A Securities and Exchange Commission Inspector General report released Tuesday alleged that the agency’s former general counsel, David Becker, benefited personally by participating in matters related to the liquidation proceedings dealing with the Bernie Madoff fraud.
H. David Kotz, the SEC’s IG, said in his report that Becker “participated personally and substantially” in particular matters in which he had a personal financial interest because his mother’s estate included an account managed by Madoff.
The matters on which Becker advised “could have directly impacted his financial position,” the IG’s report said.
Irving Picard, trustee for the liquidation of Madoff’s firm, filed a suit in February against Becker and his two brothers as part of his efforts to regain “claw back” funds from investors who gained from the Madoff Ponzi scheme. Becker earned more than $1.5 million from a Madoff account held in his mother’s estate.
SEC Chairman Mary Schapiro (left) released a statement the same day in which she said that after hearing about the Trustee’s suit against Becker, she asked the agency’s IG in March to investigate any conflicts of interest arising from the participation of Becker in determining the SEC’s position in the liquidation proceeding brought by the Securities Investor Protection Corporation (SIPC) of Bernard L. Madoff Investment Securities, LLC (BMIS).
Said Schapiro on Tuesday: “I take [the IG’s] report, which was published today, very seriously.”
The SEC’s IG, H. David Kotz, says that, after extensive investigation, his office found that “Becker played a significant and leading role in the determination of what recommendation the [SEC] staff would make to the Commission regarding the position the SEC would advocate as to the determination of a customer’s net equity in the Madoff Liquidation.”
Said Kotz in his report: Under the Securities Investor Protection Act of 1970 (SIPA), where SIPC has initiated the liquidation of a brokerage firm, net equity is the amount that a customer can claim to recover in the liquidation proceeding. “The method for determining the Madoff customer’s net equity was, therefore, critical to determining the amount the Trustee would pay to customers in the Madoff Liquidation,” Kotz said.