February 27, 2024

S.E.C. Refers Ex-Counsel’s Actions on Madoff to Justice Dept.

Mr. Becker had financial ties through his family to an account with Mr. Madoff that he inherited with his brothers in 2004 and quickly closed. The Beckers have since been sued by the trustee overseeing the Madoff case, who is seeking to recover about $1.5 million in gains they received. Mr. Becker’s work at the S.E.C. in 2009 included advising on the compensation of Madoff victims, including how much they could recover.

The referral was part of an investigation into whether it was appropriate for Mr. Becker to work on Madoff-related matters at the commission given his financial tie. The 119-page report on Mr. Becker’s actions was undertaken by H. David Kotz, the inspector general of the S.E.C. Mr. Kotz wrote that he is referring the matter to federal prosecutors after consulting last month with the Office of Government Ethics and receiving its recommendation to do so.

The report is another black eye for an agency already under scrutiny for missing the Madoff scandal and more recently for routine destruction of some enforcement documents that may have been useful in later investigations.

Mr. Becker was involved in developing the S.E.C.’s recommendations for the distribution of money among Madoff victims, the report said.

The report, which was obtained by The New York Times, will be at the center of a joint hearing on Thursday of the House Financial Services Committee and the Committee on Oversight and Government Reform. Mary L. Schapiro, the chairwoman of the S.E.C., is expected to testify alongside Mr. Kotz and Mr. Becker.

Based on extensive e-mails, interviews and memorandums, the report says that Mr. Becker was treated differently from other S.E.C. employees who had ties to the Madoff family, and that Mr. Becker was allowed to advise on the commission’s recommendations related to the Madoff case despite his own financial interest.

Randy Neugebauer, the Texas Republican who chairs the oversight and investigations subcommittee of the financial services committee, said on Monday that the hearing “will examine whether there needs to be process improvements at the commission to vet conflicts of interest in a way that gives the public confidence. The Becker matter raises serious questions about the decision-making by senior management at the S.E.C.”

Ms. Schapiro said in a statement Tuesday morning that the commission will redo a critical vote on the way Madoff victims are compensated, as was recommended by the report.

 She declined to comment on the criminal referral but noted that she had asked Mr. Kotz to conduct the inquiry. And she said of Mr. Becker, who worked at the commission in two different periods: “I do want to state that I’ve known David for many years to be a talented, highly skilled lawyer and a dedicated civil servant who served under three chairmen.”

William R. Baker III, a lawyer at Latham Watkins who spent 15 years as associate director of enforcement at the S.E.C., working alongside Mr. Becker at times, now represents him.

Mr. Baker declined to comment until he had read the report.

Ms. Schapiro is mentioned in several parts of the report. In one incident in 2009, Mr. Becker was preparing to testify before a House subcommittee that was holding a hearing on compensation of Madoff victims. After he told an S.E.C. staff member that he would want to disclose his mother’s Madoff investment if he testified, the staff member met with Ms. Schapiro and the pair decided that someone other than Mr. Becker should speak at the hearing.

The report concluded: “The decision that Becker would not serve as a witness was made in large part because he would have disclosed the fact that his mother had held a Madoff account.”

Mr. Kotz interviewed individuals who were at the commission while Mr. Becker was working on matters related to the Madoff victims. One person was William Lenox, the ethics official who reported to Mr. Becker and determined that his work on Madoff-related issues at the commission posed no conflict. Mr. Lenox indicated to Mr. Kotz that he did not keep records of his rulings on employees’ ethics questions because of the sensitive nature of the information that was disclosed to him.

This article has been revised to reflect the following correction:

Correction: September 20, 2011

An earlier version of this article incorrectly identified Luis A. Aguilar as a Republican. He is a Democrat.

Article source: http://feeds.nytimes.com/click.phdo?i=8c791c2da8cdb0dae4014908420b2c94

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