I love that line. I first heard it on the trading desk at Bear Stearns in the early ’90s. For the last twenty years, I have used the line often to counter those who would bemoan an outcome with the standard, “If only . . .” My response typically generates a healthy chuckle and we then move on.

At this point, I feel comfortable amending the line from above to “If my aunt had balls, she’d be Mary Schapiro.” Too harsh, you say? I think not. How so?

Let’s review a recent Wall Street Journal article, Madoff’s Ghost Still Haunts SEC:

Financial executives aren’t the only folks lawmakers are pursuing. They also want to see more heads roll at the Securities and Exchange Commission.

Nearly 18 months after Bernie Madoff’s multibillion-dollar Ponzi scheme was exposed and almost a year after the SEC’s inspector general issued a blistering report, lawmakers are still questioning how the SEC staffers who reviewed the Madoff firm and investigated fraud allegations were being punished.

SEC Chairman Mary Schapiro told Congress during an oversight hearing that 15 of 20 enforcement attorneys and 19 of 36 examination staffers that dealt with the Madoff matter had left the agency. The SEC was still conducting a disciplinary process, she said, but it should be concluded soon.

Republican Rep. Bill Posey of Florida –- home to many Madoff victims -– said he wants to know if those SEC employees ended up at other regulatory agencies, working for companies they were supposed to regulate, or retired with government pensions.

“There’s a necessity to know where they went,” said Posey. “It’s like letting a pedophile slink out the door or change neighborhoods. We’re dealing with the same type of problem here.”

Wow!! Representative Posey is being aggressive here, but I commend him because the nation still deserves answers to so many Madoff questions that have been swept under the SEC’s and FINRA’s rugs. The WSJ continues:

Schapiro strongly disagreed. “These aren’t bad people. In some cases they were people who were very junior and not adequately trained or supervised.” In other cases, she said, they were pulled from one project to another.

‘Junior people’ logically implies that in other cases there were senior people. In fact, the people calling the shots on the Madoff investigation were certainly not junior.

Why were the investigators pulled from the Madoff case? Were some of them getting too close for comfort? Were they asking too many questions? Were they being frozen out by the SEC’s inner circle? I do not ask these questions in a rhetorical fashion. I ask them because those were the clear cut impressions left by an SEC attorney well trained in the school of options trading who was making real progress in deciphering the Madoff scam. To whom do I refer? Longtime readers of Sense on Cents and listeners to No Quarter Radio’s Sense on Cents with Larry Doyle may recall my interview in October 2009 with Genevievette Walker-Lightfoot, a former SEC attorney who investigated Madoff. Genevievette was not bashful in excoriating the senior laden ‘inner circle’ at the SEC. Perhaps Mary may want to listen to the interview or call on Ms. Walker-Lightfoot. Maybe she’ll learn something.

What does Mary Schapiro have to say now about the impact Mr. Madoff has made on current work at the SEC?

During examinations, Schapiro said, “We don’t rely on the word of somebody like Madoff.”

Wow!!!!

Mary has some set of cojones!! Industry insiders have shared with me that Mary kept close company with Mr. Madoff at industry conferences. Now she has the balls to let America know that SEC investigators do not currently rely on the word of somebody like Madoff.

You can’t make this stuff up.

Sense on cents compels me to inquire, “Mary, how would you even know? If you were not able to detect the likes of a scam artist such as Madoff for decades, what makes you think America believes you might be able to detect another scam artist now?”

Yes indeed. If my aunt truly did have balls, she would be Mary Schapiro.

LD

Read how Austan Goolsbee, one of Obama’s chief economic advisors, tiptoes, avoids and runs away from this idea!!

CORKER: There is no question, and I think that first of all, I plan to offer changes to this resolution authority that say that, if a large entity like this has to go through this resolution where in essence they’re liquidated in an orderly way, I think that everything that the executive team and the board members have earned through this company over the last five years needs to be clawed back. In other words, there needs to be some penalties assessed to the management that have caused the country to have to go through this orderly liquidation process. So absolutely, I will be offering an amendment that deals with that, so that we’re taking back, we’re clawing back all the earnings that management has made out of this firm, if it has to go through orderly liquidation. I think that’s very appropriate, and certainly I’m going to be doing that on the floor if it doesn’t make
it into the base bill.

TAPPER: Austan, can the White House get behind that clawback
provision? Are you being out-populisted by Republicans?

GOOLSBEE: Well, look, in the bill now — the president went to
Cooper Union this last week to revisit the spot where more than two
years ago, he went and said we need to have fundamental reform–

TAPPER: But there is no clawback in this bill?

GOOLSBEE: There is a requirement that they’re all fired. If you
get to that point, all the management is fired–

TAPPER: So they take their $500 million to their home in the Hamptons.

GOOLSBEE: — all the shareholders are wiped out. Well, look, as I say, on any details, we’re open to looking at negotiating the details of how we carry out the president’s principles. But if negotiation — and Senator Corker, to his credit, is not in this camp — but if the negotiators are going to come forward more as a delaying tactic and we’re just going to put in hundreds of amendments and try to keep this going so as to stall, delay and kill reform, that’s not going to happen. This is going to pass.

Um. No. It’s not a delaying tactic. But since we saw in the case of Goldman Sachs that they were betting on the market crashing and profiting by our losses, we need to find some way to put the fear of God into these jerks so that they do not try to profit by playing Ponzi schemes with our dough. Corker’s idea is just one way to make sure we have leglsiation with teeth.

Whether Senator Corker is just doing some populist-type posturing or not, the point is made — if we don’t have accountability in this reform bill and, as Dem. Senator Sherrod Brown discussed earlier, a way to overcome this “too big to fail” debacle, any reform falling short of tackling those two concerns effectively is meaningless.

What do you think would be fitting punishment for irresponsible and dishonest Wall Street sharks? I have a feeling I know the answer!

Democratic officeholders should be afraid.

Republican officeholders, too.

For many a year now, officeholders of both major parties have worked hard to earn the distrust of ordinary Americans. It appears that they finally have succeeded.

If only ordinary Americans hadn’t been so inattentive. If only ordinary Americans hadn’t been so trusting. If only ordinary Americans hadn’t been so damnably nice, the country would be in a better position to manage its finances today. [snip]

Better late than never, a lot of ordinary Americans are waking up to the sobering reality that there really is no one they can trust. Not Democrats. Not Republicans. Not government. Not corporations. And certainly not corporations in league with government.

