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Monday, September 26, 2011

David Becker was the Securities and Exchange Commission's top lawyer, but he could not keep Bernie Madoff away from his own mother


When she died in 2004, she left Mr. Becker and his siblings an estate that included a $2 million Madoff account. His father had made the investment, originally. Didn't his parents ever get a fake statement in the mail and say, "Hey, this is great. Maybe we should show our son, the securities lawyer?"

Mr. Becker's parents died not knowing how the investment would turn out. Mr. Becker's brother liquidated the account in 2005 to pay estate taxes, also not knowing.

Mr. Becker informed his boss, SEC Chairman Mary Schapiro, and the SEC's ethics office, after Mr. Madoff finally confessed to running the world's greatest Ponzi scheme right under the SEC's nose. Oh, he was some character -- taking money from a regulator's mom. But Mr. Becker's colleagues at the SEC told him not to worry about it.

Mr. Becker went right on dealing with Madoff matters, influencing such questions as how much victims should receive in compensation from the Securities Investor Protection Corp. and whether Congress should limit clawback lawsuits in Ponzi schemes.

Nobody said anything about his mom's Madoff loot.

"It simply did not occur to me then that his mother's account, closed years ago, could present a financial conflict of interest," Ms. Schapiro told Congress last week.

This is the sentence that Ms. Schapiro should have used to start off her resignation speech.

Despite her vast regulatory experience and legal training, she doesn't seem to have any idea what happens after a Ponzi scheme implodes: A bankruptcy trustee sues everyone who ever took a fictitious profit so that the money can be divided up fairly among all the victims.

The SEC, which preaches disclosure, never said a word until, inevitably, Mr. Becker was hit with a clawback lawsuit. Turns out $1.5 million of the $2 million in his parents' account were fictitious profits, according to SEC Inspector General David Korz, who has turned the matter over to the Justice Department to see whether criminal conflict-of-interest laws were violated.

"I thought it doubtful that the trustee would institute a clawback action against me," Mr. Becker told Congress last week.

Mr. Becker has already left the SEC. So this is the sentence where he should have begun his announcement to resign from the practice of law. All those Madoff victims, out all that money, and they were never going to knock on his door for the $1.5 million? Hey, stop paying the bank while you're at it, Mr. Becker. Maybe they won't foreclose on your home.

"For those who think I acted in my financial interest, I would point out that I took a pay cut of over 90% to return to the SEC," Mr. Becker told Congress. "I ... forfeited millions of dollars to serve my country."

Cue the John Philip Sousa music here. Mr. Becker should have taken the millions he could have earned in private practice and left the country alone.

The SEC's job is to root out deadly conflicts of interest in America's corporations. But Mr. Becker and Ms. Schapiro couldn't smell them in their own office.

1 comment:

  1. I find it interesting that every detail of the Madoff fraud and the US government's failures related to it are researched, reported and made public, yet the Antiguan Government hasn't charged anyone with wrongdoing, had any public hearings or released any report regarding the SIB fraud and their chartering and regulation of Stanford International Bank.