Fraudster Madoff boasts of duping market investigators for 16 years

Published on Saturday 31 October 2009 13:56

DISGRACED American financier Bernard Madoff has claimed it never occurred to Securities and Exchange Commission (SEC) staff he was running a "Ponzi" scheme, despite its numerous investigations.

In a summary of a prison interview in June with the SEC inspector general, Madoff said: "It never entered the SEC's mind that it was a Ponzi scheme."

Madoff, 71, a former Nasdaq stock-market chairman, pleaded guilty in March to running a multi-billion dollar Ponzi scheme as an investment adviser. In Ponzi schemes, new investors are paid with other investors cash rather than any actual profit from investments. Madoff is serving a 150-year sentence in federal prison in North Carolina.

In June, Madoff also said he did not take a lawyer along to SEC enforcement division interviews because he believed he did not need one. He said he was also trying to fool investigators he had nothing to hide.

Inspector general David Kotz interviewed Madoff at the Metropolitan Correctional Center in New York. Details were released last week with hundreds of other documents related to Kotz's extensive probes, which failed to catch Madoff over a 16-year period.

Madoff said he was "worried every time" that he would be caught. "It was a nightmare for me," he said. "I wish they caught me six years ago, eight years ago."

Kotz also issued a statement saying there was no evidence to back Madoff's claim of a "close relationship" with SEC chairwoman Mary Schapiro, former head of the Financail Industry Regulatory Authority.

Madoff had described her as a "dear friend" who "probably thinks, I wish I never knew this guy." Her self-regulatory body also failed to find anything wrong with Madoff's separate brokerage operation.

An internal review subsequently found a regulatory breakdown in the Madoff case.

Madoff's auditor, David Friehling, is expected to plead guilty in a co-operation deal before a federal judge in New York on Tuesday. He is accused of securities fraud, investment advice fraud, filing false accounts with the SEC, and obstructing or impeding the Internal Revenue Service.

The charges carry a prison term of up to 108 years, though significant co-operation with prosecutors can result in a degree of leniency.

In his interview with Kotz, Madoff said the SEC never asked him about his tiny accounting firm. It seemed incongruous that, with more than $65 billion in private investments he claimed he oversaw for thousands of people, Madoff used what seemed to be a small-time auditor with a tiny office in suburban New City, New York. Authorities say that Friehling appeared to have rubber-stamped Madoff's records.