Posted by Rick Stine
on September 03, 2009
, Securities & Exchange Commission
You have to wonder if even this made-up exchange would have raised eyebrows at the Securities and Exchange Commission.
EXAMINER: Mr. Madoff, how do you explain the remarkable returns you generate year after year even when others aren’t doing well.
BERNIE MADOFF: Ouija.
EXAMINER: Mr. Ouija, one of your employees? Is he a fund manager? (The examiner scribbles the name on a piece of paper with the words next to it: DON’T BOTHER TO FOLLOW UP)
BERNIE MADOFF: No, Ouija Board. (At which point Bernie pulls one out of his briefcase. He and the examiner place the board on their knees with their hands moving across the top. Moments later Bernie claims to hear a voice, whispering – “Bernie, buy July IBM 120 calls, sell September American Express 33 puts…”)
The news from the inspector general of the Securities and Exchange Commission is nothing short of shocking. And grizzled journalists aren’t supposed to shock easily.
SEC Inspector General David Kotz reported on how the SEC failed to expose the fraud perpetrated by Bernard Madoff, despite getting six warnings over 16 years.
The inspector general found no influence by Madoff or his family, but it is a tale of astonishing incompetence that makes one worry and wonder about the capabilities of the U.S. markets watchdog.
Here’s just one paragraph from the article on the report by The Wall Street Journal’s Kara Scannell. The whole article and the whole IG report are worth reading.
“The report described how the SEC staff at times didn’t follow through on leads, failing to seek information from a third party because reviewing such information could be too time cinsuming. In another instance, an SEC examiner looked into an institution that Mr. Madoff had said he used to clear his trades. The examiner learned from the institution there was no trading activity by Mr. Madoff during the period under review. The SEC associate director in examinations never followed up or informed the rest of the staff, according to the report.”
Posted by Neal Lipschutz
on April 09, 2009
Financial journalists should know how to read a balance sheet, understand the basics of banking and know that bond yields move inversely to bond prices.
These days, some experience in law and order also wouldn’t hurt. As we navigate this global recession, consider the following that could fall under the category of business crime reporting:
How many times in the wake of the 9/11 attacks against the U.S. did we hear complaints about outmoded and “siloed” technology employed by various law enforcement agencies of the U.S. federral government? That was followed by vows to make it right. On a much smaller scale, the head of the Securities and Exchange Commission Wednesday described to Congress her agency’s technological and systemic stumbling blocks. SEC Chairman Mary Schapiro in written testimony cited systems problems at the agency, which has been lambasted for being behind the curve in the financial crisis and missing years-long scandals like the alleged Madoff Ponzi scheme. The agency gets 700,000 tips and referrals a year and has “no central depository or system through which this information comes together to ensure it is handled consistently or appropriately.” The Obama administration has asked for a 9% bigger SEC budget for fiscal 2010 and some money would go here, Schapiro said. But don’t look for anything overnight. First there will be a “comprehensive review,” Schapiro said, adding the agency will invest “over the next couple of years in new systems as needed.”