Lawmakers also will question
Stephen Harbeck, president of the Securities Investor Protection Corp., at Monday's hearing.
Of course Madoff's scheme raises larger questions as the government
seeks to improve the regulatory system in 2009, and Monday's hearings
may also touch upon that topic. The failure of the SEC to stop Madoff
could also cause some embarrassment for the newly nominated SEC chair,
Mary
Schapiro.
The suspicion concerning Madoff's investment group, Bernard L.
Madoff Investment Securities LLC, already existed and had been mounting since 2005.
The Wall Street Journal
reported that the SEC examined the firm at least eight times in 16 years and
interviewed him twice. But the SEC apparently couldn't pin those suspicious down.
So what were the holes?
- In November 2005, SEC investigators met with competitor Harry Markopolos, who prepared a 21-page report outlining his concerns that Madoff was running a Ponzi scheme. Markopolos canceled his appearance at Monday's hearing citing illness, according to Bloomberg.
- Kotz had said he would examine the relationship between a former SEC attorney, Eric Swanson, and Madoff's niece, who have since gotten married.
- Investigators believe Madoff had at
least one and possibly multiple accounts located in offshore tax havens, according to The Wall Street Journal. Austrian authorities began investigating Bank Medici following reports
it had placed about $2.1 billion in funds controlled by Madoff, causing the Austrian government to take over the bank.
Madoff's alleged list of
victims included many foreign banks, hedge funds and even some Hollywood actors. These banks had about $37 billion
in investments, according to
Bloomberg.
- Maria Woehr
It's grilling time for David Kotz, inspector general of the Securities and Exchange Commission. The House of Representatives Financial Services Committee will question the Wall Street regulator on how the office failed to uncover Bernard Madoff's alleged $50 billion Ponzi scheme.
