The SEC chairman has criticized his own agency's failure to investigate warnings about Bernard Madoff, who is accused of a massive fraud scheme. Analysts examine the SEC's inquiry.
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Since the arrest last week of Wall Street financier Bernard Madoff, the financial web and pain have spread, and now the government itself is on the hot seat.
Christopher Cox, the chairman of the Securities and Exchange Commission, confirmed today he has launched an investigation to find out why the SEC had ignored tips and allegations about Madoff going back a decade.
For more on that, we're joined by Diana Henriques, who's covering the story for the New York Times, and John Coffee, professor of law at Columbia University Law School and director of its Center on Corporate Governance.
Diana, tell us more about what the SEC is now saying about its past experience with Mr. Madoff. What were those red flags?
DIANA HENRIQUES, The New York Times:
Well, they aren't saying, so I'm, of course, not privy to that, but they have given us some suggestions.
In that really remarkable statement that Chris Cox made last night, he suggested that credible evidence, credible tips had come in and had not been pursued.
Interestingly — and John can tell you more about this — they hadn't been pursued because they were not pushed forward and turned into a formal investigation.
So the people who were looking into those tips were limited to whatever Bernie Madoff decided to tell them and whatever volunteer cooperation he gave them.
So, certainly, any sensible commission would want to know who made those decisions to not elevate this to a more serious level, where they'd have more weapons at their disposal to investigate it.
It was described as an investigation in 2007 that ended in no action. Is that a fair even characterization, investigation, do we know?
No, not formally. I'm not a lawyer. You've got a great one here.
But there was no formal order of investigation voted by the commission in that case, and that was because the people who did the inquiry in 2007 did not seek a formal order. They did not refer anything to Washington, according to the SEC itself.