Schapiro Letter March 8 2011 Oversight and Investigations, Et Al

8/7/2019 Schapiro Letter March 8 2011 Oversight and Investigations, Et Al

1/5

@g EXC~

f UNITED STATES8S E C U R I T I E S A N D EX C H A N G E C o S S I O N

P.W ASH IN GT ON , D .C . 2 0 5 4 9

' Whh~%

March 8, 2011

The Honorable Spencer Bachus The Honorable Jeb Hensarling

Chairman Vice ChairmanCommittee on FinancialServices Committee on Financial Services

U.S. House of Representatives U.S. House of Representatives

2129 Rayburn House Office Building 2I29 Rayburn House Office BuiMingWashington, DC 20515 Washington, DC 20515

The Honorable RandyNeugebauer The Honorable Scott Garrett

Chairman ChairinanSubcommittee on Oversight and Investigations Subcommittee on Capital Markets andU.S. Houseof Representatives Government Sponsored Entities

2129 Rayburn House Office Building U.S. House of Representatives

Washington, DC 20515 2129 Rayburn House Office BuildingWashington, DC 20515

Dear Chairmen Bachus,Neugebauer and Garrettand Vice Chairman Hensar1ing:

I write in response to your letter of March 1, 2011, seeking information. regarding theinvolvement of former General Counsel David M. Becker in Commission activities relating tothe Bernard L. Madoff Ponzi scheme. Thank you for the opportunity to respond to questions you

have regarding this issue. Last Friday, March 4, 2011, I asked the Commission's Office of

Inspector General ("OIG") to examine the matter fully, and I look forward to working with. you

and the Inspector General to promptly and thoroughlly review the matter.

As you are aware, Mr. Becker's last day at the Comrmssion was February 25, 2011,

having completedthetwo-year commitment he made to the agency when he returned in 2009'.Upoii Mr. Becker's departure, a new General Counsel was appointed and assumed those duties

on February 28, 2011. When your March 1 letter seeking certain information and documents byMarch 7 was received by the Commission's Office of Legislative and Intergovernmental Affairs("OLIA"), it was forwarded, asis typica1for requests of this nature, to the Office of the General

Counsel ("OGC") for assistancein expeditiously responding to yourrequests.

As you may also be aware, on March 3, 2011, I received a letter from House Oversight

and Government Reform ChairmanDarrell Issaand Senator Charles Grassley seekinginformation similar to that which you requested. On the evening of March 4, OLIA staff receivedan e-mail from members of the staffs of Chairinan Issa and Senator Grassley expressing the view

that the OIG, and not anyone in the OGC, should be given primary responsibility for collecting

the relevant documents. The e-mail also communicated the view that any further investigationbeyondthatwhich was required to respond to the narrative questions in their March 3 lettershould be the responsibility of the OIG.


2/5

Page 2

Notwithstanding that communication, on March 7, 2011, I received another letter from

Chairman Issa and Senator Grassley requesting that we limit the involvement of the OGC in boththe gathering of documents and the preparation of the written responses called for by their March

3 letter, despite the fact that Mr. Becker was no longer employed as General Counsel. In addition,the OIG expressed concern about attorneys outside that office conducting the witness interviews

necessary to respond toyour inquiries and document requests. Accordingly, in an abundance of

caution, I directed that theOGC staff be recusedfrom either the gathering of documents orthe

preparing of narrati.ve responses to this letter and to the March 3 letter from Chairman Issa and

Senator Grassl~ey.Instead, as was discussed yesterday with HouseFinancial Services Cominittee

staff and the OIG, I have decided that the OIG will both gather the docuinents responsive to your

requests and conduct the witness interviews necessary to prepare responses to certain questions.

This should further ensure that the integrity of both the OIG's investigation and the

Commission's. responses to your inquiries is fully maintained.

As a result, my ability to answer your questions is limited to my personal knowledge, In

answering the questions, my responses have been prepared without the assistance of anyone fromthe OGC. In. addition, I should note that, because I have not had an opportunity to review the

relevant documents that the OIG may gather or otherwise refresh my recollection, I am offering

my answers based on my best recollection of the events in question, some of which occurred aslong ago as two years. Based on my memory of the events in question., my responses follow:

1. In Mr. Seeker's February 25 response, he notes that "either shortly before or

after [he] returned to the SEC in 2009, [he] informed both Chairman Mary

Schapiro and ihen-SEC Ethics Counsel William Lenox" about his interest in his

mother's Bernard L. Madoff Investment Securities ("NIadoff") account. Pleasedetail the comniunication(s) between you andMr. Seeker regarding his another's

Madoff account.

I recall that, shortly after Mr. Becker began his service as General Counsel in 2009, heinformed me that his mother had had an account with Mr. Madoff, that the account

had been closed years earlier, and this his mother had died approximately five years

earlier. I do notrecall asking Mr. Becker for or receiving additional information.

