Lawmakers to grill SEC chief over Madoff account
Thursday, March 10, 2011
WASHINGTON (AP) — The head of the Securities and Exchange Commission says she didn’t think the agency’s former general counsel’s financial tie to convicted felon Bernard Madoff represented a conflict of interest.
SEC Chairman Mary Schapiro told lawmakers in a letter this week that she did not see a cause for concern when David Becker told her his mother had an account with Madoff, who pleaded guilty in 2009 after conducting a multi-billion-dollar Ponzi scheme.
Schapiro is expected to face tough questions Thursday at two Capitol Hill hearings over why she allowed her general counsel at the time to play a key role in crafting the agency’s policy on how Madoff’s victims should be compensated. Becker is being sued because a federal court-appointed trustee says Becker inherited money his mother made from Madoff’s scheme.
Schapiro’s judgment is being questioned at a time when the SEC is seeking more money from Congress to implement new financial regulatory rules. The SEC chief will make the case that her agency needs the $1.4 billion for the budget year that begins Oct. 1 to hire more staff and invest in technology.
The agency was widely criticized for its failure over two decades to discover Madoff’s epic fraud despite numerous warnings and red flags.
Schapiro is testifying before a panel of the Senate Banking Committee and a joint hearing of two House Oversight subcommittees. She will be questioned by Republican lawmakers who voted against the sweeping financial overhaul law and who oppose the rules the SEC is charged with implementing.
Several Republican lawmakers are also investigating her handling of Becker, as is the SEC inspector general.
Becker, who was appointed by Schapiro in February 2009, left the SEC last month. His tie to Madoff became public late last month, when the court-appointed trustee sued Becker and his brothers, saying they earned more than $1.5 million in profits from their deceased mother’s investments with Madoff.
Schapiro told the lawmakers in a letter that Becker told her about the account soon after he came to the SEC. She said she doesn’t recall asking Becker for additional information at that time.
“The issue did not appear to me to present a financial conflict of interest,” Schapiro wrote in the letter to Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee, and three other senior Republicans.
“However,” she added, “I relied on Mr. Becker to present any ethics-related issues” to the agency’s ethics officer.
Becker did that. The ethics officer told him that “a reasonable person with knowledge of all of these facts would not question (his) impartiality,” according to the questions posed to Schapiro by the four Republicans.
SEC spokesman John Nester said that Becker properly sought and followed the advice of the ethics officer. Nester declined to comment further Wednesday.
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