One of the "key participants" at the U.S. Securities and Exchange Commission who investigated Bernie Madoff in 2005 and 2006 - and entirely missed the fact that he was running a $50 billion Ponzi scheme - was rewarded with a cash bonus for later Madoff work, the SEC's inspector general found in a report released Aug. 2.
The unnamed employee was nominated for a bonus in September 2009, shortly after Inspector General H. David Kotz released a massive report detailing the SEC’s failure to catch Madoff. That report flagged the employee — and the assistant regional director who nominated the employee for the award, also unnamed in the report — for “numerous performance issues” and potential disciplinary action.
One might think such findings would bring a person’s career to a standstill. But not, apparently, at the SEC. Instead, the employee got a bonus, in part “to reward the employee’s efforts in 2009 pertaining to a follow-on investigation of Madoff” — a decision that Kotz found “jeopardizes the integrity of the awards program.”
The SEC did postpone payment of the award until April of 2010, after outside counsel from Fortney & Scott concluded the employee’s actions did not warrant formal disciplinary action.
“However, the Fortney & Scott report did not dispute the serious performance issues pertaining to the employee raised in our report, including the fact that the 2005 examination of Madoff in which the employee had played a critical role was inappropriately focused, conducted without obtaining critical independent data, closed with unresolved issues remaining, and relied too heavily on the representations of Madoff,” Kotz wrote.
The inspector general also found that the SEC’s budgeting process for employee awards is “flawed and ineffective,” and the average awards are nominal — $951 per person in 2010. Last year, the SEC gave out 2,524 cash awards to employees.