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 The Securities and Exchange Commission is facing yet another red-face moment over the Bernard Madoff case.
Massachusetts Secretary of State William Galvin released a transcript of a phone call with Fairfield Greenwich Group Wednesday during which Madoff coached its chief risk officer on how to bamboozle federal regulators. "Obviously, first of all, this conversation never took place. ... OK?" begins the call. During the recorded call, Madoff was asked what to say if SEC investigators asked about how shares of a trade are distributed. "You know, you don't have to be too brilliant with these guys because you don't have to be, you're not supposed to have that knowledge and, you know, you wind up saying something which is either wrong, or, you know, it's just not something you have to do," Madoff said, according to the transcript. Madoff said that being evasive with the SEC should not pose too much of a problem since no one knew the secret to his success anyway. "The less you know, the better off you are," he said. Elsewhere in the conversation, Madoff says: "You don't want them to think you're concerned about anything. You're best off, you just be casual." During the call, "you basically have him coaching" the Fairfield employee, Galvin told The Associated Press late Wednesday. "And it's an admission that basically Madoff knew it was a scam and it's really how he conned the Securities and Exchange Commission," Galvin said. Fairfield Greenwich Group reached an $8 million settlement this week with the Massachusetts Securities Division in connection with the Madoff scandal. State regulators sued Fairfield for misleading investors and acting as a feeder fund to Madoff's $65 billion Ponzi scheme. With the settlement, Massachusetts dropped fraud charges against the company. Last week the SEC's Inspector General David Kotz released a scathing report that detailed how the agency botched five investigations of Madoff's business between June 1992 and last December, when the self-confessed conman was arrested. The SEC's failure in the Madoff affair has led Congress to open an inquiry into the matter and has the agency bolstering its enforcement efforts to rebuild its reputation and restore investor confidence. "It is a failure that we continue to regret, and one that has led us to reform in many ways how we regulate markets and protect investors," SEC Chairman Mary Schapiro stated last week. - Donna Block
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