WASHINGTON (Reuters) - The alleged $50 billion fraud by Wall Street veteran Bernard Madoff may have escaped the attention of U.S. Securities and Exchange Commission staffers for one simple reason — they saw him as one of their own.
The former Nasdaq Stock Market chairman regularly made appearances at the SEC, serving on agency advisory panels, where he was widely regarded as a sage markets expert and jovial voice representing his brokerage firm, Bernard L. Madoff Investment Securities, and the securities industry as a whole.
“When it came to Bernie, people paid more attention. This was a guy who really knew how markets worked,” said Georgetown University Law School professor Donald Langevoort, who served on an SEC advisory committee with Madoff in the early 2000s.
“He was the grown-up in the room. If there was confusion or a question or two people on opposite sides going at each other, Bernie would speak up and explain what the deal was,” Langevoort said. “I’m sure in some way that may have thrown even the commission off their guard.”
Madoff’s name was so well known around the SEC’s offices that his efforts to give market-makers a broad reprieve from short selling restrictions led SEC officials to call the measure the “Madoff Exemption.”
SEC Chairman Christopher Cox on Wednesday said he was “deeply concerned” by the agency’s apparent multiple failures to thoroughly investigate almost a decade of credible allegations of wrongdoing at Madoff’s brokerage firm.
Following is a selection of Madoff comments pulled from transcripts of his appearances at SEC advisory meetings, which can be found on the SEC website:
SEC ADVISORY COMMITTEE ON MARKET INFORMATION, OCTOBER 2000
Madoff, speaking about the profit potential of market data:
* “I think that we all know that when we have to deal with bottom-line numbers our motivations change, and our style of doing business changes somewhat.”
Madoff, speaking about competition between electronic trading markets and traditional stock markets:
* “You know, we — we operated our firm saying that no good deed goes unpunished.”
* “I think the SEC, all the years that I’ve been involved in this process, has always taken the position, ‘Let’s go forward, let’s run the risk of making mistakes in allowing innovation and allowing competition to go forward, and we can always circle back and correct the problems that occur.’”
Madoff, speaking on Regulation NMS, a series of SEC rules designed to modernize and strengthen the national market system for equity securities:
* “Our firm has made a, you know, fairly decent living as a fast market competing with a slow market, so I’m not sure that it’s in our own best interests to have everyone on a fast market. But, since our good (SEC) chairman (William Donaldson) has asked us all to take off our selfish hats and speak for the public good, I’m going to try to do that.”
* “You really have to start with the assumption that most of us in this industry really have their clients’ interests, you know, coming first. Not necessarily the firm’s self-interest.”
Reporting by Karey Wutkowski, editing by John Wallace