CORRECTED - UPDATE 1-Issa subpoenas Madoff trustee on ex-SEC lawyer

Wed Mar 16, 2011 3:40pm EDT

(Corrects 6th paragraph quote by removing the word "fraud")

* Issa subpoenas trustee Picard over ex-SEC lawyer Becker

* Becker had personal financial ties to Madoff fraud

* Issa investigating if Becker should have recused himself (Adds detail on subpoena, background)

By Sarah N. Lynch

WASHINGTON, March 16 (Reuters) - U.S. House Oversight Chairman Darrell Issa said on Wednesday he has subpoenaed records from Bernard Madoff Trustee Irving Picard in his quest for more details about former Securities and Exchange Commission top lawyer David Becker's personal ties to the fraud.

Issa's committee is probing whether the former SEC general counsel should have recused himself from advising the agency on Madoff matters because he had received an inheritance from his mother that included Madoff funds.

An SEC ethics counsel cleared him to work on Madoff legal matters, including a recommendation on how Madoff's victims should be compensated.

The SEC voted in 2009 on the recommended method to compensate Madoff's victims, with some commissioners and staff unaware that Becker had received money from Madoff funds, sources have told Reuters. [ID:nN09295660]

Picard is now suing Becker and his brothers to claw back $1.5 million in phony profits from their mother's estate.

"Victims of the Madoff swindle rightly feel cheated by the SEC's ineptitude," Issa said. "The decision to allow David Becker to work on the Madoff case, despite family earnings from a Madoff account, necessitates answers."

Issa's announcement about the subpoena comes nearly one week after he held a hearing on the issue.

At that hearing, SEC Chairman Mary Schapiro told lawmakers she now wishes in hindsight that Becker had recused himself. She said she knew that Becker's mother had a Madoff account, but could not recall whether Becker specifically told her that he inherited money from that account.

Schapiro has asked the agency's inspector general to investigate the matter.

Issa said on Wednesday he has asked Picard for all documents pertaining to the Becker family account as well as communications between Picard and the SEC concerning how victims should be able to file claims.

Picard must comply with the subpoena by the end of business on March 22. (Reporting by Sarah N. Lynch; Editing by Gerald E. McCormick and Tim Dobbyn)

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