The SEC's Madoff Report is the Starr Report of Finance: Hysterical, Embarrassing, SadS

The SEC's inspector general finally released the full 477-page internal audit on Bernie Madoff's misdeeds and how the SEC completely missed the mark on catching them. How badly did they completely screw the pooch on this one?

Badly. Not only was the SEC never able to get an accurate measure on the size of Mr. Madoff's penis, but they also weren't able to catch him after crossing the trail he left several times over a period of time lasting about 17 years. The Wall Street Journal tears into it, teeth bared, as the report more or less implicates the SEC as the Keystone Cops of American Finance. Among the better ones:

  • "A May 2003 email from a hedge-fund manager citing 'indicia of a Ponzi scheme,' but the agency months later decided to pursue a different allegation because that's where its expertise lay."

  • In 1992, the SEC looked into two Florida accountants who were getting money to Madoff. They punished the accountants, but not Madoff.

  • 25 people invested with Madoff after the SEC issued a report saying there was no reason to believe Madoff was a crook. Whoops!

  • In May, 2003, a hedge fund manager tipped off the SEC to Madoff's Money not adding up. The SEC senior examiner in charge chose to look at abusive trading practices (called "front-running") instead of the questions raised by the SEC tipster because that's where the senior examiner's "team's area of expertise led." In other words: the senior-examiner thought he'd further his own career by pushing forward on a line of inquiry he knew he could handle as opposed to something he'd have to call in help for. Whoops.

  • A routine examination of a hedge fund called Renaissance Technologies, run by a guy named James Simons, yielded internal emails wondering whether or not Madoff's money was real. These emails led to a 2005 SEC investigation of Madoff's funds.

  • My favorite: an anonymous complaint registered with the SEC suggested "a scandal of major proportion." The SEC looked into it, by calling Madoff's lawyer about a specific investor. They asked, he denied, and they dropped it. Wow.

So! To sadists, schadenfreude enthusiasts, and to those of you who fetishize and enjoy the fuckups of an overinflated bureaucracy, of fraud perpetrated in proportions otherwise unseen, and of people losing millions and millions of dollars, the entire thing will make a great read, and can be downloaded here. To those of you who lost any amount of money to Bernie Madoff and have dutifully paid taxes assuming that one day that money would go to protect you in the event of something like this, uh, yeah, you're not gonna be happy.