SEC’s IG Report Says Ex-Counsel Becker Benefited in Madoff Liquidation

Kotz said that the IG office is referring the findings of its investigation to the Justice Department. Schapiro noted in the statement that it “would be inappropriate for me to comment on the Inspector General’s referral to the Department of Justice.” However, she said, “I do want to state that I’ve known David [Becker] for many years to be a talented, highly skilled lawyer and a dedicated civil servant who served under three Chairmen.”

Specifically, Kotz stated, the issues that should be referred to the Department of Justice for consideration are:

• Mr. Becker’s work as General Counsel on the policy determination of the calculation of net equity in connection with clawback actions stemming from the Madoff matter, and
• Mr. Becker’s SEC work on the proposed legislation affecting clawbacks.

Kotz also recommended that the SEC seek another vote of the Commission on the question of the SEC’s position on the valuation of Madoff victim accounts, which Schapiro said the agency will do. Schapiro also said the SEC will implement Kotz’s other recommendations, which are:

(1) The SEC Ethics Counsel should report directly to the Chairman, rather than to the General Counsel.

(2) The SEC Ethics Office should take all necessary steps, including the implementation of appropriate policies and procedures, to ensure that all advice provided by the Ethics Office is well-reasoned, complete, objective, and consistent, and that Ethics officials ensure that they have all the necessary information in order to properly determine if an employee’s proposed actions may violate rules or statutes or create an appearance of impropriety.

(3) The SEC Ethics Office should take all necessary actions to ensure that all ethics advice provided in significant matters, such as those involving financial conflict of interest, are documented in an appropriate and consistent manner.

Two House Financial Services subcommittees will hold a joint hearing on Thursday, Sept. 22, to examine the IG report and the SEC’s handling of potential conflicts of interest involving Becker. The joint hearing will be held by the Financial Services Committee’s Oversight and Investigations Subcommittee and the Oversight and Government Reform Committee’s TARP, Financial Services, and Bailouts of the Public and Private Programs Subcommittee.

“The Inspector General’s finding that Mr. Becker played a ‘significant and leading role’ in matters that directly affected his personal financial interest, and the decision to refer these findings to the Department of Justice, confirms the concerns the Oversight Committee raised last February,” said Oversight Committee Chairman Darrell Issa. “This adds to the SEC’s long list of failures in the Madoff ponzi scheme and casts continued doubt about the direction the agency is headed.”
 
The hearing, entitled “Potential Conflicts of Interest at the SEC: The Becker Case,” will also review what safeguards are in place at the SEC to avoid conflicts of interest.