The people who are angry today are more in tune with this nation’s founders than ordinary Americans have been in decades.

While there are those who make fun of a few tea partiers dressing up in costumes reminiscent of our founding fathers, those costumes are designed to make a point:

The United States has an intricate system of checks and balances, and a government structure based on a separation of powers, and a Bill of Rights that safeguards the rights of states and the rights of the people precisely because the greatest collection of political talent and philosophical insight ever assembled on this continent — and maybe anywhere on this planet — looked at the concept of government and said, “We need to make a really small cage for this thing, then be careful not to overfeed it.”

We seem to have lost the care-and- feeding instructions about a century ago. We let government out of its little cage and it has been consuming everything it can lay its paws on ever since. In the last 45 years, it has been on a real binge, and in the last year and a half, it has taken bigger bites than a lot of people thought possible.

Ordinary Americans who care about freedom are finally getting a clue and — horrors! — they’re hollering at members of Congress. That’s right: Nice, trusting, formerly inattentive Americans are getting in the faces of the political class and calling them names.

…If members of the political class are too tender to endure a little well-earned rudeness from the people whose hard-earned money they like to “spread around,” then they ought to get out of politics. Maybe their successors will find the voice of the people less irritating.

While O’Brien is correct in stating that this righteous anger needs to be expressed without violence, he also states that this administration and our media as taking to shutting down criticism with tactics of demonization (just like the administration before it):

Don’t doubt for a second that the left is hoping desperately for someone to step all the way out of line. They thought they had their man — and early news reports said they did — when Joseph Stack crashed his Piper Dakota into an IRS building in Texas.
As it turned out, Stack proved to be a Marx-quoting lefty — the wrong flavor of nut.

So the left has to settle for a little name-calling of its own: “ignorant,” “racist,” “homophobes,” “hooligans,” “extremists.” The list, as you know, goes on and on.

It’s bunk, but it’s the script.

Tea Party folks are just patriots worried, with good reason, about the future of the country they love. They’re vocal and they’re inspiringly unaffiliated.

They scare the hell out of both political parties, because they’ve embraced distrust.

The Democrats fear them because they see through the left’s empty promise of utopia in exchange for freedom. The Republicans fear them because they’re pushy and because they’re loyal to their principles rather than to a party.

They make everyone uncomfortable. That’s healthy.

While I’ve never been to a tea party protest, I got good and angry when the bailouts started at the end of 2008 and the pork laden non useful Stimulus package passed in 2009 and the bailouts of car companies that couldn’t run themselves properly happened, too. The 2700 page health care monstrosity, whose ugly details are now just coming to light, was the last straw.

I was taught to play by the rules only to discover my taxpayer dollars were used to bail out those using our investments as a giant ponzi scheme. And too many politicans who exempt themselves from the rules and policies we are expected to follow take pork for their districts as an inducement to continue to sell taxpayers down the river.

So crooks and liars are rewarded for their folly while the rest of us are told to pay the bill – and keep playing by the rules. That is but one reason for the groundswell of anger sweeping the country.

What are yours?

Harry Markopolos

Markopolos’ biggest bombshell this morning is his warning to America, “Don’t trust your government.” No surprise that Today host Matt Lauer did not probe deeper. I am not confident that other outlets will delve deeper into Harry’s statement, either. I wonder why Harry himself is reticent to specifically point out the individuals and the instances which lead him to make that statement.

Recall that a year ago Harry defined the SEC as merely incompetent while simultaneously defining FINRA (Financial Industry Regulatory Authority) as ‘in bed with the industry’ that is Wall Street. Well, it does not take an advanced degree to connect Harry’s grenade toss into FINRA’s backyard a year ago with his volley this morning.

Who is the central figure coarsing across the landscape of the NASD (FINRA’s predecessor), FINRA, and now the SEC?

Mary Schapiro.

Why doesn’t Harry get very specific in making these statements?

Why doesn’t the media probe deeper?

When will Mary Schapiro be compelled to answer questions not only about her relationship with Bernie Madoff, but about her tenure at the NASD and FINRA?

At that point, would Harry think we might be able to trust our government?

I certainly would like to get answers to a whole host of questions surrounding Ms. Schapiro. What questions? As I wrote last December and repeat today, “Mary Schapiro Owes America Some Answers”:

Mary Schapiro, the current SEC Chair and formerly the head of FINRA, possesses a wealth of information on a number of topics for which America would like greater detail. What are some of these topics?

1. Did FINRA possess material, non-public information and act upon it in the liquidation of its $671 million auction-rate securities position in mid-2007 as the ARS market was failing?

2. Did FINRA invest its own funds in Bernard Madoff, as alleged in the complaint Amerivet Securities vs. FINRA.

3. What was the nature and full depth of Mary Schapiro’s relationship with Bernie Madoff? Bernie himself characterized Mary as a ‘dear friend.’

4. Did Mary Schapiro and her fellow FINRA execs lie verbally and in a proxy statement regarding the merger of the NASD with NYSE Regulation to form FINRA?

Are these some of the questions leading Harry to make his statement this morning about not trusting our government? In my opinion, they are a good start. America deserves these answers.

(UPDATE: Late Monday afternoon, Judge Jed Rakoff issued a ruling on Question #4 above. He has dismissed a complaint regarding this allegation, believing that Schapiro and FINRA are entitled to absolute immunity. For the full story, please read here).

Now let’s listen to Harry’s 7-minute clip.

LD

Who is speaking? What ‘idiot woman?’

This quote is by none other than Bernie Madoff. His assessment is of Erin Arvedlund after she had written the first comprehensive review of Madoff’s business in 2001. Ms. Arvedlund seriously questioned the integrity of Madoff’s enterprise. Madoff later admitted he was shocked that the SEC did not follow up on the points raised by Ms. Arvedlund.

Our markets and media are filled with analysts and pundits who are overly qualified in reviewing events after the fact. Where are those who have the insights, intellect, and courage to pursue the story before it breaks? Erin Arvedlund is one of the few who possess those admirable traits. Sense on Cents looks to pursue truth, transparency, and integrity in our markets and our economy. On that note, I am thrilled as No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Erin Arvedlund.

