Legal News

Schapiro to Lawmakers: ?I Wish Mr. Becker Had Recused Himself?

By Ashby Jones

Frankly, it’s hard for us to fully comprehend how this was allowed to happen.

How was the former general counsel of the SEC, David Becker, allowed to stay on to work on Madoff-related matters at the SEC when it was well-known that he had inherited money tied to the Madoff fraud.

But indeed he was, and on Thursday, SEC chairman Mary Schapiro answered questions from Republican lawmakers over the issue.

Schapiro said she regretted her handling of Becker, and wishes that he had recused himself from working on agency decisions related to Madoff. Click here for the WSJ story on the hearing; here for the a previous LB post on the situation.

“Knowing those things now, I wish that Mr. Becker had recused himself. Absolutely,” Schapiro said Thursday in sworn testimony to a House Oversight subcommittee.

Becker, who became SEC general counsel in 2009 and left the agency last month, is now the target of a lawsuit filed by trustee Irving Picard on behalf of victims of Madoff’s Ponzi scheme. During his time at the SEC, Mr. Becker was allowed to work on an SEC proposal involving the compensation of Madoff victims.

Mr. Becker and his brothers inherited $2 million from their late mother’s account with Madoff. Becker told Schapiro about the account shortly after joining the SEC, and later received clearance from the agency’s ethics counsel to work on Madoff issues.

In 2009, Mr. Becker’s office recommended to the SEC’s five commissioners that the agency call for victim payouts to be increased for longer-term investors to account for inflation. Lo and behold, the the opinion differed from the recommendations by the trustee and the Securities Investor Protection Corp. An appeals court is expected to rule on the issue soon.

Republican lawmakers seeking to cut the SEC’s budget have seized on the episode as evidence of the SEC’s mismanagement. The matter poses “the greatest challenge to the SEC’s credibility” since the SEC failed to detect Madoff’s huge fraud, the panel’s chairman, Darrell Issa (R., Calif.), said.

Full post as published by Law Blog - WSJ.com on March 11, 2011 (boomark / email).