CREW SUES SEC FOR RECORDS OF REFORMS IN WAKE OF MADOFF SCANDAL

January 6, 2010

Contact: Matt Jacob // 202.408.5565

6 Jan 2010 // Washington, D.C. - Today, CREW filed a lawsuit against the Securities and Exchange Commission (SEC), challenging the SEC’s failure to produce records in response to CREW’s October 6, 2009 Freedom of Information Act (FOIA) request for records related to reforms the SEC has taken in the wake of its failure to detect Bernard Madoff’s $65 billion Ponzi scheme. Although the agency received numerous complaints and tips about Mr. Madoff’s activities over a 16-year period, and conducted five major investigations and examinations of Mr. Madoff, the SEC still failed to detect his colossal fraud. In January 2009, the SEC began implementing what it described as “decisive and comprehensive steps” to reduce the chance similar frauds will occur in the future or remain undetected by law enforcement, and an extensive Inspector General report outlining the SEC’s multiple failures suggested 58 more reforms in September. The records CREW seeks will help the public understand the extent to which the SEC has implemented meaningful and necessary reforms.

CREW’s complaint.

CREW FILES SEC FOIA REQUEST FOR INFORMATION REGARDING REFORMS IN WAKE OF MADOFF SCANDAL
LINK

6 Oct 2009 // Washington, D.C. - Today, CREW filed a Freedom of Information Act request with the Securities and Exchange Commission (SEC) seeking records related to steps it has taken to institute reforms in the wake of Bernard Madoff’s $65 billion Ponzi scheme that the SEC failed to detect for at least 16 years. The SEC’s systemic failures are documented in a series of reports issued in September by the SEC’s Inspector General, which also made 58 recommendations for changes. Since Madoff turned himself in last year, the SEC has announced a series of reforms to its Division of Enforcement and Office of Compliance Inspections and Examinations – the groups that did not uncover Madoff’s fraud. CREW seeks these documents to help the public understand the extent to which the SEC has implemented meaningful and necessary reform and the extent to which the SEC is currently capable of enforcing the nation’s securities laws.

CREW’s FOIA request to the SEC.

Dave Nolan applauds 2 new FOIA lawsuits filed against SEC about Madoff
LINK

Dave Nolan applauds Citizen for Responsibility and Ethics and Washington (CREW) for filing a FOIA suit against SEC, based on its failure to produce records related to its post-Madoff reform. This suit is described in the TPMMuckraker Blog.

Dave Nolan notes, though, that the CREW suit misses the real cause of SEC's failures in Madoff - the battered "merit principles" in SEC, resulting from 30 years of OSC and MSPB lawbreaking, which results in a dysfunctional and corrupt SEC workplace that Madoff exploited. Another FOIA suit has been filed, by a federal whistleblower who supports Dave Nolan for OSC, against SEC for its failure to produce records of its compliance with it statutory duty to prevent violations of the "merit principles." This suit explicitly connects SEC lawbreaking with its failure to catch Madoff. The suit is here, its exhibits are here.

According to Dave Nolan, "MSPB has a duty, which it renounced 30 years ago, to conduct "special studies" to ensure federal emploees are adequately protected from agency violations of the "merit principles" of the federal civil service - the bedrock of the federal civil service. Because of this, MSPB has no records showing MSPB employees are adequately protected from violations of the "merit principles." If MSPB has no records of its compliance with this duty, no other agency has them either. SEC is compounding is lawbreaking by failing to comply with a FOIA request for records because it has no records showing compliance with its most essential duty to SEC employees - protect them from violations of the "merit principles," the bedrock of their employment relationship with SEC."

He continues, "had MSPB conducted the required "special studies," it would have exposed that OSC unlawfully renounced its duties to protect federal employees from agency vioations of the merit principles and Madoff would have been stopped by SEC, likely in early 1990's."


TPMMuckraker
SEC Sued Over Failure To Disclose Post-Madoff Reforms
Nick Pinto | January 6, 2010, 3:52PM,
LINK

The Securities and Exchange Commission is being sued over its failure to respond to Freedom of Information Act requests for information about what reforms, if any, it has undertaken since it failed to detect Bernard Madoff's multibillion fraud.

The government watchdog Citizens for Ethics and Responsibility in Washington announced the lawsuit today, saying that the SEC has yet to reply to CREW's October 2009 information request.

Last month, a different good-government group, the Project On Government Oversight, did manage to get some Madoff-related records out of the SEC. As we reported at the time, those documents showed that the agency has yet to institute many of the reforms recommended by its internal watchdog after the Madoff scandal.

Regular TPMMuckraker readers will remember that we've been closely following just what went wrong with the SEC's oversight of Madoff and what the commission plans to do about it.