U.S. Rep. Darrell Issa
Rep. Darrell Issa, R-Calif., the chairman of the House Oversight and Government Reform Committee, is stepping up pressure on the Securities and Exchange Commission to explain apparent conflicts of interest presented by General Counsel David Becker’s involvement in the Bernie Madoff investment scam.
In a letter co-authored yesterday with Sen. Charles Grassley, R-Iowa, the ranking member on the Senate Judiciary Committee, Issa demanded to know why SEC chief Mary Schapiro allowed Becker to be involved in the Madoff case when Becker’s family appears to have benefited from investments made with Madoff.
“Becker’s participation in any aspect of the commission’s involvement with the aftermath of Madoff’s fraud suggests multiple conflicts of interest,” wrote Issa and Grassley in their letter to Schapiro. “It has also subjected the commission to further questions about its management and independence.”
John Nester, the director of the SEC’s office of public affairs, declined to comment on the Issa-Grassley letter.
That Becker benefited personally from investments made with Madoff had remained hidden from the public until last Saturday, when the New York Daily News reported that Becker and his brothers had gained more than $1.5 million after investing their late mother’s estate with Madoff in 2005.
Becker has now been named as a defendant in a clawback suit filed by Irving Picard, the trustee who is trying to recover lost assets for his clients including the owners of the Mets baseball team, Fred and Jeff Wilpon.
Picard is trying to recover from Becker the more than $1.5 million he and his brothers allegedly made by investing with Madoff.
Becker served as SEC general counsel from 2000-2002, and then again from 2009 until he resigned on Feb. 25, supposedly for personal reasons.
Becker’s involvement with the Madoff scandal dates back to 2000, when Harry Markopolos, a Boston-based investment analyst, warned the SEC that Madoff, then operating as an SEC-registered broker/dealer, was engaged in investment fraud.
Becker and the SEC, looking into the complaints filed by Markopolos more than 10 years ago, found nothing wrong at that time.
Issa and Grassley in their letter to Schapiro charged that she had allowed Becker to advise and represent the SEC in the Madoff case without properly examining the conflicts of interest presented by Becker’s personal financial interest.
Specifically, Issa and Grassley’s accusations include that:
- Chairman Schapiro knew, from February 2009, that Becker had received money from a Madoff account, but she never ordered Becker to determine his possible clawback liability in the Madoff bankruptcy case;
- Becker advised and represented the SEC in the Madoff bankruptcy case – the same case in which he eventually became a clawback defendant. In that case, Becker recommended a position that affected his personal financial interest;
- Chairman Schapiro knew that Becker, her general counsel, was responsible for this work, but never asked Becker whether the advice he was providing might affect his personal financial interest;
- Becker asked for a waiver from the SEC’s ethics office to perform this work, but did not fully disclose his financial interest to the ethics office;
- SEC ethics counsel William Lenox granted Becker’s waiver request 25 minutes after Becker made it, accepting Becker’s incorrect assertion that the work would not affect his financial interest;
- Becker met with Madoff victims whose interests were opposed to his, because they will receive portions of any Madoff money that he forfeits in the clawback litigation – and did not disclose this fact to them; and that
- Becker’s financial interest and conflicts were not disclosed to the commission’s inspector general, or the public, until Becker was sued in the Madoff bankruptcy case.
Issa and Grassley gave Schapiro until 5:00 p.m. on Monday to answer some 28 detailed questions about Becker’s involvement with Madoff and to produce the documents requested.
Even a brief look at the questions gives insight into the indignation Issa and Grassley obviously feel over Becker and his family having personally gained from investing with Madoff, while Madoff stole from investors what a court-appointed trustee estimated at $18 billion in a Ponzi scheme Madoff began in the 1990s and perpetrated at least in part under Becker watch as SEC chief legal counsel.
Here are the first three questions:
- When did Mr. Becker first tell Chairman Schapiro that his late mother’s estate had included proceeds from the Madoff account? What did Mr. Becker tell Chairman Schapiro about the Madoff account? Did Chairman Schapiro ask Mr. Becker for additional information?
- When Mr. Becker first told Chairman Schapiro that his late mother’s estate had included proceeds from the Madoff account, did Chairman Schapiro direct Mr. Becker to disclose that fact to the commission’s inspector general? Did Chairman Schapiro direct Mr. Becker to disclose that fact to anyone else?
- When Mr. Becker first told Chairman Schapiro that his late mother’s estate had included proceeds from the Madoff account, did Chairman Schapiro direct that Mr. Becker recuse himself from activities related to the commission’s involvement with the aftermath of Madoff’s fraud?
Madoff, 72, is serving a sentence of 150 years at Butner Federal Correctional Institution in North Carolina after pleading guilty to 11 federal felonies involving investment, securities fraud, money laundering, making false statements and perjury.