You know that feeling you get when you are watching a particular genre of murder mystery and everyone in the audience sees the criminal lurking but the clueless protagonist has no idea?
That’s the feeling you get when you read the SEC’s Inspector General’s report on their decade-long, multi-office, multi-inquiry bungling of the Madoff investigation.
All throughout the document, you read about how close they came to revealing his fraud but always fell short. The problems seem to fall into three main categories —
1) inexperienced staffers who did not understand investment operations and strategy (a bad thing if you are an enforcement officer at the SEC),
2) a remarkable lack of follow-through on basic inconsistencies or easily verifiable assertions in Madoff’s statements to the SEC (at one point, Madoff himself terms it “astonishing” that they did not bird-dog a particular piece of easily-found and damning information), and
3) a lack of emphasis and interest in this particular case.
We’ve blogged on this before, but its worth noting that Boston’s own Harry Markopolos took his belief that something was amiss to the SEC 3 times in the last ten years (with his subtly titled “The World’s Largest Hedge Fund is a Fraud” memo). Nobody listened. Pathetic.