WASHINGTON The top attorney for the U.S. securities regulator was advised not to recuse himself from handling Bernard Madoff matters for the agency even though his family's estate had invested with the swindler.
Outgoing Securities and Exchange Commission General Counsel David Becker discussed his rationale for continuing to work on Madoff matters in a letter to House of Representatives Republicans who inquired about the issue last week.
Becker, who is leaving the SEC for private practice, is the subject of a lawsuit by Madoff Trustee Irving Picard. Picard filed suit against Becker and his brothers in December seeking to recover $1.5 million in phony profits the Becker family estate received from Madoff investments. Becker is a co-executor of his mother's estate. His mother passed away in 2004.
The suit does not claim that Becker or his brothers knew anything about the fraud, and merely seeks to recover money to harmed investors. Madoff was arrested in December 2008 after admitting he ran a decades-long, multibillion-dollar swindle, considered the biggest investment fraud in history.
Key House Financial Services Republicans last week raised ethical questions about Becker's family's investments and his role as general counsel at the SEC. Becker worked at the SEC between 1998 and 2002, serving as general counsel for part of that time. He later returned to work as general counsel under SEC Chairman Mary Schapiro in February 2009.
In a letter to Republicans, Becker said he disclosed his mother's investments to the SEC's ethics attorney William Lenox in 2009 right around the time of his return.
"At the time, the SEC was focused on bringing enforcement actions against Mr. Madoff and others, and in the view of the ethics counsel, those matters did not have a direct and predictable effect on my financial interests," Becker wrote in a letter dated February 25, and disclosed on Monday.
Becker said he later consulted with the ethics attorney again in May 2009 after law firms wrote to the SEC asking the agency to get Picard to change his interpretation for how people could file claims to get their money back.
He said he recognized this issue could affect his financial interests because it could "affect the trustee's decision to bring clawback actions against persons like me."
The ethics counsel decided he could advise the SEC on how to respond to the letters from the law firms questioning Picard's interpretation of the term "securities positions" because it would "not have a direct and predictable effect on the trustee's decision to bring clawback actions."
Becker sent his responses to the top Republicans on the House Financial Services Committee, which oversees the SEC. The Republicans who raised questions about the matter include House Financial Services Chairman Spencer Bachus and Vice Chairman Jeb Hensarling, as well as House Financial Services oversight subcommittee Chairman Randy Neugebauer and House Financial Services capital markets subcommittee Chairman Scott Garrett.
(Reporting by Sarah N. Lynch, editing by Gerald E. McCormick)