Former U.S. Securities and Exchange Commission chairmen and directors were generally unaware that staff were probing Bernard Madoff until the former financier was arrested in December 2008 for running a $65 billion Ponzi scheme, a federal watchdog said in a report released on Friday.
The report underscores the disconnection between senior officials and their employees, who often lacked the experience necessary to follow up on leads and understand the magnitude of their investigation.
Former Chairmen Christopher Cox, William Donaldson and Arthur Levitt, former director of enforcement Linda Thomsen and former director of examinations and compliance, Lori Richards, did not play any inappropriate role in the SEC's probes of Madoff, according to the 457-page report released late on Friday before a three-day holiday weekend.
Two days ago, the SEC released a summary of the report, which accused the regulator of never conducting a competent probe of Madoff despite complaints dating back to 1992.
SEC Inspector General David Kotz found that the SEC missed numerous red flags and did not follow up on leads that may have uncovered Madoff's investment scam years ahead of his confession in December of 2008.
Among his criticisms, Kotz said SEC compliance managers and examiners assigned to a 2003 investigation of Madoff lacked any particular expertise or experience.
Kotz recommended that current SEC Chairman Mary Schapiro take appropriate action to address performance failures by employees who still work at the agency.
Madoff pleaded guilty in March to orchestrating the Ponzi scheme and is now serving a 150-year prison term.
Prosecutors have said that Madoff appeared to be rewarding his customers with steady returns, but he was faking their account statements and did not place trades on their behalf.
Kotz' report was posted online at http://www.sec.gov/news/studies/2009/oig-509.pdf
(Reporting by John Poirier, Julie Vorman, Rachelle Younglai; Editing by Tim Dobbyn)