"Top SEC Lawyer Named in Madoff Suit"

"Irving Picard hits Securities and Exchange Commission's top lawyer with Bernie Madoff lawsuit" 

These headlines and the others that will surely follow as this story develops today will no doubt draw readers' attention. They are, however, quite misleading to the extent that they imply that the SEC lawyer in question, David Becker, did anything wrong.

The story is sensational but, when you break it down, appears to be more of an unfortunate coincidence than anything else. As discussed here in the NY Daily News and elsewhere, a woman named Dorothy Becker had an account with Bernard Madoff's firm. Upon her death in 2004, Ms. Becker's sons were named executors of their mother's estate, and they liquidated the Madoff account in 2005, withdrawing $2,042,845.

 

Now, the trustee overseeing the Madoff bankruptcy is suing hundreds of Madoff investors trying to "clawback" any money that was withdrawn from the firm under the theory that the whole operation was a Ponzi scheme and nobody was entitled to withdraw money and benefit from the fake proceeds shown on their account statements. Because Ms. Becker is now deceased, the trustee's claim for the money withdrawn from her account is being filed against her three sons.

 

As stated in the Daily News article,

 

the lawsuit, filed on Nov. 12 of last year ... against [the three sons] is one of up to 200 that Picard has filed in an effort to recover money from people who gained from Madoff's scheme and redistribute it among the far greater number of those who lost their savings.

 

If this is just one of hundreds of clawback cases being filed in the Madoff mess now, why the screaming headlines above? Because one of Ms. Becker's three sons, David, happened to be General Counsel of the SEC in 2000-2002 and again from Feb. 2009 until this month. That is where the speculation begins. If David Becker knew that his mother had an account with Madoff, a cynic might say, perhaps that could help explain why the SEC failed to shut down the Ponzi scheme decades ago. Of course, if he had no such knowledge, then the fact that Becker worked at the SEC is irrelevant and simply a unfortunate coincidence in terms of public relations for the SEC.

 

Both the SEC and Becker himself have stated unequivocally that Becker was unaware of his mother's account with Madoff prior to her death. SEC spokesman John Nester said Becker "had no involvement with his parents' financial affairs, and no recollection of his parents' account with Madoff prior to his mother's death and subsequent liquidation of the account." Becker told the NY Post that he had nothing to do with his parents' investments and "absolutely" no idea Madoff had been running a fraud.

 

I have no idea what Becker's brothers do for a living but let's just make something up for argument's sake and say one of them is a zoologist. Assuming that David Becker had no knowledge of his mother's investments--and there is no reason to believe otherwise--his position at the SEC is irrelevant and the headlines above could just as logically read, "Zoologist Named in Madoff Suit." Except nobody would care about that.