commission is a damning indictment of an agency that “almost consciously turned away from a fraud that was staring it in the face.”
The report portrays SEC investigators as so intimidated and out of their depth that they failed to ask even the most elementary questions of Madoff. In order to expose the scam, “all anyone in enforcement ever had to do over the years was to obtain documents showing that wily old Bernie wasn’t doing any trading at all. They never did.” They ignored many other red flags as well, such as a credible tip, received in 1992, that a Madoff associate was running a Ponzi scheme. Incredibly, SEC investigators focused exclusively on the associate, even after they learned that Madoff made all of his investment decisions.
And to think that we depend on these same experts “to root out fraud in the mind-bogglingly complex world” of derivatives and collateralized debt obligations. Heaven help us.