SEC Inspector General's Report of Investigation on Madoff

I don't know about this report. It concludes that nobody high-up improperly influenced SEC action/inaction; instead, it throws lots of junior, "inexperienced" people under the bus, and when it identifies supervisors who did screw up, it doesn't name them. Why not? How else are we supposed to find out whether they're still screwing up somewhere else? Also, there is no explanation of why the investigators who wrote the report concluded that the supervisors didn't purposely tank the investigations. Bernie Madoff was a highly-connected, powerful person; it doesn't seem unreasonable to consider the possibility that he could have used his money and power to influence behavior at the SEC. This report doesn't seem even to consider the possibility. I find that surprising.

1992: The "inexperienced" investigative team appointed to check out customer complaints about Avellino & Bienes (who invested its customers' funds with Madoff) focused in on A&B's registration failures instead of potential fraud, and relied on Bernie's records and thereby failed to check 3rd party records held by the the Depository Trust Company (DTC). So who decided to appoint an "inexperienced" team to check this out? Who was in charge of asking this inexperienced team questions like, "Did you check the DTC's records?" The report doesn't say. Why not?

2000: Harry Markopolis's initial complaint to Boston District Office (BDO) goes nowhere because "it was clear that the BDO's Assistant District Administrator did not understand the information presented." So who was this Assistant District Administrator, what is he or she doing today, and how do we know he or she wasn't just playing dumb?

2001: Markopolis complaint #2 goes to the BDO, which, this time, hands it on up to the Northeast Regional Office (NERO) in NYC. The NERO Assistant Regional Director in Enforcement kills it after one day. Again, who did this, what is he or she doing today, and how do the investigators know that this Assistant Regional Director wasn't influenced by illegal factors?

2001: After Markopolis #2 is dropped, MARHedge and Barron's each publish articles questioning Madoff's business, and the Barron's article makes its way to both the director of NERO and the director of the Office of Compliance Inspections and Examinations (OCIE), the latter of which passes it along to an Associate Director in OCIE for follow-up action (which doesn't happen for several years). How do we know that the director of NERO (see Markopolis #2 above) wasn't deliberately tanking the investigation?

 2003: A "Hedge Fund Manager" files a "detailed complaint" with the OCIE's investment management group in D.C. This went nowhere because (i) of inexperienced staff (again), (ii) of an unexplained 7 month delay in the investigation, and (iii) the Assistant Director focused on the issue of illegal "front-running" instead of the Ponzi scheme possibilities. Requests for independent 3rd-party data that would have exposed the Ponzi scheme were prepared, but abandoned. Who decided to appoint inexperienced staff? How do we know that this Assistant Director wasn't deliberately tanking the investigation? Who decided to abandon the requests for 3rd-party data? Who told the examiners to "back burner" the Madoff exam in April 2004?

2004: A NERO investigator uncovers a crucial set of emails re: Madoff's operations in the course of an investigation of an unrelated party. Again, inexperienced investigators are appointed to look at the issues, and when they ask to continue the investigation and broaden its scope, the Assistant Director shoots them down. Who was this person, and what is he/she doing now?

 2005: Markopolis files complaint #3 with BDO, and the BDO again refers it up to NERO. NERO assigned the majority of the investigatory work to a 19-month veteran of the SEC who had just graduated from law school.  The NERO staff almost immediately expressed skepticism about Markopolis, and, again, never verified the information that Madoff's provided by checking it against the DTC's records.

To me, there are a few too many "inexperienced teams" appointed to investigate Bernie, and a few too many complaints that died in NERO's office, at the behest of fairly senior people in that office. I'm fully prepared to accept that a governmental agency could mess up a series of investigations, such as the above, without any illegal activity on the part of the investigators; but this report doesn't convince me that that's what happened.

I wonder what Harry Markopolis thinks of this report.