Bloomberg
By Jesse Westbrook and John Tucker
Dec. 16 (Bloomberg) — Bernard Madoff’s financial records were “utterly unreliable” and will take six months to sort out, said Stephen Harbeck, president of the Securities Investor Protection Corp.
“There are some assets, but I have no idea what the relationships of the assets available are to the claims against them,” Harbeck said on Bloomberg Television. “The records are utterly unreliable on this case.”
His comments came as Bank Medici AG of Austria became the latest lender to reveal a loss from Madoff’s alleged $50 billion fraud. Two funds at the Viennese bank, 75 percent owned by Chairman Sonja Kohn, invested $2.1 billion entirely in Madoff’s firm, the bank said today. It joined institutions and wealthy individuals from Tokyo to Paris. New York’s Yeshiva University lost as much as $140 million, the student newspaper said.
U.S. Senate Banking Committee Chairman Christopher Dodd, meantime, told the Securities and Exchange Commission to explain how it failed to detect the “giant Ponzi scheme.”
Dodd, a Connecticut Democrat, “is seeking more information from the SEC about this case,” Kate Szostak, the senator’s spokeswoman, said in a statement late yesterday. “Senator Dodd is concerned not only about the people caught up in this reported scheme who may have been misled, but how such a massive fraud could have gone undetected.”
2005 SEC Review
Madoff, 70, was arrested Dec. 11 after he told his sons that Bernard L. Madoff Investment Securities LLC was a “giant Ponzi scheme,” the SEC said. Clients facing losses range from a Fairfield, Connecticut, pension fund to hedge funds and New York Mets owner Fred Wilpon’s Sterling Equities Inc.
The SEC hadn’t inspected Madoff’s investment advisory business since he registered the firm with the agency in September 2006, two people familiar with the matter said. The SEC tries to inspect advisers at least every five years and to scrutinize new firms in their first year of registration, former agency officials and securities lawyers said. Harbeck’s SIPC is liquidating the firm.
SEC examiners reviewed Madoff’s brokerage business in 2005 after an investment manager, writing to the agency, and press reports questioned the validity of his investment returns. The SEC’s enforcement division completed an investigation involving the company last year without bringing a claim.
Peter Madoff Subpoenaed
One of Madoff’s sons, Peter Madoff, was today subpoenaed by Massachusetts Secretary of State William Galvin, according to a copy of a court filing. The son was chief compliance officer at Madoff’s firm, the filing said. Galvin is also seeking documents from Marcia Beth Cohn, chief compliance officer of Cohmad Securities Corp., located at the same address as Madoff’s firm, the filing said.
Galvin became involved after Tremont Group Holdings Inc., a hedge-fund firm owned by Massachusetts Mutual Life Insurance Co., revealed that it had $3.3 billion invested with Madoff. The investment amounted to more than half Tremont’s total assets, a person familiar with the matter said.
The SEC was already under fire before Madoff’s alleged fraud came to light. The collapses of investment banks Bear Stearns Cos. and Lehman Brothers Holdings Inc. this year tarnished the SEC’s reputation and lawmakers such as Dodd and Senator Charles Grassley, an Iowa Republican, have questioned its vigilance in enforcing securities laws.
SEC spokesman John Nester didn’t return a phone call and e- mail seeking comment.
Separately, Madoff made $182,250 in campaign donations since 1993 to federal candidates, the political parties, and securities industry’s political action committee, according to the Center for Responsive Politics. He gave $100,000 to the Democratic Senatorial Campaign Committee, including $25,000 in September. He contributed to both Democratic and Republican members of Congress.
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