Former SEC attorney who inherited Madoff money defends actions

{mosads}Testifying before a joint hearing hosted by the House Financial Services and Oversight Committees, Becker said the SEC ethics office gave him a clean bill of health after he told them that he and his brothers inherited funds that had once been invested with Madoff.

And while he told lawmakers that he considered recusing himself even with the ethical clearance, he opted to work on Madoff issues instead.

“I worry sometimes that people spend too much time worrying about their rear ends and not doing the right thing,” he said.

Meanwhile, SEC Chairman Mary Schapiro said the fallout from the financial crisis and Madoff’s widespread fraud overshadowed Becker’s ties.

She painted a picture of an SEC that was reeling from the financial crisis and the revelation of the massive fraud when Becker came on board in 2009. That dramatic period overshadowed Becker’s ties to Madoff, she said.

“We were coming out of a financial crisis. There were a thousand things to do. There was virtually no senior staff on board. I was focused on lots of others things,” Schapiro said.

While aware of Becker’s ties, the SEC’s primary focus was on the victims of Madoff’s fraud, not potential beneficiaries.

“People who were literally moving into their children’s basements because they lost their homes because of what this man did,” she said. “I was not thinking of David Becker’s mother’s account at this time.”

However, Schapiro admitted that if she knew the extent of Becker’s connection at the time, she would have asked him to remove himself from matters related to Madoff.

Becker was the subject of a report released Tuesday by the SEC’s Inspector General David Kotz, who recommended the Justice Department examine whether Becker violated criminal conflict-of-interest laws with his actions.

At a joint hearing hosted by the House Financial Services and Oversight Committees, Schapiro and Becker were both subjected to bipartisan grilling, as both parties faulted the agency for flaws in its ethical process and the decisions of its top officials.

Rep. Elijah Cummings (R-Md.), the ranking member of the House Oversight Committee, said the Becker situation raised “serious questions” about how the SEC’s ethics office operates.

“The victims of the Madoff scheme deserve to know that the SEC’s decision in this case was not tainted by conflicts of interest,” he said.

However, lawmakers steered clear of any fierce personal attacks, focusing their attention instead on institutional failures and how to prevent them going forward.

“What is clear about this situation is that you did make a mistake,” said Rep. Patrick McHenry (R-N.C.), who co-chaired the joint hearing. “What we want to know…is how we prevent this from happening again.”

“Making a mistake is one thing, but how you react to the mistake is to me usually more important,” said Rep. Michael Capuano (D-Mass.).

At issue is the fact that Becker and his two brothers inherited over a million dollars that had once been invested with Madoff. The account was owned by his mother.

But Becker, who left the agency earlier in the year, ran the situation past the SEC’s ethics office, which determined it did not constitute a major conflict of interest. The connection only came to light publicly after the trustee charged with aiding Madoff victims sued the Becker brothers in an attempt to claw back $1.5 million in fictitious profits.

Becker told lawmakers that if he knew the Madoff trustee would be suing him, he would have recused himself from working on the Madoff case.

In particular, Becker has come under scrutiny for advising for a particular approach to compensating Madoff victims that theoretically reduced the amount that could have been clawed back from the family inheritance.

In his report, Kotz recommended the SEC reconsider that issue, which Schapiro agreed to, saying the agency would be reanalyzing the matter and its five commissioners would revote on it.