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SEC Looked Other Way In Madoff Debacle

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The SEC Inspector General's 457-page report on fraudster Bernie Madoff shows that the "negligence and malperformance" of the Securities and Exchange Commission(SEC) were so great that it acted "as if it did intend for Madoff not to be caught and stopped," says a legal authority who lost money invested with Madoff.

The report shows that the SEC "did the very things one would do if one were trying to enable Madoff not to be caught and were thereby attempting to destroy the antifraud policy of the statute that the SEC is instead supposed to enforce," says Lawrence Velvel, Dean of the Massachusetts School of Law at Andover (MSL) and formerly an attorney on major antitrust cases.

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Based on the just issued 457-page report of SEC Inspector General H. David Kotz, Velvel gave the following reasons showing that the SEC looked the other way to such an incredible extent that its failure to catch and stop Madoff was "defacto intentional."

# It would have taken "only a single phone call to the Depository Trust Co. to learn that Madoff never held the securities positions he claimed to have held, but for 16 years, through six complaints and five investigations, not a single member of the SEC, not a single one of its supposed investigators ever made that single phone call," Velvel wrote.

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# The SEC could have requested relevant records from the NASD (National Association of Securities Dealers) and other organizations that would have shown Madoff never did the trading he claimed to have been doing, yet for 16 years it never made the request.

# Although Madoff told the SEC he acted through Barclay's Bank, the bank told the SEC there had been no activity in his account---yet the SEC made "no effort to plumb this discrepancy," Velvel said.

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Sherwood Ross worked as a reporter for the Chicago Daily News and contributed a regular "Workplace" column for Reuters. He has contributed to national magazines and hosted a talk show on WOL, Washington, D.C. In the Sixties he was active as public (more...)
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