Bernard Madoff - Government Access

Government Access

Since 1991, Madoff and his wife have contributed about $240,000 to federal candidates, parties and committees, including $25,000 a year from 2005 through 2008 to the Democratic Senatorial Campaign Committee. The Committee returned $100,000 of the Madoffs' contributions to Irving Picard, the bankruptcy trustee who oversees all claims. Senator Charles E. Schumer returned almost $30,000 received from Madoff and his relatives to the trustee, and Senator Christopher J. Dodd donated $1,500 to the Elie Wiesel Foundation for Humanity, a Madoff victim.

The Madoff family gained access to Washington's lawmakers and regulators through the industry's top trade group. The Madoff family has long-standing, high-level ties to the Securities Industry and Financial Markets Association (SIFMA), the primary securities industry organization. Bernard Madoff sat on the Board of Directors of the Securities Industry Association, which merged with the Bond Market Association in 2006 to form SIFMA, and was Chairman of its Trading Committee. He was also a founding board member of the DTCC subsidiary in London, the International Securities Clearing Corporation.

Madoff's brother Peter then served two terms as a member of SIFMA's Board of Directors. He and Andrew received awards from SIFMA in 2008 for "extraordinary leadership and service". He stepped down from the Board of Directors of SIFMA in December 2008, as news of the Ponzi scheme broke. From 2000 to 2008 the two Madoff brothers gave $56,000 to SIFMA, and tens of thousands of dollars more to sponsor SIFMA industry meetings. Bernard Madoff's niece Shana Madoff was active on the Executive Committee of SIFMA's Compliance & Legal Division, but resigned her SIFMA position shortly after her uncle's arrest.

In 2004, Genevievette Walker-Lightfoot, a lawyer in the SEC's Office of Compliance Inspections and Examinations (OCIE), informed her supervisor branch chief Mark Donohue that her review of Madoff found numerous inconsistencies, and recommended further questioning. However, she was told by Donohue and his boss Eric Swanson to stop work on the Madoff investigation, send them her work results, and instead investigate the mutual fund industry. Swanson, Assistant Director of the SEC's OCIE, had met Shana Madoff in 2003 while investigating her uncle Bernie Madoff and his firm. The investigation concluded in 2005, in 2006 Swanson left the SEC and became engaged to Shana Madoff, and in 2007 the two married. A spokesman for Swanson, who has left the SEC, said he "did not participate in any inquiry of Bernard Madoff Securities or its affiliates while involved in a relationship" with Shana Madoff.

While awaiting sentencing, Madoff met with the SEC's Inspector General, H. David Kotz, who conducted an investigation into how regulators failed to detect the fraud despite numerous red flags. Madoff said he could have been caught in 2003, but bumbling investigators acted like "Lt. Colombo" and never asked the right questions:

I was astonished. They never even looked at my stock records. If investigators had checked with The Depository Trust Company, a central securities depository, it would've been easy for them to see. If you're looking at a Ponzi scheme, it's the first thing you do.

Madoff said in the June 17, 2009, interview that SEC Chairman Mary Schapiro was a "dear friend", and SEC Commissioner Elisse Walter was a "terrific lady" whom he knew "pretty well".

After Madoff's arrest, the SEC was criticized for its lack of financial expertise and lack of due diligence, despite having received complaints from Harry Markopolos and others for almost a decade. The SEC's Inspector General, Kotz, found that since 1992, there were six botched investigations of Madoff by the SEC, either through incompetent staff work or neglecting allegations of financial experts and whistle-blowers. At least some of the SEC investigators doubted whether Madoff was even trading.

Because of concerns, raised by David P. Weber, former SEC Chief Investigator, of improper conduct by SEC Inspector General H. David Kotz in the Madoff investigation, Inspector General David C. Williams of the U.S. Postal Service was brought in to conduct an independent, outside review of Kotz's alleged improper conduct. The Williams Report questioned Kotz’s work on the Madoff investigation, because Kotz was a "very good friend" with Markopolos. Although investigators were not able to determine when Kotz and Markopolos became friends, the report concluded that it would have violated U.S. ethics rules if their relationship began before or during Kotz’s investigation of Madoff.