The Securities and Exchange Commission, which failed to stop Bernard Madoff’s long-running investment fraud despite repeated warnings, has disciplined eight agency employees over their handling of the matter but did not fire anyone.
The SEC’s head of human resources and a law firm hired to advise the agency had recommended that SEC Chairman Mary L. Schapiro fire one person, whom the SEC described as a manager in the office that inspects investment firms.
But the chairman decided not to fire the employee, because doing so “would harm the agency’s work,” SEC spokesman John Nester said.
The disclosure that no one was terminated comes at a time when street protesters and other critics who blame Wall Street for the country’s economic plight are questioning whether the government is serious about holding powerful wrongdoers accountable. This week, a federal judge excoriated the SEC for letting firms such as Citigroup settle fraud charges without admitting or denying wrongdoing.
Madoff’s fraud cost investors billions of dollars, shattered lives and became perhaps the biggest embarrassment in the SEC’s history. Many clients who had entrusted Madoff with their savings were left struggling to make ends meet.
“After all the talk about ethics and cleaning up the SEC, the entire Madoff scandal continues to place serious doubt on claims of meaningful progress,” Rep. Darrell Issa (R-Calif.), chairman of the House Committee on Oversight and Government Reform, said in a statement.
The Washington Post reported on its Web site Friday that seven SEC employees had been disciplined, based on details provided by a person familiar with the actions. A second source, an official involved in the process, told The Post that Schapiro had received recommendations to fire an employee over the mishandling of the Madoff case.
Later Friday, Nester confirmed details and added that an eighth employee also received disciplinary action. A ninth employee, who was facing a potential seven-day suspension, resigned before disciplinary action was taken, Nester said.
The punishments given the SEC employees varied and included suspensions, pay cuts and demotions.
The employee recommended for termination received one of the more severe penalties, a 30-day suspension along with a reduction in pay and grade. Another was given a pay cut of 5.7 percent. At the low end, one employee was suspended for seven days, another for three days and two others were issued counseling memos, a step below a reprimand.
Before the agency took the actions, it “thoroughly examined all factors relevant to the imposition of discipline, including the employees’ performance before and since the Madoff events,” Nester said.
When the law firm advising the SEC recommended that an employee be fired, it included a qualifier. If the SEC thought the loss of that person would affect the agency adversely, it could consider a different punishment.
The SEC’s disciplinary process with respect to the Madoff matter was concluded months ago, though one of the employees disciplined has appealed the action beyond the agency, Nester said.
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