The Madoff Investigation Should Focus on the SEC.

Ever since the Bernie Madoff scandal broke, I’ve wondered: was the SEC paid off? It’s hard to believe the SEC could have investigated Madoff as it did, see what anyone who looked closely could see, and not dig sufficiently to uncover the fraud. And a story today from the Washington Post only adds gasoline to the fire of that suspicion. An SEC lawyer told her superiors in 2004 that “information provided by Madoff during her review didn’t add up and suggest[ed] a set of questions to ask his firm.” She was instructed in response to focus on other matters. And her immediate supervisor’s boss later married Madoff’s niece!

The suspicious SEC lawyer, Genevievette Walker-Lightfoot, “had previously worked at the American Stock Exchange, where she developed an expertise in specialized trading strategies.” After she was diverted to other matters, she never was asked about the Madoff investigation again, even during an agency investigation into Madoff in 2005 which only “found three violations of minor rules.” In 2006, Walker-Lightfoot left the SEC after filing a complaint with the agency alleging that she’d been subjected to a hostile workplace. A person familiar with the complaint said it was settled in Walker-Lightfoot’s favor.”

Madoff, incidentally, once “boasted at a business roundtable discussion about his close relationship with SEC regulators, saying “my niece just married one.”