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Wednesday, February 23, 2011

Fox Guarding Henhouse? SEC Criminal Complicity in Madoff Fraud?

Disgruntled victims of the Bernie Madoff fraud looking to nail the Securities and Exchange Commission for its failure to detect, investigate and ultimately stop the huge scam just got more ammunition.

A lawsuit brought by bankruptcy court-appointed trustee Irving Picard against the former general counsel of the Securities and Exchange Commission, David Becker, whose family allegedly made more than $1 million in profit from the Madoff Ponzi scheme, suggests possible complicity by the SEC in the mammoth scandal.

Becker reportedly leaves his role as Mr. Magoo  post as SEC general counsel for the "private sector" in just a few days.  Presumably, with 35-plus years of legal experience, this will be a cushy partnership at a major Washington, D.C. law firm.  (Note: Picard's lawsuit was filed under seal in November 2010.)  Perhaps Becker left government service for the big firm partnership salary and draw (i.e., share of profits), in contemplation of the need to eventually write out a big check.

Becker's official New York attorney registration has not been updated to show the move.

Let's see whether Mr. Becker keeps that partnership title, ever sees even one check of his partnership draw (assuming, of course, that he is an equity partner and not an "income partner") or even is allowed in the front door of whatever firm is willing to tolerate the bad publicity.   

One must wonder whether the SEC's failure to detect, much less investigate, the fraud was the result of deliberate concealment (in which case felony criminal charges for "misprision of a felony" would be warranted), as opposed to merely horrendous, legendary incompetence.

One can be sure -- or at least hope -- that the U.S. Attorney's Office in Manhattan (or perhaps Main Justice, as the national head office in Washington is called by insiders) is watching.

Eric Dixon is a New York lawyer with a background in securities compliance.  The views expressed in this article are opinion only and do not constitute legal advice.  Mr. Dixon is available for further comment at edixon@NYBusinessCounsel.com.


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