Criminal Charges Hounding Ex-general Counsel Over Madoff Fraud

Jack Humphrey, Regulatory journalist
September 21, 2011 /

The former general counsel of the Securities and Exchange Commission who worked on the Bernard Madoff fraud case is facing investigation in a bid to find out whether or not a conflict of interest was involved during his stint.

David Becker, who is facing criminal investigation by the Inspector General following a suit filed by a Trustee last March, allegedly dealt with the Madoff case while having “personal financial interest by virtue of his inheritance”, according to a report released by SEC Inspector General David Kotz.

Accordingly, Becker received an inheritance that included $2 million of Madoff funds and worked closely on the compensation policy for the victims. Meanwhile, trustee Irving Picard lost in a bid to put down the request of Madoff investors for a rehearing of how he should calculate the compensation for losses in the Madoff fraud and who should get it.

The US Court of Appeals in New York said on August 16 that Picard can disregard phony profits that Madoff never invested in when he would calculate the losses and who is entitled for a payback.

On the other hand, Kotz report cited Becker’s personal involvement in certain matters that he has personal financial interest in by virtue of his inheritance. Becker received money including Madoff funds from his mother.

Becker was involved in policy-making related to the compensation of the Madoff $65 billion Ponzi scheme victims. His role as adviser could have directly impacted his financial position, according to the report.

That is so because Becker’s way of valuing the claims could have restricted the power to recover the money from Madoff beneficiaries, of which he was one.

In a statement, SEC chairperson Mary Schapiro said she is taking Kotz’s report “very seriously.”

She added: “It would be inappropriate for me to comment on the Inspector General’s referral to the Department of Justice.”

Schapiro said she has known Becker for many years as “a talented, highly skilled lawyer and a dedicated civil servant who served under three Chairmen.”

“As the Inspector General recommends, we will seek another vote of the Commission on the question of the SEC’s position on the valuation of Madoff victim accounts.

“I believe that the decision the Commission made on that issue was appropriate under the law and in the best interest of investors.”

The SEC is planning to implement the other recommendations included in the report.

 

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