SEC SUES FINANCIER FOR IGNORING SIGNS OF MADOFF FRAUD

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The Times reports that the SEC filed a civil suit in June against the operator of a “feeder fund” to Bernie Madoff and the Justice Department is investigating the same setup for possible criminal violations. The basis asserted by the SEC and, presumably, the Justice Department, is that he “ . . . steered clients’ money to Mr. Madoff — and collected hundreds of millions of dollars in management fees — ‘despite having clear indications that Madoff was conducting a fraud.’ ”

It is tempting to put the last quotation in screaming purple italics. Is the SEC not the same organization that for over a decade ignored complaints about Mr. Madoff’s operations from knowledgable sources “. . . despite having clear indications that Madoff was conducting a fraud?” This gives us a new definition of chutzpah: in place of the old one, a child who murders his parents and pleads for mercy because he’s an orphan, we have a government watchdog suing an individual for not acting on evidence that the watchdog itself ignored the whole time

Surely the defendant will try to point this out to the jury, but the SEC’s lawyer, or the prosecutor, will object on the ground that following the example of a government agency is not a defense. Everyone involved in the SEC’s show trial will take it with a straight face. But I won’t. I’m laughing already.

This Bizzaro standard of responsibility advocated by the SEC is as ridiculous as Jeffrey Dahmer complaining that his victim's corpse assaulted him with its final twitch. If there is justice in the world we’ll see the feeder fund operator let off the hook and the entire SEC marched off in chains in an internationally televised perp walk. Of course, that won’t happen, but I’m still laughing.