Sunday, September 6, 2009
As noted here, the SEC's release of the executive summary of the Madoff Report (Investigation of Failure of the SEC to Uncover Bernard Madoff's Ponzi Scheme) demonstrated that there was no finding of corrupt conduct. But the bottom line was that the ball was dropped on more than one occasion. It is, of course, easy to look back and examine the mistakes made. The 477 page Report, now released, allows that to be done. But as people ponder the sad findings in this report, the more important report and findings that need to now be made - is what to do about all of this to make certain it won't happen again. Clearly the new SEC chair has put into place some measures to allow for better regulations and control. But is this enough? Some thoughts -
- If this had been a company that had missed the red flags, the DOJ would be making them pay a lot of money, institute a more effective corporate compliance program, and probably have monitors in place to make certain that wrongdoing would not occur again.
- Is Madoff no different from the rogue employee who operates improperly and hurts innocent victims (in this case the victims are those who invested, those who benefitted from entities that had invested, and the general public).
- Will there ever be sufficient controls in place without thorough outside monitoring? In the case of corporations, the DOJ typically wants more than a company compliance program and looks for outside monitors to make certain there are no future violations. Should the SEC be held to a lesser standard? No - I am not suggesting that we employ John Ashcroft for this one.
- An Inspector General Report after-the-fact is wonderful, but where was the oversight when this fraud was occurring.
- It is easy to put blame on individuals who may have missed items, but we need to also consider their workload and whether it was reasonable for them to discover this fraud and whether more resources and systems are needed to assure they can properly perform their jobs.
- Clearly it is easy to Monday morning quarterback, especially on a Sunday over Labor Day - but this amount of fraud needs more thought and consideration.
The 477 pages tells us what happened. Now we need to examine the controls in place to assure it will never happen again.