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SEC: We're looking at internal contacts with Madoff

Documents held by staffers in alleged Ponzi scheme are due Jan. 16
By Ronald D. Orol, MarketWatch
Last update: 2:18 p.m. EST Jan. 5, 2009 WASHINGTON (MarketWatch)

The Securities and Exchange Commission is at work investigating how it missed an alleged $50 billion Ponzi scheme operated by investment manager Bernard Madoff, according to the agency's inspector general.
"We have also begun identifying the particular issues that need to be investigated, and are reviewing and updating daily the list of witnesses that we plan to interview," David Kotz told lawmakers and others on Monday at a House securities subcommittee hearing.
In his testimony, Kotz said that he's requesting documents related to Madoff from both the agency's enforcement division and its compliance and inspection unit by Jan. 16. The inspector general added that he has begun efforts to obtain additional resources for the investigation, including more office space.

The agency's technology division also was ordered to hold emails of SEC staffers and contractors.
In addition to reviewing complaints about Madoff, the inspector general's office is examining SEC staff contacts with the investor, and whether there were any conflicts of interest between agency officials and managers at the investment vehicle, Kotz said.
Madoff, who was arrested in December and charged with securities fraud, oversaw a fund that managed capital for high net-worth individuals, hedge funds, banks and other institutions. Many high-profile figures, including economist Henry Kaufman and actor Kevin Bacon, are reported to have lost money in the alleged Ponzi scheme.
Kotz was instructed by SEC Chairman Christopher Cox on Dec. 16 to investigate how the SEC's compliance, inspections and examinations division handled criticism of the fund that it has received over the years.

Ronald D. Orol is a MarketWatch reporter, based in Washington.

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