Recently, The Litwin Foundation filed a suit against the SEC for carelessness and their inability to expose Bernie Madoff and his $65 billion Ponzi scheme. The Foundation is looking to recover at least $19 million in damages against the SEC. Currently, government agencies are protected by “sovereign immunity”, but should they be? Did the SEC mess up royally this time around?
According to an article on Bloomberg, The Litwin Foundation says the SEC did mess up, and messed up BIG time. They were quoted as saying, “The SEC had countless opportunities to stop the Ponzi scheme Madoff operated over 16 years and botched all of them.” It was also mentioned that the SEC investigated Madoff countless times. So was Madoff just that good at hiding his scheme, or was the SEC just careless with their investigations? I have to admit, it does seem unlikely that they didn’t notice any signs of fraud during all of their investigations.
Another article I recently read on Advanced Trading mentioned that U.S. Senators are becoming a bit perturbed that more prosecutions aren’t sought against high level Wall Street executives. The SEC responded to this complaint by commenting that only in the past two years has there been fraud enforcement reform that has allowed them to properly fight crime. So to me that means they are now able to prevent some of these offenses, but that still doesn’t answer the senators’ complaints about the lack of prosecutions. To date, no one within the SEC has been fired or called out for their failure to catch Madoff’s Ponzi scheme. Now, I don’t want to see anyone lose their job, but, if someone really did overlook Madoff’s transgressions, should they really still be investigating for the SEC? How many other issues are they letting through the cracks?
Obviously, people are still upset over the financial crisis and worried about the large number of financial crimes being reported as of late. They want to see people punished and in a high-profile way. I guess we will just have to keep an eye on what government agencies are doing to prosecute those in the wrong and prevent future crimes. It will be very interesting to watch what happens next in the case The Litwin Foundation v. United States of America to see if the SEC can, in fact, be sued.