Shana Madoff and the Madoff Family SEC Connection

by Tina Kells | December 17, 2008 at 02:04 pm

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The Bernie Madoff Ponzi Scheme fraud is turning out to be a scandal of epic proportions that spans generations and could involve nepotism and corruption in the Securities and Exchange Commission. Like something out of a 1980's night time soap, the Madoff fraud scandal is turning out to be the financial crime of the century.

US investment baron Bernard Madoff was Wednesday due in court for the first time since being accused of a 50-billion dollar scam as the US finance watchdog admitted it had long ignored warnings.

The initial findings by the Securities and Exchange Commission probing the affair were "deeply troubling," admitted SEC chairman Christopher Cox.

"I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them," he said in a statement late Tuesday.

He said the watchdog would investigate why almost a decade of warnings -- including an examination of staff contact with Madoff's family -- did not uncover the Wall Street investment fraud sooner.

Madoff was able to run his fraudulent Ponzi scheme for decades without any detection by the SEC, but a probe announced today suggests that it may not have be incompetence but rather patronage that allowed Bernie Madoff to con savvy investors and banks across the globe out of billions of dollars. It has been suggested that Madoff's niece, Shana Madoff, may have acted as a go between with SEC attorney Eric Swanson, whom she married in 2007.

The SEC chairman announced a probe late Tuesday into how the financial regulatory body failed to detect the scheme, which duped large European banks as well as millionaire investors, for almost a decade.

Cox said the SEC "has learned that credible and specific allegations regarding Mr. Madoff's financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the commission for action."

The SEC probe is also investigating the relationship between Madoff's niece, Shana Madoff and a former SEC attorney Eric Swanson. The couple were married in 2007.

The probe will "include all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm," Cox said.

Before leaving the commission in 2006, Swanson worked for 10 years as a senior inspections and examination official. Swanson dated Shana Madoff for a year before marrying, his spokesman told the Wall Street Journal.