Report: SEC Bungled Madoff Investigation

(CBS)  The Inspector General's report reads like a roadmap of jaw-dropping incompetence. During five inquiries between 1992 and 2008:

• SEC enforcement staff "almost immediately caught Madoff in lies and misrepresentations, but failed to follow up on inconsistencies."

• "Even when Madoff's answers were seemingly implausible, the SEC examiners accepted them at face value."

• Despite receiving six "substantive complaints that raised significant red flags" like those expressed by securities expert Harry Markopolos as far back as 1999, who said it took him "five minutes to figure out he was a fraud," a "thorough and competent investigation or examination was never performed."

The report also found Madoff intimidated SEC attorneys, dropped names of higher ups in the agency, and went so far as to claim he was on the short list to be the head of the SEC, reports CBS News chief investigative correspondent Armen Keteyian.

Read SEC Inspector General's Full Report

To top it off, the agency's efforts were so uncoordinated, staffers didn't know there were two simultaneous inquiries being conducted in different cities. How did they find out? Madoff himself told them.

"When a federal agency's left hand does not know what the right hand is doing, and it has a mission, which is investor protection, it really calls into question whether the agency is up to the task," said Jacob Frenkel, a former SEC enforcement attorney.

Wednesday the new SEC Chairman Mary Schapiro said the fraud was a "failure that we continue to regret, and one that has led us to reform in many ways how we regulate markets and protect investors."

Madoff told the Inspector General that, at one point back in 2006, he thought he was a phone call away from being caught.

He said he was "astonished" that the SEC did not catch on.

Read more coverage of Bernard Madoff on CBSNews.com:
Watchdog: SEC Screwed up on Madoff
Madoff Sons May Pay for His Sins
Madoff Beach House Shown Off for Sale
Madoff's Beach House
Prison Denies Madoff Cancer Report
Author Claims 20-Year Affair with Madoff

[oiaf0831]

People in the SEC should be going to prison for making President Clinton look like a crook.

They made all these bad thing happen while he just happened to be the president at the time. People might think he was to blame, just because there was so much fraud on his watch.

Of course, we all know that can't be true. Bill Clinton proved that he was honest and trustworthy, in his public life. He was never convicted of doing anything wrong related to his public life.

Private life should be separate.

Why not go after all those Republicans who had affairs? They are the ones who should be kicked out of office.

[oiaf0831]

by frankie2fing September 3, 2009 8:15 AM EDT
Oh, so very sorry Alabama, everyone makes a mistake. Oh, wait, they were shut down in 1999, I am not too good at math, I need a good ole southern edukated redneck to do the math for me. Was not 1999 BUSH?!? Oh well, I think it is time for you to pass the brain to someone else in the trust, obviously you are not using it...
@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

Bill Clinton was the president in 1999. Clinton was president from 1993-2001.

Is that the year they shut down the company that reported Madoff's fraud in 1992?

[lomtevas]

You have yet to evaluate our legal system and our courts.

[platteman]

Yah Think!!!!! Holy Mackrel Batman, SEC missed the Madoff thing!!!! How could that happen, was Tax man Timmy in charge there also!!!!!

[donnerwetter]

This is just one more reason why we cannot trust the US Government. The war in Iraq is lie, the war in Afganistan is lie, teh financial crisis is a lie..... and on and on. Outsourcing our jobs was another nobel act allowed by our Government just to keep us on our knees. The net act will be the devaluation of the US dollar. That will be the final blow given to us, the middle class. Americans wake up and do something like writng your senator and congressman and please do not address them with Honorable Sir, more like Horobal Sir.... Move over America, China has taken your place.

[jab232]

The Bush SEC bungled the Madoff investigation? And probably was so lax in regulation there were all kinds of other scams? Tell us something we didn't know.

[nextgenman09]

Woo. Big Surprise. The SEC is the proverbial Fox Watching the Hen House.

[ramos1129]

The report does not go far enough. Given the many warnings by reputable professionals, there had to have been some posibility of collusion. Somebody in the DOJ has to pick up the ball and investigate to see who participated and if any laws were broken. A Ponzi scheme of this size had to have had active participation by a lot more people

[jsilver2th]

Now I'm totally shocked- tell us something we don't know...

Probably more of a cover-up than anything...

[mnbrant]

I really like the guy. Maybe should write him to say hi. Just kidding.