New missteps in response to the epic fraud of Bernard Madoff threatened to undermine the US Securities and Exchange Commission's pitch for more money before a trio of congressional committees on Thursday. A key senator called for a quick probe into why the SEC's former top lawyer was allowed to advise the agency on the Madoff case while having personal ties to the massive fraud.
And a House lawmaker said people from both parties agreed there was at least an appearance of a conflict of interest. The SEC's top watchdog is already investigating whether former SEC General Counsel David Becker should have recused himself from advising the SEC on Madoff matters, including how to compensate victims, because he had inherited money from his late mother, who had invested with Madoff.
The SEC voted in 2009 on a method to compensate victims of Madoff with some commissioners and staff unaware that the SEC's then general counsel had received money from Madoff funds, sources told Reuters on Wednesday. SEC Chairman Mary Schapiro has already told lawmakers she was aware of Becker's Madoff connection.
Senate securities subcommittee chairman Jack Reed said after his hearing that there should be a thorough investigation. "It should be done quickly and the response should be made public," Reed told Reuters. Becker's Madoff link, his clearance to work on Madoff matters by the agency's ethics council, and Schapiro's knowledge of the tie, is raising new questions about the agency which missed several chances to catch Madoff before his 2008 arrest.
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