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Financial regulator critised over Madoff -

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ELEANOR HALL: Now to the mea culpa from the US financial regulator.

In a damning report into its own activities, the Securities and Exchange Commission found that it
botched no fewer than five investigations into the now imprisoned financial conman Bernard Madoff.

The report found that despite receiving numerous detailed and credible complaints about Madoff's
conduct the SEC never conducted a thorough or competent investigation.

Among the findings was that two SEC officers became aware that they were carrying out parallel
probes into Madoff's schemes only when he himself alerted them to the fact.

Barbara Miller has our report.

BARBARA MILLER: The report by the Securities and Exchange Commission's Inspector General David Kotz
starts off well enough.

It finds no evidence of improper behaviour. There was nothing, the report found, to suggest that
any SEC personnel had any financial or other inappropriate connection with Bernard Madoff or the
Madoff family that influenced the conduct of their investigations into his investment schemes.

But the report's conclusion is stinging.

EXTRACT FROM REPORT BY SECURITIES AND EXCHANGE COMMISSION: Despite numerous credible and detailed
complaints the SEC never properly examined or investigated Madoff's trading and never took the
necessary but basic steps to determine if Madoff was operating a ponzi scheme.

BARBARA MILLER: In the end the global downturn was Bernard Madoff's downfall. When investors hit by
the bad times tried to cash in on some of the investments they'd made with him he didn't have the
money to cover their requests.

Previously existing investors had been paid high returns from money put into the schemes by new
investors. New victims were also in short supply as the recession took hold and the multi-billion
dollar ponzi schemes were exposed.

In June Madoff was sentenced to 150 years in jail for what the judge described as extraordinarily
evil crimes.

Some of his clients thought that wasn't punishment enough.

VICTIM: When he leaves prison, which means after his death and he leaves prison virtually unmourned
by anybody on this earth, that he will then go down to the depths of hell. He'll join those other
people who are in the mouths of Satan.

BARBARA MILLER: The Securities and Exchange Commission found it should never have got that far.

At least six detailed and credible complaints were made to the commission over a period of a
staggering 16 years. The second of these was said to be "very specific".

EXTRACT FROM REPORT BY SECURITIES AND EXCHANGE COMMISSION: The complaint submitted in 2005 was
entitled "The world's largest hedge fund is a fraud" and detailed approximately 30 red flags
indicating that Madoff was operating a ponzi scheme, a scenario it described as highly likely.

The red flags included the impossibility of Madoff's returns, particularly the consistency of those
returns and the unrealistic volume of options Madoff represented to have traded.

BARBARA MILLER: SEC officers were assigned to look into these complaints but their investigations,
the report finds, were not thorough.

At one point unbeknownst to one another two officers were carrying out parallel investigations into
Madoff's activities.

EXTRACT FROM REPORT BY SECURITIES AND EXCHANGE COMMISSION: Astoundingly both examinations were open
at the same time in different offices without either knowing the other one was conducting an
identical examination.

In fact it was Madoff himself who informed one of the examination teams that the other examination
team had already received the information they were seeking from him.

BARBARA MILLER: David Ruder was the SEC chairman between 1987 and 1989.

DAVID RUDER: I think that the commission was understaffed and incompetent in what they did. It
boils down to that for that particular area.

What happened was that the commission did not assign people with sufficient understanding of the
securities markets to investigate the Madoff matter.

BARBARA MILLER: In a statement the current chairwoman of the Securities and Exchange Commission
Mary Schapiro said the steps being taken to try to better detect fraud included putting more
experienced staff on the frontlines, increasing training and revamping the way the hundreds and
thousands of tip-offs received annually were handled.

Mary Schapiro said the fact that Bernard Madoff's fraudulent practices had not been detected was a
failure that the commission continued to regret.

ELEANOR HALL: Barbara Miller reporting.