SEC Pleads Mea Culpa on Madoff Affair

Last Updated Sep 3, 2009 12:41 PM EDT

This report from the SEC's Inspector General details how the agency repeatedly let Bernard Madoff slip through its grasp. Mostly it confirms what we already know -- regulators had many, many cracks at this guy over the years and they blew it. But it does provide lots of often amusing color.

For instance, the SEC for a time unwittingly conducted two simultaneous investigations into Madoff. One pencil-pusher literally didn't know what the other was doing. At least until Bernie kindly clued them in. States the report:

"Astoundingly, both examinations were open at the same time in different offices without either knowing the other one was conducting an identical examination. In fact, it was Madoff himself who informed one of the examination teams that the other examination team had already received the information they were seeking from him."
Then there's the bit about how Madoff threw investigators off the scent. Basically his tactics were to lie, get mad, tell amusing anecdotes, boast of his importance and get really mad. He also had employees use Keystone Cops-like tactics to disrupt the probe.
"On one occasion, when a Madoff employee was speaking to the... examiners at Madoff's firm, after a couple of minutes, another Madoff employee rushed in to escort her from the conversation, claiming she was urgently needed. When the examiners later asked Madoff the reason for the urgency, Madoff told them her lunch had just arrived, even though it was 3:00 o'clock in the afternoon."
Saw that bit on the Three Stooges once. Killer! SEC chief Mary Schapiro isn't laughing, of course. She sounded predictably contrite in announcing the Inspector General's findings. "His report makes clear that the agency missed numerous opportunities to discover the fraud," she said in a statement. "It is 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."

We'll see. As for you Madoff-ophiles out there, you'll have to wait until the SEC issues its full 450-page report on the affair, expected in the next few days, to get all the gory details.

Photo courtesy of Flickr user JoeMarinphoto's

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    Alain Sherter covers business and economic affairs for CBSNews.com.