Ms. Arvedlund’s top selling book, Too Good To Be True, provides the most comprehensive review of the entire Madoff fiasco. Let’s learn more about Erin Arvedlund:

Erin Arvedlund began her career as a reporter at Dow Jones newswires in 1993. In 1996, she moved to Moscow to write about business and emerging markets for The Moscow Times. In 1998, she joined TheStreet.com, one of the first real-time news and stock market web sites. She then moved to Barron’s magazine to cover options, mutual funds and hedge funds from 2000-2003. From late 2003 to 2005 Arvedlund reported on business and politics in the former Soviet Union for The New York Times. She also has Wall Street experience, having worked in the hedge fund industry at two separate firms, Vision Opportunity Capital Management and Sanford C. Bernstein. Arvedlund has a B.A. from Tufts University in International Relations and studied abroad for a semester at Leningrad State University in St. Petersburg. She has also freelanced extensively for print and online magazines such as Fortune, Outside, The Economist Intelligence Unit, Portfolio.com, and Slate.com. She is married and divides her time between New York and Philadelphia.

The Madoff investigation is a long way from being over. What about Bernie’s family’s involvement? What about the feeder funds? What about Bernie’s relationships with the regulators, including current SEC Chair Mary Schapiro? What hasn’t been revealed by regulators? What has not been fully exposed of Bernie’s early years in the business?

Please join me Sunday evening from 8-9pm ET as we explore these questions and so much more with Erin Arvedlund. As a preview, here’s a short video clip of Ms. Arvedlund discussing her book. – LD

Rackets operate best in the dark. Well, let’s get that flashlight out again. First a little background on SIPC, then two riveting video clips after the fold.

For those unaware, SIPC (the Securities Investor Protection Corporation) is an insurance fund in which member firms pay premiums to cover losses. From SIPC’s own website, we learn:

What SIPC Covers . . . What it Does Not

The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC.

Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

It is important to recognize that SIPC does not work the same way as the Federal Deposit Insurance Corporation in terms of blanket protection of losses.

For this insurance coverage, SIPC charged its member firms an annual premium of $150 from 1996 until April 2009. That is no joke. Wall Street firms paid a token $150 a year to promote the idea that your investments were protected. While SIPC did have a $1 billion reserve fund, that was woefully insufficient to cover the losses incurred in the Madoff scam. Make no mistake, though, the SIPC annual premium of $150 should also be looked upon as a scam.

Think of it. Individuals pay far more for auto insurance than Goldman Sachs paid for investor insurance for over 12 years.

Are you getting increasingly pissed off? America should be extremely pissed off. The SIPC coverage has been a critical part of the Wall Street racket.

What follows are two video clips from last week’s Congressional hearing on securities investor protection reform. The first 7-minute video clip highlights Rep. Paul Kanjorski (D-PA) undressing the SEC’s Mike Conley and SIPC’s Stephen Harbeck for the massive failure of the governmental and non-governmental financial regulatory system.

Kanjorski certainly hits on America’s rage at the dysfunctional financial regulatory system. My only concern with Kanjorski’s delivery was his very deferential comments directed toward SEC Chair Mary Schapiro. I can only guess he is not aware of the outstanding lawsuits against FINRA, including the Standard Investment Chartered vs. FINRA which alleges Schapiro and other FINRA executives of lying.

This next video clip is Rep. Gary Ackerman’s (D-NY) undressing of SIPC’s Stephen Harbeck. Ackerman rails on Harbeck and SIPC for the token $150 annual insurance premium paid by SIPC member firms. While we can watch Rep. Ackerman confront SIPC Chief Harbeck, how did we get here in the first place? Why haven’t heads rolled? Who is truly protecting American investors?

America deserves to know the full extent of the Wall Street racket that was and to a large extent still is facilitated by the regulatory incest between Wall Street and Washington. Will this hearing be a start, a finish, or merely a pit stop along the way?

LD

Each and every investor in America should be livid at the insurance scam perpetrated by SIPC and its member firms, but especially by the largest firms taking the greatest risks! I will address this insurance scam in a post later today, but for now I want to highlight an engagement between Rep. Paul Kanjorski (D-PA) and Stephen Harbeck, the head of SIPC that occurred last week during a hearing on securities investor protection reform.

This interaction should have received massive coverage by the mainstream media. Regrettably, but not surprisingly, it did not. Why? If it received the appropriate coverage, it would shine a laser beam on the incestuous nature of the relationship between Wall Street firms and its regulators (SEC and FINRA) and insurer (SIPC).

From the transcript of the hearing last week:

KANJORSKI: And just a couple of questions. I think you’re absolutely correct, Ms. Speier. And we’re going to work toward that end, I hope, as a committee.

But I — I notice you’re talking about increasing the premiums in the future. Why haven’t you thought about making a back assessment? You’re — you’re really punishing the people that are going to come into the business or may not even have been in the business when Madoff was around.

Why shouldn’t we put the assessment on the people that were in the business when it happened, and with the law professor, Coffee, indicating that would put an incentive on the dealers to be working more in conjunction with the SEC and with your organization to see that this doesn’t happen, because there would be a payment that they would have to make.

(CROSSTALK)

KANJORSKI: Why — why — in order to accomplish an assessment instead of a future increase in premiums, would you need legislation to do that?

HARBECK: Yes, we would, Mr. Chairman.

KANJORSKI: Well, will you prepare that request so you get it to the committee and we can look at it.

Will Wall Street firms be hit with this ex-post facto one-time assessment to address the gross failures of the regulators at the SEC and FINRA, along with the SIPC business model, in truly protecting Madoff investors?

The Madoff scam, the financial regulatory failures, and the SIPC insurance scam are all part and parcel of the Wall Street racket. It is high time the racket gets hit with the bill!

Stay tuned for Part II of this piece, where I will provide riveting video clips from last week’s Congressional hearing. In the meantime, for those who would like to read the entire transcript from the hearing, please click on the image to open a pdf document. It is well worth the read.

LD

High five to JD for tipping me off to a segment about Bernie Madoff that just aired on CNBC. While little is truly new in this segment, Bernie’s assessment of his relationship with former FINRA head and current SEC chief Mary Schapiro is startling. While Ms. Schapiro and her colleagues at FINRA have downplayed any sort of relationship with Madoff, Bernie has a different take.

There’s something about Mary as Bernie calls her “a dear friend.”

