Madoff Records Are “Utterly Unreliable”

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Dec. 17 (Bloomberg)Bernard Madoff’s ability to avoid scrutiny from U.S. regulators for years shows that the monitoring system is “broken and has to be fixed,” former Securities and Exchange Commission Chairman Arthur Levitt said.

Levitt, a senior adviser to Carlyle Group, said today in a Bloomberg Radio interview that the SEC must respond to allegations that it failed to act on tips of wrongdoing by Madoff that it had received since the 1990s.

“The system is obviously flawed and it’s got to be rethought in terms of how investors can be protected,” Levitt said. SEC Chairman Christopher Cox “is doing the right thing” by calling for a probe of the agency’s role, Levitt said.

Madoff was arrested Dec. 11 after telling his two sons and federal investigators that he’d been using money from new investors to pay off old ones in a Ponzi scheme. He said clients of his New York-based investment-advisory firm lost $50 billion.

Levitt said Madoff may have run a conventional business for a while and “shifted gears,” when the market turned against him. Madoff “clearly lied” to avoid registering with the SEC, which has shrunk as the financial industry has grown, Levitt said.

In 2004, the agency had 477 people in its inspection office, overseeing about 8,000 investment advisers, Levitt said. Today, 430 people regulate 11,300 advisers, along with about 16,000 mutual funds, he said.

Cox said yesterday the SEC failed to act for almost a decade on “credible and specific allegations” against Madoff. He announced an internal probe to review the “deeply troubling” revelations.

Levitt is a board member of Bloomberg LP, the parent company of Bloomberg News.

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