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A 150 years, that was the prison sentence handed down to Wall Street swindler Bernard Madoff. It did offer a measure of relief to some of his victims, but financially, they are no better off this morning than they were yesterday, and the Madoff victims worry that not enough is being done to prevent, well, the next Madoff.
NPR's Mike Pesca has more.
MIKE PESCA: There are half a dozen dramas on Broadway, two dozen or so off Broadway, perhaps a 100 more if you count all the performance spaces in New York. None of them surpassed the scene at the federal court house in lower Manhattan, yesterday, in conveying the pain of human suffering or raising unanswerable questions about the depths of indifference. Bernard Madoff was called a beast and the most despised person in America by his victims. One hoped that Madoff's jail cell would be his coffin. Another imagined Dante's Satan growing a fourth mouth with which to consume him. This made the words of Richard Friedberg(sp) all the more striking.
Mr. RICHARD FRIEDBERG: Madoff is basically irrelevant to most of the Madoff victims now.
PESCA: Friedberg was one of Madoff's victims who had attended the sentencing.
Mr. FRIEDBERG: The fact that the SEC checked them seven times and each time gave a clean bill of health. People used to rely on the SEC, clearly they could see that you can't any more, so why should anyone investing in this country feel safe. You can't, there must be changes.
PESCA: Actually The Wall Street Journal has reported that the Securities and Exchange Commission examined Madoff's operations no fewer than eight times, each time missing the scheme that was afoot. One of Madoff's victims told the court that SEC incompetence allowed a psychopath to steal from her and the world. For almost a decade, securities investigator Harry Markopolos warned that Madoff was running a fraud. That was the title of his 2005 submission to the SEC. The world's largest hedge fund is a fraud. But as Markopolos told the congressional committee…
Mr. HARRY MARKOPOLOS (Securities Investigator): Unfortunately, as they didn't respond to my written submissions in 2000, 2001, 2005, 2007 and 2008, here we are today.
PESCA: That was Markopolos's testimony five months ago. What's changed since, Columbia Law School professor John Coffee says, not enough.
Professor JOHN COFFEE (Columbia Law School): I don't think that either Congress or the SEC has focused on those reforms that would really work.
PESCA: Professor Coffee is being called before Congress to offer his expertise. His top reform deals with the fact that independent investment advisors, as Madoff was, are allowed to be the custodians of the money they invest.
Prof. COFFEE: Mr. Madoff served as his own self custodian and it's very easy to corrupt yourself - you can't be your own watchdog.
PESCA: Investment advisors don't want that rule changed. They earn a few extra percent if they are also custodians. But Coffee points out that mutual funds have to use outside custodians - a bank, a trust or some other financial institution that safeguards investors' money - and they are doing quite well as an industry, and by the way no publicly traded mutual fund that he is aware of has been the source of a Ponzi scheme. Yes, changing the custodian rules is a bit of closing the barn door after the horse has escaped, but at least to prevent the next horse from slipping away using the exact same route. But there has been a lack of momentum because, Coffee says, this is in an area where the public understands what kinds of answers might work. Many of Madoff's victims, like Ellen Bernfeld(ph), might not know the details of what to do next, but they sense that something has gone horribly wrong.
Ms. ELLEN BERNFELD: You tell me what kind of system allows a complete fraud to go unnoticed for 20 years. Who's in control of this?
PESCA: The new chair of the SEC is Mary Schapiro. Harry Markopolos has described her as on fire, citing her initiative to empower more whistle blowers. But Markopolos still warns that the agency is staffed with people who lack sufficient expertise, in his words, 3500 chickens trying to chase foxes.
Mike Pesca, NPR News, New York. Transcript provided by NPR, Copyright NPR.
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