After Mr, Becker provided the initial information to me regarding his mother's closedMadoff account, I recall having an additional discussion with Mr. Becker regarding

the matter in the late fall of 2009. That discussion concerned the designation ofCornrnission staff to testify before a congressional subcommittee regarding legal

issues arising from the liquidation of Bernard L. Madoff Securities LLC being

conducted by the Securities Investor Protection Corporation. During that discussion,either Mr. Becker or I referred to the information he had previously provided to inc

regarding his mother's closed Madoff account.


3/5

Page 3

2. Did you discuss the conversation you had with Mr. Becker and/or the substance

thereof with anyoneelse, including other Commissioners, membersof your staff,

the Office of the Ethics Counsel ("Ethics Counsel" ), the Office of Government

Ethics ("OGE"}, or the Office of Inspector General? Please provide any notes,einail, or other documentation referring or relating to the conversation you had

with Mr. Becker or auy relatedconversations.

I do not recall discussing my conversations with Mr . Becker wi th anyone else.

However, it is possible that the discussion with Mr. Becker regarding the designati~oii

of Commissiioii staff to provide congressional testimony in the late fall of 2009 also

involved other individuals. With regard to yoiir request for notes, emails, or otherdocumentation, I have deferred to the OIG with regard to the collection of any

responsive documents.

3. As the government official responsible for appointing Mr. Becker to his position

in 2009, what steps did you take to manage tbe appearance of or actuall conflict

of interest presented by Mr. Becker's financial interest in the NIadoff Securities

investorProtectionCorporation ("SIPC"} liquidation?

When Mr. Becker initially notified me that his: deceased mother had had a Madoffaccount that had been closed years earlier, the issue did not appear to me to present a

financial conflict of interest. However, I relied on Mr. Becker to present any ethics

related issues, including appclaricc issues, to Ethics Counsel and on Ethics Counselto perform his review and analysis of such situations. I had confidence both in Mr.

Becker as a responsible aiid experienced senior government official and in Mr. Lenoxas a long-time and highly regarded agency ethics officer. It is my understanding that areview by Ethics Counsel did occur as expected and was documented.

4. In Mr. Becker's February 25 response, he states,that in or around May 2009, he

received a letter from "a number of llaw firins" regarding a legal position taken

by the Madoff trustee. Please provide a copyof this letter and a list of clients

whose interests the law firms sought to advance. Please a)so describe your

involvement in the consideration of any matter raised by this letter, including

detail any meetings or other communications you had with these law firms, the

lawyers or their clients about the same.

While I do notrecall receiving the referenced letter, I may well have. Again, I have

deferred to the OIG to gather responsive documents, Although I have not had the

opportunity to review the letter at issue iii preparing these responses, I did have

meetnigs with both Commission staff and SIPC representatives iegai'Ching the

positions the SEC might take in Madoff-related litigation. In late 2009 and 2010, the

Commission subsequently authorized staff to file legal briefs in Madoff-related


4/5

Page4

proceedings concemirig legal issues under the Securities Investor Protection Act, and

I participated in those decisions,

5. In Mr. Becker's February 25 response, he states that he consulted with theEthics Counsel about his interest in his mother's Madoff account and was

advised that "a reasonable person with knowledge of all of these facts would not

question [his] impartiality." What is the Ethics Counsel's policy for

memorializing conversations with SEC employees when asked for an opinion

regarding a possible conflict of interest? If written documentation exists from

the Ethics Counsel related to Mr. Becker's inquiry regarding Madoff-rellated

matters, please provide us with a copy of these documents. If no such documentsexist, please provide a detailed explanation of why such documents do no exist

and the reasoning behind the Ethics Counsel's opinion. Were you aware of the

Ethics Counsel's advice at the time that Mr. Seeker received it? If not, why not?Do you agree with the advice given to Mr. BeckerP Why or why not?

As noted above, in order to honor the Inspector General's request that witness

interviews and document collectionbe conducted by the OIG, I do not have the

requested documents or the ability to speak to the Ethics Counsel's documentationpolicies. I do not recall whether I was awareof theEthics Counsel's advice to Mr.Beckerat orabout the time it was given. Consistent with the DIG's request, I have not

reviewed thewritten advice givento Mr. Becker, and thus I cannot express aview

thereon.

6. Harry Markopolos first presented his analysis of the NIadoff Ponzi Scheme tothe SEC in 2000. Please provide us with the naines of any individuals who havebeen employed by the SEC since 2000 who had a financial interest in a Madoff

account. We understand that you may not have all o f the relevant information,

but we expect that you will request such information from the SIPC. We alsoexpect that you willi cross-reference all information provided by SIPC with SEC

employmentrecords.

As noted above, it is my expectation that the OIG will gather the relevarit

documentation responsive to thisrequest.


5/5

Page5

As I noted above, some of the events about which you have inquired occurred several

years ago, and I have not had. the opportunity to refresh my memory be reviewing all relevantdocuments or discussing the matter with other relevant witnesses. Nevertheless, I have made my

best attempt to respond to your inquiries. I look forward to working with you and the OIG toensure this issue is fully reviewed.

Sincerely,

Mary L. Schapiro

Schapiro Letter March 8 2011 Oversight and Investigations, Et Al

Documents

Transcript of Schapiro Letter March 8 2011 Oversight and Investigations, Et Al