SEC’s Failure in the Madoff case prompts lawsuit by Citizens for Responsibility and Ethics in Washington (CREW)

January 8, 2010

CREW, since 2003, has closely monitored government ethics, bringing egregious conduct to light and holding public officials accountable for their misconduct.  This statement is made according to their website.

On January 6th, 2010 – some three months after they requested information from the SEC (Securities and Exchange Commission) CREW filed a lawsuit against the 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.

As a business ethics speaker, and one who is constantly asked about the Madoff scandal, especially how the SEC completely missed this massive fraud conducted right under their nose, I was poised to applaud CREW’s effort in this matter.  It is becoming clear that what is stated is often nothing more than smoke and mirrors.

Then I became confused.  Is CREW after headlines or did they just miss the obvious?  The SEC’s website (see here) states what actions they have taken as a result of the Madoff scandal.  The bullets points are stated below:

Somehow, as I type this, I am sure that someone can provide clarification, but why is a lawsuit necessary when the SEC has published what they are doing following Madoff?

Now if CREW is asking for more specifics than what the SEC has published…then I get it.  But for now, I wonder where the Washington ethics breech is when the SEC has publically stated their intent and actions?