Will the government powers have the cojones to more fully explore this relationship? Or, are they already aware of it? As I wrote in my commentary of October 22nd, “Nasdaq Sale: Why Would Schapiro and FINRA Execs Lie?”:

Did Ms. Schapiro receive the “E-Z Pass” to the SEC from FINRA with the support of the powers that be on Wall Street? Was the chair of the SEC the ultimate payoff to Ms. Schapiro for the successful completion of the merger between NASD and NYSE Regulation to form FINRA?

What does Bernie have to say? Let’s review the CNBC segment, Madoff: It’s ‘Amazing’ I Didn’t Get Caught Sooner. . . (video clip after the fold).

Jailed swindler Bernie Madoff said it was “amazing” that he didn’t get caught sooner in his multi-billion-dollar Ponzi scheme, and that everything the SEC did to investigate him prior to 2006 was a waste of time, according to a jailhouse interview he gave to SEC Inspector General H. David Kotz.

Madoff also told Kotz that SEC Chairwoman Mary Schapiro was a “dear friend,” although she “probably thinks, ‘I wish I never knew this guy.’”

• For a Full Text of the Interview, Click Here

Madoff gave the interview to Kotz in June while awaiting sentencing for one of the largest financial frauds in history. At the time, Madoff was being held at the Metropolitan Correctional Center in New York. He agreed to speak to Kotz, who was investigating the SEC’s decades-long failure to uncover the scheme. The SEC released notes of the interview along with hundreds of other exhibits in the investigation following a request by CNBC under the Freedom of Information Act.

US Department of Justice Bernie Madoff mugshot

Madoff tells Kotz he feels “misunderstood” by prosecutors in his case, and that there is ” a lot of misinformation” circulating about the scandal as a result. However, he adds, “I’m not saying I’m not guilty.”

Madoff says that in multiple encounters with SEC investigators over the years, he never had to tell them about his role in the industry because “they already knew.”

The Inspector General’s report, released in early September, found multiple lapses at the SEC, but said there was no evidence of improper influence by Madoff.

Kotz told CNBC in a statement Friday that he found no evidence to support Madoff’s claim of a close relationship with Mary Schapiro.

Perhaps Mr. Kotz might be interested in the allegation embedded in the lawsuit brought by Amerivet Securities. Yes, that suit alleges that FINRA, the organization headed by Ms. Schapiro, had an investment in Madoff. For more info on that claim, I submit “Attorney Claims Wall Street’s Cop, FINRA, Invested in Madoff.”

Did Mary protect Bernie unwittingly or unknowingly? “A dear friend.”

Who in Washington has the guts to dig deeper into this story and reveal the full extent of the relationship between Ms. Schapiro and Mr. Madoff?

The American public and especially those who invested in Madoff deserve nothing less.

LD

What did we learn from yesterday’s report? Plenty. For that, I commend all those involved in this effort. With all due respect to FINRA employees who have legitimately tried to fulfill their obligations to the best of their abilities, yesterday’s report is nothing short of a massive indictment of FINRA’s management, FINRA’s board, and the SEC which is charged to oversee FINRA. Why? Having read this report twice and studied critical components of it, FINRA is exposed as nothing more than a collection of crossing guards . . . said with all due respect to crossing guards. Have the supervisors of the crossing guards been so heavily influenced by Wall Street so as to render large parts of the FINRA mission ineffective? Many believe this to be true, including me.

Why so harsh? Let’s navigate and be a little more aggressive than the mainstream financial media in analyzing this report. In the process, I think you will appreciate my assessment and also realize there are many more questions which need to be answered.

The FINRA report is largely divided into the organization’s dealings with the financial frauds encompassing Allen Stanford and Bernard Madoff. Referencing the massive regulatory failings on FINRA’s behalf in these two cases, the authors provide recommendations which FINRA’s management will present for approval or ratification at the December 2009 Board meeting.

For purposes here, I will not regurgitate the numerous individual failings of FINRA examiners and management in each of these cases. Rather, I will highlight those failings which I find most egregious. In turn, I want to focus on highlighting the recommendations so the American public can truly understand how woefully inept, incompetent, and ill-prepared this financial self-regulatory organization has been and currently is to uphold its mission to protect investors. Against that backdrop, I will then lay out questions which I deem to be critically important for FINRA to answer if the American public can ever regain a degree of confidence in the oversight of Wall Street.

>> Stanford Case

1. In 2003, the Stanford broker-dealer generated 68% of its revenues from the sale of Stanford International Bank CD’s. Are you kidding me? Red Flag!! That finding did not prompt the examiner to dig deeper?!

2. A 2003 Anonymous Tip Letter laid out the Stanford scheme in detail.

3. In 2005, a FINRA examiner learned that the Stanford broker-dealer is paid an annual fee of 3% of the deposit sum for every CD. Another red flag! Standard practice would have bankers or securities salespeople earning a one-time fee of maximum .25%.

At this point, Stanford International Bank had raised approximately $1.5 billion in what would grow to a $7.2 billion scam.

With all due respect to FINRA employees who may have continued to look into Stanford over the 2005-2008 time period, truth be told FINRA did not further aggressively pursue this case until the Madoff situation broke in December 2008.

>> Madoff Case

1. FINRA largely limits its review of the Madoff scam to the 2003-present time period. Why not go back further? FINRA had oversight of Madoff from the time of his launching his firm in 1960.

2. FINRA largely reduces the extensive relationships between Bernie Madoff and family members with FINRA to nothing more than a footnote. That footnote on page 46 provides a cursory approval of FINRA’s relationship with the Madoff firm and family. Why aren’t these relationships more deeply explored?

3. The report acknowledges what we always knew about FINRA having oversight of Madoff’s operation. FINRA representatives, including Mary Schapiro, have willingly and intentionally misrepresented the fact that FINRA had oversight of Madoff’s enterprise. Did Mary Schapiro perjure herself on this topic during her confirmation hearings to be Head of the SEC? Well, she may not have perjured herself, but she and others have willingly misrepresented FINRA’s required oversight of Madoff.

4. FINRA failed to detect the full breadth of the relationship between Cohmad Securities and Madoff. Bernie Madoff and his brother Peter owned 24% of Cohmad, and the Cohmad broker-dealer operated within the same office space as Bernard Madoff Investment Securities. Cohmad was largely a front for feeding customers into Madoff’s scam. The report provides:

Cohmad was registered as a broker-dealer and reported having approximately 750 to 850 customer accounts, which were held by and cleared through Bear Stearns Securities Corporation. These accounts usually generated roughly 300 transactions per month, mostly in equities and, to a lesser extent, municipal bonds.

