Watchdog probing if SEC lawyer had Madoff conflict

WASHINGTON Fri Mar 4, 2011 1:57pm EST

Bernard Madoff is escorted from Federal Court in New York, January 5, 2009. REUTERS/Lucas Jackson

Bernard Madoff is escorted from Federal Court in New York, January 5, 2009.

Credit: Reuters/Lucas Jackson

WASHINGTON (Reuters) -The top watchdog at the Securities and Exchange Commission has launched an investigation into whether the agency's senior lawyer should have been allowed to handle Bernard Madoff matters even though his deceased mother had invested with the convicted swindler.

SEC Inspector General David Kotz confirmed the probe on Friday, just a day after House Oversight Committee Chairman Darrell Issa and the Senate Judiciary Committee's top Republican Charles Grassley announced their own inquiry.

SEC Chairman Mary Schapiro is due to testify before Issa's committee on Thursday.

SEC spokesman John Nester said on Friday that Schapiro had requested a review by the inspector general "to ensure an independent gathering and analysis of the relevant facts."

David Becker, who left his post as SEC general counsel a week ago, is currently being sued by Madoff trustee Irving Picard, along with his two brothers.

The suit does not accuse them of knowing about Madoff's Ponzi scheme, but it seeks $1.5 million in alleged phony profits their mother's estate received through Madoff investments. Becker is a co-executor of his mother's estate.

Becker has told Republican lawmakers he was advised by the SEC's ethics attorney that his mother's investments posed no conflict of interest.

He also told them he helped the SEC recommend a method of valuing net equity to determine which Madoff victims could file claims. He said he knew this issue could affect his financial interests if Picard sought to file clawback suits against investors, but he was told his participation would not pose a conflict.

(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn and Gerald E. McCormick)