SEC Probes Its Own Chummy Ties To Madoff

(CBS)  This story was written by CBS News' Faiza Virani

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The internal investigation into how the SEC failed to detect the largest Ponzi scheme in history is heating up.

In a recent report to Congress, Inspector General David Kotz of the SEC outlined his investigation into how the enforcement agency overlooked the massive scam despite investigating Bernard L. Madoff seven times in eleven years. Kotz's full report is expected in August.

According to the report, Kotz is concentrating on personal and professional relationships between the SEC staff and Bernie Madoff, and how it may have potentially affected the Commission's oversight.

For example, Kotz is looking into a former SEC official who allegedly had a personal relationship with a Madoff family member. It has been reported that the former SEC employee is Eric Swanson, a compliance lawyer for the SEC who is now married to Shana Madoff, Bernie Madoff's niece. Kotz is investigating whether or not their relationship affected the SEC's regulatory oversight of Madoff's affairs.

Investigators have already reviewed more than 1.3 million emails from at least 27 SEC employees relating to the SEC's investigations of Madoff. The Inspector General has also ordered e-mail providers to preserve and maintain personal e-mail accounts of several unnamed individuals. More document requests are underway.

The investigation includes interviews of 44 witnesses and the sworn testimony of 13 current and former SEC employees.

[govtguy]

So the bottom line here is what ? The SEC will prove that they themselves were involved, give themselves a handslap, and continue on. Might be better management if they fired all those who played with Bernie, and if they are already gone, go after them through the courts for aiding and abetting. At this juncture, due to the malingering, malfeasance, misfeasance, and non-feasance by the SEC, SEC Inspector General Kotz is wasting a lot of our time and tax dollars.

[bajajohn1]

Obama's administration is the one doing the investigation. Are you dense, BothR2blame?

[cbsblogger]

IMHO the system is totally corrupt. The government, Congress and other lobbying entities that have huge control over our government such as AIPAC,etc do not want any independent maverick investigations whose discovery process may end up involving their own or their client state, or those being controlled. Once an investigation by an honest zealous prosecutor starts, how it ends is unknown.

Bernie Madoff was making big time returns (they believed he was) for some whom are likely AIPACs supporters. Does anyone actually believe that these lobbyists would not lean on Senators and Congressmen to subvert an SEC investigation of Madoff and pressure their media friends to keep mum? The primary role of AIPAC is to keep its members rich so that they have clout, and to keep American Wal-Mart working class as the sugar daddies to a country that offers them nothing?

[didserve]

They are AIPAC members and so they trust each other to rip off the little man!

Never did they think they would start stealing from each other!

[bajajohn1]

The big of Army of help probably came from the White House, where anything goes capitalism ruined the lives of millions of Americans. Eight years of Republicans ruining the country and the Repubs still want to involve the democrats. Pontius Pilates' man.

[Kuei1248]

I told everyone the SEC was in on the Madoff scandal as well as politicians. There is no way he could have pulled this off alone without and army of high level help.

[bajajohn1]

And yes, Americans are quick to point the accusative finger at other nations, calling their governments corrupt. A scheme of this size and the look the other way SEC had more than one compliance officer involved. How big were the payoffs?

[cbsblogger]

So in your most unbiased objective spin tell us Mr. SEC Investigator David Kotz that Rep Chuck Schumer, and other big time banking committee members in Congress, never told the SEC Chairman (or others) to back off investigating Mr. Madoff. Tell us also that campaign donations do not buy friends in high places more than willing to stifle any investigation that may financially harm said donor (or donor's clients).

[jlc555]

1.3 million internal emails about Madoff??!! Are you kidding me?? How could they miss this guy? Might as well say there was no SEC at all. Or worse, by having an SEC that couldn't catch him with 1.3 million !! internal emails, the investors were duped by the SEC as well!! Unbelievable.

[jojo9357-2009]

Right on Whitemale08, and while they are investigating add on Maxine Waters and Barney Frank for giving Freddy and Fanny a pass for so many years.