I would very much like to know more details about these municipal bonds. Were they municipal auction rate securities?

5. How did FINRA miss the Madoff scam? This report acknowledges the fact that FINRA examiners merely took Madoff and his representatives at their word that Madoff was running nothing more than a broker-dealer. Are you kidding me? It was common knowledge that Madoff had a money management business. FINRA maintains that the FINRA ‘crossing guards’ checked the little boxes on their Madoff review sheets and went on their way.

>> Request and Recommendations

FINRA is currently lobbying to gain regulatory oversight of the investment advisory industry. Representatives of the Investment Advisors Assocation are working diligently to remain under the purview of the SEC. FINRA makes the case in this report that if it had oversight of investment advisors it may have detected the Madoff scam. That argument runs very shallow. FINRA has not displayed the capabilities of managing its current jurisdiction. Why should it be charged with greater oversight responsibilities?

FINRA has clearly been incompetent. We know that not only from reviewing the analysis provided in the Madoff and Stanford cases, but moreso in the recommendations proposed by the authors of this report. I highlight these recommendations not to embarass, but to further publicize just how poorly managed this organization is currently and has been for a LONG time. These recommendations include:

1. Establish a Fraud Detection Unit . . . are you kidding me? How is it that a financial self-regulatory organization charged with protecting investors does not have a unit like this to this point? The lack of a fraud unit is clearly a ‘failure of management.’

2. Prioritize Examinations and Resources According to the Seriousness of Misconduct? I repeat my question and assertion from above: another gross ‘failure of management.’

3. Strengthen the Cause Examination Program; Revise the Cycle Examination Program . . . this initiative entails shifting resources from lower risk ‘cycle’ (perfunctory) exams to higher risk ’cause’ exams. A tremendous grasp of the obvious here is another gross ‘failure of management.’

4. Assess Structure and Management of District Offices . . . focus on quality of exams rather than the quantity. Another gross ‘failure of management.’

5. Improve Documentation and Tracking of Enforcement Referrals to and from the SEC and Other Authorities . . . the lack of communication and ability to record and track referrals between FINRA, the SEC and other regulatory authorities is another gross ‘failure of management.’

6. Improve Procedures to Assure Legal and Regulatory Issues Are Properly Escalated, Addressed and Documented . . . yes, the fact that FINRA has fallen woefully short on this front is another gross ‘failure of management.’

7. Increase Use of Examination Staff with Specialized Qualifications . . . crossing guards are not typically qualified to undertake and pursue simple frauds such as Stanford’s and Madoff’s let alone the complicated frauds on Wall Street.

8. Enhance FINRA’s Information Technology and Systems . . . FINRA has not had the technical wherewithal to collect and process member firms information in a timely and effective fashion. Yes, the lack of this capability is another gross ‘failure of management.’

9. Confirm Member-Provided Information with Independent Third Parties; Cross Check Data Provided by Member Firms . . .the fact that FINRA has utilized the ‘trust’ method rather than the ‘trust but verify’ method in its collection and processing of member firm information is . . . another gross ‘failure of management.’

>> LD’s Questions:
While I can appreciate that readers may be exhausted, exasperated and bewildered at this point, I would ask you to stick with me because the questions I raise for FINRA remain critically important. I ask the following:

1. Nowhere in this report is there a reference to Mary Schapiro. How can a report of this magnitude be put forth without referencing the head of FINRA?

2. When will the authors of this report call for and work to produce a report of similar depth in the study of FINRA’s interactions with its major member firms which brought our financial industry and economy to its knees? I speak of Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs, Morgan Stanley et al.

3. Will the authors of this report support that FINRA provide full and total transparency across all of its investment activities in its internal investment portfolio? FINRA should provide all details on its investments across EVERY hedge fund, fund of fund, and private equity position. Additionally, FINRA should provide EVERY detail involved in its liquidation of its $647 million auction rate securities position in mid-2007.

4. How do FINRA and the authors of this report in good conscience promote the messages embedded in FINRA’s Annual Reports along with the messages promoted in its massive national advertising campaign? This report provides an expose of the enormous holes in this organization, not only from a structural standpoint but clearly from a cultural standpoint as well.

While this report focuses on the Stanford and Madoff frauds, against the backdrop provided I am now more convinced that there have been and likely still are other massive frauds perpetrated on the American public.

I write this commentary strictly in an attempt to get to the total truth so real market confidence can be restored. Perhaps more of this truth will be revealed in the adjudication of the three lawsuits (Amerivet, Benchmark, Standard Investment Chartered) currently facing FINRA.

Comments, questions, constructive criticisms always appreciated.

LD

Please join me this evening for NQR’s Sense on Cents with Larry Doyle as we dig deeper and work harder in navigating the economic landscape. My special guest will be Genevievette Walker-Lightfoot.

Ms. Walker-Lightfoot was previously employed as an attorney in the Office of Compliance Inspections and Examinations at the U.S. Securities and Exchange Commission in Washington, D.C. for almost five years, where she worked on policy matters and conducted field examinations and inspections of transfer agents, brokerage firms, hedge funds, trading exchanges, ATSs, SROs, credit rating agencies, mutual fund companies and investment advisers.

Genevievette Walker-Lightfoot

Genevievette was the lead attorney on the 2003-2004 Madoff examination conducted by OCIE and identified the substantial elements of his fraud in 2004, as detailed in a July 2, 2009, Washington Post article. However, despite her attempts to pursue her findings, her supervisors directed her efforts elsewhere, missing an opportunity to have caught Madoff’s Ponzi scheme four years prior to him turning himself in to authorities.

Ms. Walker-Lightfoot received the SEC’s Chairman’s Award for Excellence for her work on the Mutual Fund Reform Team, as well as the SEC’s Capital Markets Award for her work on the Research Analyst/Investment Banking Conflicts of Interest Team. Prior to the SEC, Genevievette was employed with the American Stock Exchange’s Member Firm Regulation Division in New York and the Dispute Resolution Department of the NASDR, now known as FINRA, in Washington, D.C.

She is a graduate of Georgetown University in Washington, D.C. where she received a Bachelor of Arts in government, with a concentration in international relations and a minor in French. She also holds a J.D. and International Law Certificate from the Columbus School of Law at the Catholic University of America in Washington, D.C. and an M.B.A. from the R.H. Smith School of Business at the University of Maryland at College Park, Maryland. She has been a member of the State Bar of Maryland for almost ten years.

