SEC Chairman Mary Schapiro wasn't around when the SEC blew failed to expose the Bernie Madoff caper, even after getting a roadmap from whistleblower Harry Markopolus - though she headed SRO NASD (nka FINRA) at the time.  Ms. Schapiro, nonetheless, finds herself under fire from Congress for hiring, as general counsel, someone who had financial ties to Madoff. 

Amazing!  You can't write fiction this strange.

The "fur is flying" over revelations that David Becker, the SEC's recently-departed General Counsel is someone with a Madoff financial interest.  This has raised fresh questions about ethical standards and hiring practices at the Commission. 

Mary Schapiro, who was brought into the SEC as Chairman 2 years ago with a mandate to strengthen the Enforcement Division, will appear before Congress Thursday to discuss the matter.  Congressional investigators want to know if Mr. Becker and Ms. Schapiro took all the necessary steps outlined in government ethics rules.  Under the United States code, for example, Ms. Schapiro may have been required to make a written determination that Mr. Becker’s financial interest was not substantial enough to affect his job performance.

Lawmakers also have asked Ms. Schapiro for details of her discussions with Mr. Becker about his Madoff account when she hired him in 2009.  She missed a deadline on Monday for those responses and declined to comment.  An SEC spokesperson said that such a written determination would not be required unless Mr. Becker had been found to have a substantial financial conflict.

    Madoff Trustee Raises the Red Flag.   Questions arose last month after Madoff trustee Irving Picard sued Mr. Becker and his brothers to recover $1.5 million of the $2 million they had inherited in 2004 from their late mother, who had invested with Bernie Madoff.  General Counsel Becker’s financial ties to Madoff had not been publicly disclosed until that suit.   The SEC has come under fire for failing to detect Madoff’s Ponzi scheme during the decades he ran it.

Mr. Becker said that he advised SEC Chairman Schapiro and the Chief Ethics Officer of his financial interest in a Madoff investment account, "either shortly before or after" joining the agency in February 2009.

Last Friday, SEC Inspector General H. David Kotz, the agency’s inspector general, announced that he would investigate the potential conflicts in Mr. Becker’s role as a Madoff recipient and the Commission's general counsel and senior policy director involved in decisions relating to the Ponzi scheme.  Ms. Schapiro requested the review, a spokesperson said.

    Congressional Concerns.   "One of the things the S.E.C. does is hold companies to a very high standard with regards to transparency and disclosure," said Representative Randy Neugebauer (R-TX), who is one of 4 Republican lawmakers asking Ms. Schapiro about her dealings with Mr. Becker and his disclosures. “We think it’s important that the same integrity exists within the S.E.C., ensuring that people working there do not have conflicts of interest and that here is a process to vet those issues and make sure they are taken care of in a way that gives confidence.”

Perhaps the most significant Madoff matter involving Mr. Becker reportedly is a proposed reversal of the agency’s recommendation on how to compensate victims of the scheme.  While the agency had agreed on a deal that would return to investors only the money they had put into their Madoff accounts, Mr. Becker argued that the commission should change its stance to allow victims to keep some of the gains their investments had generated, since the investment would have grown somewhat over time even in a low-interest account.  Obviously, the Becker family would benefit from this approach.

For further details, go to:   [NYTimes, 3/9, "SEC Chairwoman's Under Fire ..."]