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Madoff Victims: SEC Employee Wrist Slaps "Pathetic"

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GRAPES OF WRATH
DailyFeed
Pay cuts, demotions, 30 day suspensions, and counseling -- those are the punishments the Securities Exchange Commission will mete out to eight employees over the failure to detect and prevent Bernie Madoff’s Ponzi scheme -- and it has some victims of the biggest financial fraud in American history rather upset.
 
“It just doesn’t seem enough when their failure to detect the Madoff fraud led to the destruction of so many hopes and lives and dreams and legacies,” Ilene Kent, 57, whose parents were victims of Madoff, told the Washington Post.
 
Another investor, 68 year-old Stephanie Halio, who had to come out of retirement after losing her life savings, said, “It’s pouring salt in the wound. I think it’s pathetic.”
 
Gerri Willis of Fox Business News had her say too, writing on her blog: “The biggest Ponzi scheme in the world operates in plain sight right under the noses of the nation's biggest securities regulators -- and everybody keeps their jobs. Unbelievable!”
 
To be fair to the SEC, many of the employees who were in charge of overseeing Madoff had already left the agency when disciplinary reviews began, and thus could not be held liable.
 
Still, this is the second time this month that the SEC has been more than generous in meting out punishment in fraud cases. Earlier in the month, the agency reached a $285 million settlement with Citigroup over alleged fraud in toxic mortgage-bond deals in which investors lost over $700 million dollars. In exchange for the paltry fine, Citi had to pledge not to violate a specific antifraud statute again. It all sounds well and good, except that Citi made the same pledge in July 2010, May 2006, March 2005 and April 2000.
 
Matt Taibbi of Rolling Stone describes the SEC’s ineptitude in his inimitable style:

A unit of Citigroup, having repeatedly violated the same laws and having repeatedly violated the SEC’s own cease-and-desist orders and injunctions, is dragged into court one more time for committing a massive fraud.

And what does the SEC do? It doesn’t even bring up Citi’s history of ignoring the SEC’s own order, slaps the bank with a fractional fine, refuses to target any individuals, allows the bank to walk away without an admission of wrongdoing, and puts a cherry on the top by describing the $160 million heist not as a crime, but as unintentional negligence.


To review: This is an agency that, as the Post notes, “failed to see through the long-running scam despite receiving six complaints about Madoff over several years”, and when it does haul negligent parties to face the music, it punishes them with slaps of the wrists like 5% pay cuts or a suspension of up to 30 days.

The horror!

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