Since January of 2006, Genevievette has been employed with the Federal Reserve Board in the Division of Banking Supervision and Regulation’s Large Institutions Group in Washington, D.C., where she has responsibility for the Bank of New York Mellon Corporation, the Depository Trust Corporation and ICE Trust. She was previously a member of the Market and Liquidity Risk Group where she was the SEC, brokerage firm and private equity and merchant banking activities risk specialist for banking organizations.

Share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins. Please join me tonight for this riveting discussion. **Note: the views expressed by Genevievette Walker-Lightfoot during this broadcast are her own personal views and do not in any way reflect her position as an employee of the Federal Reserve Board.

As a reminder, past episodes of No Quarter Radio shows are archived and can be played back at the BlogTalkRadio site. In addition, No Quarter Radio programming is available as a free podcast on iTunes. From the iTunes Store, type “NQR podcasts” in the search window.

Many thanks to Larry Johnson and the rest of the team at No Quarter for providing such a vibrant media vehicle as No Quarter Radio. I look forward to having you join me Sunday evening as we collectively navigate the economic landscape!!

LD

While President Obama and Congress may believe financial regulatory reform needs to focus on the SEC, the Federal Reserve and assorted other governmental agencies, I would remind the President and his Congressional colleagues that Wall Street is regulated not only by the SEC but to a great extent by the self-regulatory organization known as FINRA (Financial Industry Regulatory Authority).

This discussion on “America’s Nightly Scoreboard” is separated into two parts.

Highlights from the videos include:

1. Richard Greenfield, an attorney representing Amerivet Securities, makes the claim that FINRA under the leadership of Mary Schapiro failed to protect investors.

2. former SEC chair Harvey Pitt defends Shapiro and FINRA

3. Greenfield indicates that a FINRA insider claims FINRA invested in Madoff!!

4. I join the panel and provide details as to why FINRA, via its parent the NASD, did have responsibility to oversee Madoff. I also comment on the nature of the relationship between Wall Street and Washington, FINRA’s investment and timely liquidation of its Auction-Rate Securities position, and the need for total transparency at FINRA.

4. the head of the Madoff Victims Coalition for Investor Protection, Ronnie Sue Ambrosino, weighs in that the entire regulatory structure from the SEC to FINRA to SIPC (Securities Investor Protection Corporation) have failed to protect investors.

In my humble opinion, the conclusion of this show highlights the screaming need for FINRA to open its books and records for a full and thorough independent analysis and review. In so doing, hopefully investors specifically and the American public at large can regain a degree of confidence in the badly shattered Wall Street regulatory process.

If you care about the markets and our country, I beseech you to watch this 18 minute video in its entirety.

Thoughts, comments, questions always welcome and appreciated.

LD

PART I

PART II

A “failure” that you “continue to regret”? Uh, no shit, Sherlock! And how do you think all of those people who lost their LIFE SAVINGS feel? Do you think they “regret” your incompetence?? I mean, really – no freakin’ duh. That’s putting it so mildly as to be insulting (to say the least), especially given what people went through, are going through, WILL be going through as a result of this “botch”:

The Securities and Exchange Commission botched numerous opportunities to uncover Bernard Madoff’s Ponzi scheme, in part because of an inexperienced staff and delays in examinations, said an SEC inspector general report.

How did one of the largest financial scandals of our time go on for so long without being detected? WSJ reporters offer insight into Bernard Madoff’s alleged Ponzi scheme.

The report, an executive summary of which was released on Wednesday, provides the most-detailed, strongest criticism to date of the agency’s failure to uncover the multibillion-dollar scheme. The release of the findings comes as the SEC is seeking to rebuild its credibility.

According to the report, the SEC received six warnings about Mr. Madoff’s trading business over 16 years, but failure of staff to follow up adequately — including to determine whether trades were executed when Mr. Madoff said they were — and poor communication within the agency’s divisions enabled him to continue his scheme.

Mr. Madoff confessed to the scheme in December and is serving a 150-year prison sentence.

So, that’s 6 warnings over 16 years, with “poor communication” and inept staff (okay, that wasn’t their word for their staff, but really – that’s the bottom line, is it not?) allowed this man to continue stealing the life savings of numerous people. It boggles the mind, especially that they think this will help rebuild their credibility. Oh, yeah – sure thing. At least there is this one positive that came out in the report:

The investigation found no evidence that the SEC staff had been influenced by Mr. Madoff or any of his family members. A senior SEC examinations official was dating Mr. Madoff’s niece during part of that period and is currently married to her, sparking speculation that Mr. Madoff’s firm may have gotten a break.

SEC Chairman (sic)Mary Schapiro said on Wednesday that missing the fraud “is a failure that we continue to regret.” She has taken some steps to address the SEC’s problems, including recruiting a new enforcement director, who is implementing substantial changes to how the agency operates. Ms. Schapiro has also proposed rules aimed at tightening regulatory holes that Mr. Madoff had taken advantage of.

Oh, whew, that’s a relief. Between the family not being involved and Chairwoman Schapiro’s acknowledgment that this was a “failure that we continue to regret.”

Good grief, how do these people SLEEP at night?? Seriously! Sheesh.

Perhaps some oversight over those who are supposed to be overseeing is in order:

Sen. Charles Grassley (R., Iowa) called the SEC’s failures “further evidence of a culture of deference toward the Wall Street elite at the SEC.” He said, “Until that culture is transformed, the SEC will not be the tough cop on the beat that the public needs.”

Ms. Schapiro said in a letter to Sen. Grassley that she expected to have approval from the full commission to distribute the full, 450-page inspector general report on Friday. She said she wouldn’t permit redacting the substance of the findings but sought to “safeguard” the names of junior employees who didn’t play central roles in the reviews.

The warnings and tips about Mr. Madoff’s operation ran the gamut. Some were based on hunches, others on analysis of his firm’s purported trading strategy. One self-described “concerned citizen” offered specific information alleging that Mr. Madoff combined customer accounts with those of the firm and that he kept two sets of records, one real, one phony.

The 22-page executive summary said agency staff was too inexperienced or too narrowly focused, and missed opportunities to uncover the fraud. It said the SEC’s structure hampered its effectiveness, with two groups of examiners looking separately into Mr. Madoff’s business at one point without knowing about the other.

