SEC head says she relied on counsel tied to Madoff account to sort out any conflict
Thursday, March 10, 2011
SEC Chairman Mary L. Schapiro has told lawmakers that she left any ethical questions in former general counsel David M. Becker's hands when he told her in 2009 that his late mother had an account with Ponzi scheme operator Bernard Madoff.
"I do not recall asking Mr. Becker for or receiving additional information," Schapiro wrote in her first public statements on the matter since congressional Republicans called on her last month to explain how she dealt with Becker's potential conflicts of interest.
In a pair of letters Tuesday to six Republican members of Congress, Schapiro said she relied on Becker and an agency ethics officer to sort out any potential conflicts involving Becker's inheritance of the Madoff account.
Republican lawmakers have criticized the Securities and Exchange Commission for allowing Becker to help frame the agency's position on issues affecting investors in Madoff's Ponzi scheme even though he had a potential personal stake in those matters. They have said the SEC must live by the same ethical standards it demands of others.
Rep. Randy Neugebauer (R-Tex.), chairman of the House Financial Services subcommittee on oversight and investigations, said Wednesday that Schapiro appears to have handled the matter inappropriately and that the SEC seems to have "a very loose process" for addressing such issues.
"If someone comes to you and says, 'I may have a potential conflict of interest,' you don't say, 'Well, just use your best judgment,' " Neugebauer said.
Schapiro is likely to face questions about her actions when she testifies Thursday on Capitol Hill about the SEC's budget and operations. The issue has put her on the spot as she fights to defend the agency's funding from potential budget cuts.
Schapiro wrote Tuesday that she has asked the SEC's new ethics counsel to review the agency's procedures for evaluating conflicts of interest.
"When Mr. Becker initially notified me that his deceased mother had had a Madoff account that had been closed years earlier, the issue did not appear to me to present a conflict of interest," Schapiro said in one of the letters.
Schapiro was responding to questions from Rep. Darrell Issa (R-Calif.), chairman of the House Committee on Oversight and Government Reform; Sen. Charles E. Grassley (R-Iowa); House Financial Services Chairman Spencer Bachus (R-Ala.); and three other Republican members of the Financial Services Committee: Jeb Hensarling of Texas, Scott Garrett of New Jersey and Neugebauer.
When Becker's mother died in 2004, she left a $2 million Madoff account. Becker and his brothers later liquidated the account, and Madoff's business was subsequently exposed as a fraud in which some investors were paid with other investors' money.
Schapiro said Becker told her about the matter shortly after he became general counsel of the SEC in 2009.