SEC names Michael Garrity examinations chief in Boston
Michael E. Garrity, 54, has been named head of examinations in the agency’s Boston regional office, where he will oversee efforts in six states to scrutinize mutual funds, brokerage firms, hedge funds, and private-equity firms. His responsibility stretches from Boston, home of mutual-fund giant Fidelity, to Greenwich, Conn., the nation’s hedge-fund capital. The SEC announced the promotion Monday.
SEC officials have been excoriated for missing chance after chance to stop Madoff’s massive investment fraud. Garrity was one of the rare employees described in a favorable light in a 477-page report that the SEC inspector general issued two years ago analyzing the agency’s Madoff debacle.
Garrity was also praised by whistleblower Harry Markopolos, the financial sleuth who tried in vain over several years to get the SEC to see through Madoff’s Ponzi scheme. The two met in 2005, when Markopolos was urging the SEC to act on his suspicions.
“I met with Mr. Garrity for several hours and found him to be very patient and eager to master the details of the case,” Markopolos said in written testimony to Congress.
“A few of the more difficult concepts required repeated trips up to the white board, but at the end of our meeting, it was clear that Mr. Garrity understood the scheme, its size, and its threat to the capital markets,” Markopolos testified. Garrity said that if Madoff were based in his region, “he would have had an inspection team inside BM’s operation the very next day,” Markopolos testified.
True to his word, Markopolos recounted, Garrity followed up and explained that he was trying to put Markopolos in touch with the SEC’s office in New York, where Madoff was based.
In contrast, an SEC official in New York rebuffed Markopolos’s help and was offended when Markopolos questioned her grasp of a technical subject, the inspector general reported.
The SEC’s Boston office handed off the matter to the New York office and tried to flag it as important, the inspector general reported.
Madoff is serving a 150-year prison sentence for cheating investors out of billions of dollars, pretending that he was running a successful money-management business when he was actually using money from some clients to make payouts to others. The SEC failed to notice that Madoff was not actually buying or selling securities for his clients.
The SEC has disciplined several employees in connection with its Madoff fumbles. The punishments varied and included suspensions, pay cuts and demotions.
Garrity, who joined the SEC as an examiner in 2001, has been one of two officials running the Boston-based examination program on an acting basis.
Earlier in his career, he practiced law and worked as an enforcement attorney for a state government office that regulates securities in Massachusetts, the SEC said. Garrity also worked as a newspaper reporter and public school English teacher.
Garrity was promoted “based on his entire body of work,” said David Bergers, director of the SEC’s Boston office. He has shown “a passion for protecting investors,” Bergers said.
In testimony for the inspector general, Garrity said he found Madoff’s purportedly consistent investment returns “highly improbable.”
Interviewed Monday, Garrity declined to discuss Madoff, Markopolos or any cases to which he had contributed.
“I like the money-management business” and “being able to talk to executives,” he said. “I enjoy knowing who’s on first . . . . I guess I’m kind of nerdy on that stuff.”
In his new position, Garrity will play a key role extending the SEC’s oversight of hedge funds and private-equity firms. The federal government gave the SEC new authority in those areas under the Dodd-Frank Act that was passed in the aftermath of the financial meltdown and the Madoff scandal.
With limited resources, the SEC plans to prioritize firms for scrutiny based on the level of risk they pose, Garrity said in an interview Monday.
“We’re looking forward to getting to know them and understanding their businesses, and hopefully effectively regulating them,” he said.