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Investigation of Failure of the SEC to Uncover Bernard Madoff's Ponzi Scheme-Public Version

NCJ Number
Date Published
August 2009
477 pages
This report presents the "Public Version" of the findings and methodology of the U.S. Securities and Exchange Commission's (SEC's) Office of Investigations' (OIG's) investigation of the failure of the SEC to Uncover Bernard Madoff's Ponzi Scheme.
The investigation did not find evidence that any SEC personnel who worked on an SEC examination or investigation of Bernard L. Madoff Investment Securities, LLC (BMIS) had any financial or other inappropriate connection with Bernard Madoff or the Madoff family that influenced the conduct of their examination or investigatory work. Neither did the investigation find that former SEC Assistant Director Eric Swanson's romantic relationship with Bernard Madoff's niece influenced the conduct of the SEC examinations of Madoff and his firm. In addition, the investigation did not find that senior officials at the SEC directly attempted to influence examinations or investigations of Madoff or the Madoff firm, nor was there evidence that any senior SEC official interfered with the staff's ability to perform its work. The investigation did find, however, that the SEC received more than ample information in the form of detailed and substantive complaints over the years to warrant a thorough and comprehensive examination and/or investigation of Bernard Madoff and BMIS for operating a Ponzi scheme. Had these efforts been made with appropriate follow-up at any time beginning in June 1992 until December 2008, the SEC could have uncovered the Ponzi scheme well before Madoff confessed. The OIG attributes these findings to systematic breakdowns in the manner in which the SEC conducted its examinations and investigation. For this reason, the OIG is issuing under separate cover two audit reports that provide the SEC with specific recommendations for improving how the SEC conducts its enforcement activities.