That is just pathetic. I’m sorry – it just is. I mean, c’mon – did they have to see it up in lights or something? Oh, wait – I should save some of my ire for this:

SEC Inspector General David Kotz said “perhaps the most egregious failure” was that the SEC failed to corroborate Mr. Madoff’s trading records with those held by the Depository Trust & Clearing Corp., the clearinghouse for stocks, even after Mr. Madoff handed them his account number.

Sputter, sputter, #*%&*&*&# – say whaaaa? Perhaps “inept” is too kind a word:

The summary described how the SEC staff at times didn’t follow through on leads, failing to seek information from a third party because reviewing such information could be too time-consuming. In another instance, an SEC examiner looked into an institution that Mr. Madoff had said he used to clear his trades. The examiner learned from the institution that there was no trading activity by Mr. Madoff during the period under review but never followed up or informed the rest of the staff, according to the executive summary.

Despite three examinations and two enforcement investigations into Madoff, “at no time did the SEC ever verify Madoff’s trading through an independent third-party, and in fact, never actually conducted a Ponzi scheme examination or investigation,” the summary said.

The SEC, during two of the examinations, caught Mr. Madoff in inconsistencies or contradictions, the report said, but the staff only questioned him and took his answers, even those that were “seemingly implausible,” at face value.

Well, golly gee – what could be problematic about that, huh? Just some glaring inconsistencies, and downright fabrications – whaddya want from them anyway??

Oh, you know there’s more:

The IG report found that Mr. Madoff attempted to intimidate SEC staff during an examination in 2005 by dropping names of senior SEC officials, but the report didn’t conclude whether he was successful. It said Mr. Madoff told prospective investors that he had been reviewed by the SEC, as a way to attract business.

The report confirmed the agency had received three tips from Harry Markopolos, a former rival to Mr. Madoff, from 2000 through October 2005, who urged the SEC to investigate Mr. Madoff’s trading operation, saying it was “too good to be true.”

The SEC received another complaint in 2003 from “a respected” hedge-fund manager who wasn’t identified in the executive summary. The report said the manager questioned whether Mr. Madoff was trading options at the volume he claimed, arguing that his strategy and returns weren’t duplicated by anyone else. He said these factors were “indicia of Ponzi scheme.”

That tip, which wasn’t pursued for seven months, was ultimately picked up by the SEC examination group focused on broker-dealers, which the report said lacked intimate knowledge of the investment-advisory business. The group only looked into allegations of potential front-running, or trading ahead of client orders, because that was the group’s expertise, the report said.

Aren’t you glad to know that Madoff’s intimidation apparently WORKED?? Good grief. And I don’t know about you, but I firmly suspect if these kinds of complaints and allegations came up against a regular ol’ person, they would have been treated pretty differently. As in, it would not have taken them SIXTEEN YEARS to figure it out!! Ahem. So how did they finally clue in? Like this:

During a review of another firm, the SEC discovered internal emails questioning the firm’s investment in Mr. Madoff’s business. One email provided a “step-by-step analysis of why Madoff must be misrepresenting his options trading,” according to the report. The email said Mr. Madoff couldn’t have been trading over an options exchange since the volume of trades he would need to execute to match his strategy couldn’t be supported in the market.

The SEC exam staff in New York said the emails indicated “some suspicion as to whether Madoff is trading at all.” It was eight months before a team was in place to look into the issue.

One SEC examiner said of Mr. Madoff during the examination that “veins were popping out of his neck.” When examiners reported Mr. Madoff’s aggressively pushback tactics to higher-ups, they didn’t get any support and were “actively discouraged from forcing the issue,” the report said (emphasis mine). (Write to Kara Scannell at kara.scannell@wsj.com )

Well, thank heavens for email, huh? Though it STILL took them 8 months to get off their duffs and do something about it. So many complaints, over so long, and only when they basically get it all spelled out for them are they able to make a move. When they got around to it, that is.

And what is the deal with the lack of support, no, check that, the discouragement from “forcing the issue”?? From where did that come, I wonder? Hmmm. Curious.

Isn’t it so big of the SEC to admit it completely botched the inquiries into Madoff’s shenanigans? After sixteen years? At the expense of BILLIONS of dollars of other people’s money? I reckon we can all rest easy now that the SEC has admitted its failures, make that numerous failures, over a number of years, right? I mean, really – lightning can’t strike twice in the same place, can it? Can it?

The American public learned very little with the release of the SEC Inspector General David Kotz’s review of the SEC’s failure to expose the Bernard Madoff Ponzi scheme. In fact, having just finished reading the Executive Summary of his investigation, I would maintain it is largely an extended regurgitation of much of what Harry Markopolos provided in his Congressional testimony last February.

What was Harry’s conclusion of his exhaustive pursuit to expose the Madoff scam? The SEC is incompetent.

What was the Inspector General’s conclusion from his investigation? In so many words, Kotz lays out the same results. The SEC was incompetent on so many fronts from the early 1990s until Madoff was exposed last December.

For those who would like to read Kotz’s 22-page summary of his investigation, just click on the image below.

Is this all the public gets? Is this all the public can expect from our regulators? Nothing more than a mea maxima culpa? How about a real pursuit of the total truth? This Madoff affair has many more legs. Let’s navigate.

Ronnie Sue Ambrosino, head of the Madoff Victims Coalition for Investor Protection (my guest on NQR’s Sense on Cents with Larry Doyle on August 16th), and her husband Dominic comment on the Inspector General’s report and simultaneously call out FINRA last evening during an interview on Fox Business News.

Ronnie Sue and Dominic effectively connect the dots while highlighting the following:

1. Current head of the SEC Mary Schapiro formerly headed FINRA

2. Harry Markopolos defined FINRA as being “in bed” with the industry when he provided Congressional testimony this past February detailing his decade-long pursuit to expose the Madoff Ponzi scam.

3. FINRA had an internal investment portfolio (Sense on Cents would add that the portfolio was invested in hedge funds, fund of funds, and also had hundreds of millions in Auction-Rate Securities).

4. Amerivet Securities has recently filed a complaint against FINRA. The complaint indicates it has information and reason to believe that FINRA’s investment portfolio invested in Madoff.

Sense on Cents would add that the Amerivet complaint looks to have FINRA provide a full and thorough review of the following:

>> interactions with the major Wall Street banks

>> its compensation practices

>> its liquidation of its auction-rate securities position in 2007

>> all investment activities

Sense on Cents would further add that the Madoff family had extensive relationships with the NASD, Nasdaq (Bernie helped establish this exchange) and FINRA.

