The Wall Street Journal reported this week that the former top attorney at the Securities and Exchange Commission, David Becker, and his two brothers agreed to return more than half a million dollars earned in an account that they inherited from their mother that was managed by Bernard Madoff. The Becker brothers inherited $2 million dollars in 2004. According to Irving H. Picard, the bankruptcy trustee, $1.5 million of the account represented fraudulent profit. The case is Picard v. Estate of Dorothy Becker, U.S. Bankruptcy Court, Southern District of New York, No. 10-ap-04620.
Becker became general counsel at the SEC just six weeks before Madoff was arrested. He was also the general counsel of the SEC between 2000 and 2002 after being hired in 1998 as Deputy General Counsel. It was just after Becker announced that he was leaving the SEC that his financial ties to Madoff were made public. At issue is Becker's involvement in the process of determining how Madoff's victims would be compensated and what method would be used to 'clawback' fictitious profits from past investors (including his own inherited account). Critics suggest that he should have recused himself due to the obvious conflict of interest. Questions have also been raised about what involvement he may have had in the agency's decision not to investigate Madoff years earlier. Becker says he had no knowledge that his parents were investing with Madoff until he received his inheritance in 2004.
Becker is not the only regulator that had ties with Madoff. ABC News reported in December of 2008 that Eric Swanson, a top regulator at the SEC, married Madoff's niece Shana Madoff. She was a compliance lawyer for Madoff's firm.
Whistleblower, Harry Markopolos, outlines in his book 'Chasing Madoff' how he provided the SEC detailed documentation on Madoff's fraud for nearly a decade before the agency decided to investigate. Reports are that the Justice Department will not be launching a criminal investigation into Becker's actions. Investors that lost money in the Madoff scheme filed a lawsuit against the SEC in 2010 for not uncovering the fraud for decades. The lawsuit was dismissed in April of 2011 by a federal judge stating, “The plaintiffs fail to identify any specific mandatory duty that the S.E.C. violated in its numerous instances of sloppy, uninformed, irresponsible behavior." Madoff is now serving a 150 year sentence in a North Carolina prison. Becker is back in private practice as a securities lawyer inside the beltway.
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