Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

‘There’s Something About Mary’ as Madoff Calls Schapiro “a Dear Friend”

Posted by Larry Doyle on October 30, 2009 7:57 PM |

Did FINRA invest its own funds from its internal investment portfolio with Bernie Madoff? Would FINRA’s head Mary Schapiro invest with her “dear friend” Bernie? Stick with me on this and let’s navigate the newest development in this ongoing scam. My concluding remarks provide insights you won’t find in many mainstream media outlets.

High five to JD for tipping me off to a segment about Bernie Madoff that just aired on CNBC. While little is truly new in this segment, Bernie’s assessment of his relationship with former FINRA head and current SEC chief Mary Schapiro is startling. While Ms. Schapiro and her colleagues at FINRA have downplayed any sort of relationship with Madoff, Bernie has a different take.

There’s something about Mary as Bernie calls her “a dear friend.”

Will the government powers have the cojones to more fully explore this relationship? Or, are they already aware of it? As I wrote in my commentary of October 22nd, “Nasdaq Sale: Why Would Schapiro and FINRA Execs Lie?”:

Did Ms. Schapiro receive the “E-Z Pass” to the SEC from FINRA with the support of the powers that be on Wall Street? Was the chair of the SEC the ultimate payoff to Ms. Schapiro for the successful completion of the merger between NASD and NYSE Regulation to form FINRA?

What does Bernie have to say? Let’s review the CNBC segment, Madoff: It’s ‘Amazing’ I Didn’t Get Caught Sooner. . .

Jailed swindler Bernie Madoff said it was “amazing” that he didn’t get caught sooner in his multi-billion-dollar Ponzi scheme, and that everything the SEC did to investigate him prior to 2006 was a waste of time, according to a jailhouse interview he gave to SEC Inspector General H. David Kotz.

Madoff also told Kotz that SEC Chairwoman Mary Schapiro was a “dear friend,” although she “probably thinks, ‘I wish I never knew this guy.'”

Madoff gave the interview to Kotz in June while awaiting sentencing for one of the largest financial frauds in history. At the time, Madoff was being held at the Metropolitan Correctional Center in New York. He agreed to speak to Kotz, who was investigating the SEC’s decades-long failure to uncover the scheme. The SEC released notes of the interview along with hundreds of other exhibits in the investigation following a request by CNBC under the Freedom of Information Act.

US Department of Justice
Bernie Madoff mugshot

Madoff tells Kotz he feels “misunderstood” by prosecutors in his case, and that there is ” a lot of misinformation” circulating about the scandal as a result. However, he adds, “I’m not saying I’m not guilty.”

Madoff says that in multiple encounters with SEC investigators over the years, he never had to tell them about his role in the industry because “they already knew.”

The Inspector General’s report, released in early September, found multiple lapses at the SEC, but said there was no evidence of improper influence by Madoff.

Kotz told CNBC in a statement Friday that he found no evidence to support Madoff’s claim of a close relationship with Mary Schapiro.

Perhaps Mr. Kotz might be interested in the allegation embedded in the lawsuit brought by Amerivet Securities. Yes, that suit alleges that FINRA, the organization headed by Ms. Schapiro, had an investment in Madoff. For more info on that claim, I submit “Attorney Claims Wall Street’s Cop, FINRA, Invested in Madoff.”

Did Mary protect Bernie unwittingly or unknowingly?  “A dear friend.”

Who in Washington has the guts to dig deeper into this story and reveal the full extent of the relationship between Ms. Schapiro and Mr. Madoff?

The American public and especially those who invested in Madoff deserve nothing less.

LD

  • Kathy

    Stay on this, Larry! Even if Madoff weren’t the criminal he is, this exposes the unequal treatment handed out by our regulators.

  • beth s

    I agree… stay on this one!

  • Matt

    EXACTLY Larry – what is the full extent of the relationship between Mary Schapiro and Bernard Madoff? That question absolutely must be answered as soon as possible, and it is one of the most critical (if not the most critical) questions of our time. Furthermore, the SEC Inspector General (David Kotz) is NOT in a position to objectively investigate the SEC Chairman. Only a truly third-party, outside entity is able to objectively investigate the Chairman of the SEC. So, just because Kotz says that his probe didn’t find any evidence to support Madoff’s claim, doesn’t mean Kotz did a thorough and objective probe of Mary Schapiro. Isn’t Mary Schapiro Kotz’ boss? An independent and outside third party must investigate this question and get to the truth as soon as possible.

  • Bill

    Larry, any further info on FINRA’s disposal of the $647 mil of auction rates in 2007? Perhaps this was simply the most amazing case of market timing in financial history.

  • Larry Doyle

    Bill,

    No new info other than the fact that a pending lawsuit brought by Amerivet Securities of Moreno Valley CA requests that FINRA open its books.

    This case will take time to be adjudicated, but hopefully it does bring real transparency to the Wall Street SRO, FINRA.

    Rest assured, I will be monitoring.

  • One can now reasonably fear that the lack of action by the SEC in reference to Bernard Madoff is less a case of negligence rooted in lack of focus and vigilance, but rather an intentional ignorance of a clear pattern of illicit activity by a well-connected individual who was once praised in the investment and charitable worlds. Whether officials opted to don blinders in a state of denial, or more culpably, believed that the benefits of allowing Madoff to operate outweighed the attendant risks and costs, has yet to be seen. In either case, the SEC and related agencies have some serious soul-searching to undertake.

    Even a casual perusal of the 25-page executive summary of the September SEC report on the investigation is akin to watching an impending train wreck. In particular, the SEC inaction despite numerous, specific complaints about two major red flags was very telling. First, Madoff’s returns had little correlation to comparable securities indexes, and were supposedly generated through the use of complex, secretive, nearly impossible methods. An unnamed hedge fund manager was concerned about Madoff’s investments, and told the SEC in 2003 that “Madoff’s strategy had no correlation to the overall equity market in over 10 years”. Second, his employment of a solo, partial auditor, David G. Friehling, flagrantly violated FASB SFAC 2 in regard to GAAP standards of neutrality, and associated verifiability and representative faithfulness. Reporting that would customarily be transparent and straightforward was instead opaque, scant, and in many cases inaccessible at Madoff’s funds. Prominent Madoff critic Harry Markopoulos noted in a letter to the SEC in 2000 that Madoff did not permit outside audits. Arguably, Friehling’s activities also violated the intent of the “internal control over financial reporting” provisions of Sarbanes-Oxley 404. Additionally, the report details numerous complaints from individuals concerned that Madoff was conducting his fund as a Ponzi scheme.

    Madoff was very generous in the past with his charitable giving- and also purported management of money for non-profits, especially those with Jewish affiliations. He abused that trust to feed his false funds, and caused considerable damage to non-profit assets, along with individual investors within that community. Additionally, as other articles on this site allude to, there is considerable evidence that government officials and their associated agencies had financial interests in Madoff’s funds.

    Even Bernard Madoff believes in that which he failed to do, as he stated in a recent jailhouse interview as detailed in the Wall Street Journal on October 31st. “It’s very easy if you want.” said Madoff to SEC Inspector General H. David Kotz. “You must do a third-party check. It’s an absolute must. It’s accounting 101.”

    But even if the SEC did check- why did they not act?

  • Pingback: About This Hole in My Foot… « Across the Street()






Recent Posts


ECONOMIC ALL-STARS


Archives