Let’s listen to Ronnie Sue and Dominic Ambrosino:

Is the Madoff investigation over? Any rational individual can understand there are many more regulatory questions needing answers. Where do those questions lead us? Inside FINRA and specifically to its investment portfolio. Why shouldn’t a Wall Street self-regulatory organization mandated to protect investors be obligated, and if need be compelled, to provide total transparency of all its business dealings?

I can only hope major media outlets and Washington pick up this story and understand the need to fully investigate FINRA.

I ask you again . . . is the Madoff investigation over? Not by a long shot!

What do you think?

LD

Related Sense on Cents Commentary:
“Amerivet Complaint Against FINRA Alleges Madoff Investment” (August 25, 2009)
NoQuarter Radio’s Sense on Cents with Larry Doyle Interviews Head of Bernard Madoff Victims Coalition (August 16, 2009)
“FINRA Is Supposed to Police the Market” (April 29, 2009)
“Riveting Testimony from a Great American, Harry Markopolos” (February 4, 2009)

Two weeks ago, Amerivet Securities filed a complaint against FINRA (Financial Industry Regulatory Authority), the Wall Street self-regulatory organization. This morning, Donna Mitchell of Financial Planning provides further insight on this complaint. Ms. Mitchell writes FINRA Rebuffs Amerivet’s Demand to Inspect Records. She reports:

The Financial Industry Regulatory Authority (FINRA) says it will not open its books and records to inspection by Amerivet Securities, the California brokerage firm which recently sued the regulator.

“We disclose a great deal of public information in our annual reports, far more than we are required to do,” says Herb Perone, a spokesman for FINRA. “Our records are not open for public examination.”

Sense on Cents questions why any financial self-regulatory organization mandated to protect investors would not be required to fully open all of its books and records for public review. Additionally, having extensively studied all of FINRA’s annual reports as well as those of its predecessor, the NASD, I echo the questions being raised by Amerivet. Does FINRA have any appreciation for the need for total truth and transparency in our markets and economy? The questions beg: why won’t FINRA fully open its books? are they trying to hide something? do they have reason to be concerned?

OPEN THE BOOKS!!!

Financial Planning continues:

The request for records is part of a civil suit filed Aug. 10 in the Superior Court of Washington, D.C., by Inglewood, Calif.-based Amerivet Securities. It stems from a July 23 letter sent to FINRA from Amerivet, in which the company initially asked to review FINRA’s documents.

In the lawsuit, Amerivet accuses FINRA of a litany of wrongdoings, from mismanaging the organization’s investment assets to placing substantial funds with Bernard L. Madoff Investment Securities, the former broker-dealer and investment advisory firm that was brought down amid a $65 billion Ponzi scheme.

WOW! The allegation of an investment by FINRA in Madoff is a BLOCKBUSTER. What information did Amerivet and its legal representation unearth to make this allegation? This information must be revealed and FINRA must open its books and records to address this charge. (Click on image to access copy of Amerivet complaint)

Financial Planning further reports:

Amerivet also alleges that FINRA failed to regulate and oversee the operations of large securities firms such as the former Bear Stearns & Co., the former Lehman Brothers, Merrill Lynch & Co., and Stanford Financial Group.

Amerivet also claims that FINRA overpaid its executives, sustained investment-related losses of $568 million and separately incurred substantial losses in the auction-rate securities market. “FINRA has failed in what it represents in its advertising to be its core function, i.e. the protection of investors,” Amerivet says in the lawsuit.

Is there any doubt that FINRA has failed to protect investors? Is there any doubt that senior executives at FINRA were paid handsomely?

In regard to the auction-rate securities allegation, is Amerivet maintaining that FINRA lost money on the ARS which it owned or is Amerivet referring to money lost by investors? Details of FINRA’s liquidation of ARS in 2007 must be released. Did FINRA front-run the market in the course of selling its own ARS?

OPEN THE BOOKS!!

Financial Planning gains a degree of insight from FINRA and reports:

FINRA would not comment about the lawsuit directly, but Perone said the organization had steered clear of investing with Madoff.

“As for any claim or question as to whether we had money invested with Madoff, we had no investments of any kind in Madoff or in any of its feeder funds,” Perone said.

The allegations and implications of the Amerivet complaint strike right at the core of our financial regulatory framework. Any credible media outlet should be running the Amerivet complaint as a lead story.

The American public deserves answers.

OPEN THE BOOKS!!

LD

Related Sense on Cents Commentary:

Amerivet Securities Files Complaint vs. FINRA for Release of Investment Information and More (August 17, 2009)
FINRA Must Play by Its Own Rules (August 19, 2009)

How high a pitch and how many tunes will investigators receive from the canary known as Frank DiPascali? Do you think there are a whole host of people not sleeping very well lately wondering what notes Mr. DiPascali may reach?

Who might some of these people be?

1. Walter Noel: head of Madoff’s largest feeder fund, Fairfield Greenwich.

2. Sandra Manzke: formerly headed Tremont Advisors, another large feeder fund. Manzke left Tremont in 2006 and launched a money management firm Maxam.

3. Andrew and Mark Madoff: Bernie’s sons ran the Madoff broker-dealer operation.

4. Peter Madoff: Bernie’s brother and general counsel.

5. Shana Madoff and husband Eric Swanson: Shana, Bernie’s niece, married former SEC lawyer Swanson in 2007. Swanson was with the SEC for ten years prior to departing in 2006. Ms. Madoff served on a committee at the Wall Street regulator FINRA.

6. Robert Jaffe: vice-president of Cohmad Securities. Jaffe was instrumental in signing up a multitude of investors with Madoff.

7. Sonny and Marcia Cohn: this father-daughter team owned Cohmad Securities, which was physically located within the same space as Madoff’s operations.

8. Certain large Madoff investors with whom DiPascali had regular contact. How much did they know?

9. Who were the regulators from FINRA and the SEC responsible for monitoring the Madoff operation? Are they nervous as well? Will investigators dare to pursue this angle?

Obviously, if any of these individuals (and any others) are implicated by DiPascali, they are entitled to due process.

I would love to see Mr. Harry Markopolos reintroduced into this equation. Mr. Markopolos clearly knew the inner workings of the Madoff operation. Will investigators have the courage to engage him and expose the shortcomings in our regulatory oversight?

No stone should be left unturned!!

LD