Madoff victims enraged at SEC’s decision to keep employees who failed to stop fraud

Victims of Bernard Madoff’s Ponzi scheme have reacted angrily to the Securities and Exchange Commission’s decision not to fire any employee over the agency’s failure to stop the massive fraud.

“It’s pouring salt in the wound,” said investor Stephanie Halio. “I think it’s pathetic.”

Gallery

Gallery

More on this Story

View all Items in this Story

The penalties the agency meted out — including pay cuts, demotions, counseling and suspensions of up to 30 days — are “pitifully too little, too late,” Halio said.

The Securities and Exchange Commission last week confirmed a Washington Post report that the agency’s disciplinary process had ended without any employee being terminated.

“It just doesn’t seem enough when their failure to detect the Madoff fraud led to the destruction of so many hopes and lives and dreams and legacies,” said Ilene Kent, 57, whose parents trusted Madoff with their savings.

Many of the employees involved in the SEC’s flawed oversight of Madoff had left the agency by the time the disciplinary process advanced and were therefore beyond its reach.

The SEC’s inspector general reported in 2009 that the agency failed to see through the long-running scam despite receiving six complaints about Madoff over several years. The agency conducted repeated investigations and examinations of Madoff’s business but never looked closely enough, the inspector general found.

By the time Madoff confessed in 2008, many investors had lost their life savings — in all, billions of dollars.

Halio, 68, and her 78-year-old husband came out of retirement and now drive people to and from Florida airports for a living. With a bad back, Halio said, she found herself struggling to lift a 50-pound suitcase Tuesday.

Tim Murray said that 18 members of his family spanning three generations lost investments that were meant to support them in retirement and pay for college.

Murray wasn’t impressed by the fact that one of the SEC employees received a 5.7 percent pay cut. “My goodness, I know some elderly victims that would love to have a pay cut,” he said.

SEC Chairman Mary L. Schapiro had received recommendations to fire one employee. She decided on a lesser punishment because losing the employee would have been damaging to the agency, SEC spokesman John Nester said.

In recommending termination, a law firm hired to advise the agency had said it should consider an alternative if firing would have an adverse impact on the SEC, Nester said Wednesday.

Investors said it was hard to see how someone who played a part in the disastrous oversight of Madoff could be such a valued employee.

Nester said the employee in question, a manager in the SEC office that inspects investment firms, has “highly specialized skills.”

“The person most responsible for the Madoff fraud is currently serving 150 years in prison, and many of those involved with the fraud have been indicted or imprisoned as well,” Nester said, referring to Madoff and his alleged accomplices.

Since Schapiro became SEC chairman in 2009, she has named new senior managers across the agency, he added.

Investors said the disciplinary actions undermine any argument that the agency has been transformed.

“That Mary Schapiro would have a greater sense of obligation to the personnel in her agency than the investors in this country she is charged to protect is beyond my understanding,” Ron Stein, president of an advocacy and support group for Madoff victims, said in a statement.

 
Read what others are saying