"David M. Becker, the S.E.C.’s general counsel, who went on to recommend how the scheme’s victims would be compensated, despite his family’s $2 million inheritance from a Madoff account."
"Mr. Becker’s tie to the Madoff situation came from a Madoff account held by his mother, who died in 2004. Her three sons inherited the account and closed it shortly thereafter, with a $1.5 million profit, based on Mr. Madoff’s fraud."
"Mr. Becker’s lawyer, William R. Baker III, said in a statement that the report confirmed that Mr. Becker had notified seven senior S.E.C. officials about his late mother’s Madoff account, including Ms. Schapiro and the agency’s designated ethics officer."
"Among the actions taken by Mr. Becker that were cited in the report were his efforts to influence the deliberations concerning how Madoff victims would be compensated, which could have had a direct impact on his financial standing. The report cited testimony from a witness who said that by early 2009, Ms. Schapiro indicated that most of the S.E.C. commissioners had agreed on a method that would give investors a claim to only the money they had put into their Madoff accounts. This might have meant the Beckers would be able to keep only around $500,000 of the $2 million withdrawn when the account was closed, Mr. Kotz’s report said."
"But after Mr. Becker rejoined the S.E.C. in February 2009 after an earlier stint, he argued for a reversal of this decision, the report says, at first pushing for victims to be compensated in part based on the final balance listed in their account. That position was supported by Annette Nazareth, a former S.E.C. commissioner who is representing some Madoff victims, according to the report."
"However, Mr. Becker told the inspector general that ultimately he determined that legally 'it’s not legitimate to say that we believe we have entitlement to assets that have never existed and that are just a figment of someone’s imagination.'”
"In the end, Mr. Becker supported a compromise that victims should be able to keep some of the gains their investments had generated, since the investment might have grown over time even in a low-interest account."
"The Becker family stood to benefit from this approach by $138,500, according to Mr. Kotz’s calculations. The S.E.C. approved that compensation plan backed by Mr. Becker in the fall of 2009, though final payouts and clawbacks from those who gained in the scheme are being determined in the court system."
"But none of the commissioners except Ms. Schapiro knew of Mr. Becker’s ties to the Madoff account, the report said. As a result, Mr. Kotz has recommended that the commission take another vote on the Madoff compensation matter “in a process free from any possible bias or taint.” One commissioner, Luis A. Aguilar, told the inspector general that it was “incredibly surprising and incredibly disappointing” that the conflict had not been shared with the commissioners."I think the key issues that look bad in this case are that he originally lobbied for compensating victims based on ending balances which he later admitted were based on a figment of Madoff's imagination! Then he lobbied for paying based on principal plus some reasonable return all while nobody knew he had money involved. Finally, he was the boss of the ethics officer who approved his involvement.
The SEC is supposed to be protecting us from frauds in corporations but they don't seem to understand the conflicts that lead even good people to commit fraud.