One of the more frustrating elements of the Bernie Madoff scandal is the fact that the regulatory system seemed to have been stymied by Madoff's influence and the various efforts he made to avoid scrutiny. On several occasions, the SEC didn't act on information that was given to them that suggested Madoff was doing something illegal. The SEC received a letter almost a decade ago warning them that Madoff was conducting a criminal enterprise and, as Paul Kiel notes, there were other warning signs.
Madoff did a number of things that helped hinder prosecution, including simultaneously running a separate, legitimate business that the SEC looked at instead and didn't find any problems with. Jake Bernstein takes a look at an inspector general's report dealing with other shenanigans at the SEC, and finds reports of employees downloading porn, using commission resources to run private businesses, and at least one case of a regulator using their position to intimidate a broker who was working on a family member's investments. Not quite as dramatic as the scandal that enveloped the Department of the Interior, but a reminder of how poorly many of these agencies were run under the outgoing administration.
-- A. Serwer
