According to an article by Lisa Uhlman on the Law360 website, the Department of Justice will not investigate whether David Becker, the SEC’s former General Counsel, violated ethics laws during the SEC’s handling of issues related to Bernie Madoff’s Ponzi scheme. As described here, the SEC’s Office of the Inspector General had previously referred the results of an investigation to DOJ after finding that former General Counsel "participated personally and substantially in particular matters in which he had a personal financial interest by virtue of his inheritance of the proceeds of his mother’s estate’s Madoff account and that the matters on which he advised could have directly impacted his financial position." The Law360 article quoted Mr. Becker’s counsel as stating he was "gratified by the decision" by DOJ not to take the matter any further.
According to the Inspector General’s Report released on September 20, 2011, Mr. Becker and his brothers were the executors and beneficiaries of his mother’s estate, which included assets from an account at Bernard L. Madoff Investment Securities LLC (originally opened by Mr. Becker’s father) that were liquidated for approximately $2 million. The Trustee administering the Madoff liquidation filed a clawback suit against Mr. Becker and his brothers in February 2011, seeking to recover approximately $1.5 million.
Although Mr. Becker was aware that the Trustee might commence such a lawsuit when he rejoined the SEC in 2009, he "played a significant and leading role in the determination of what recommendation the staff would make to the Commission regarding the position the SEC would advocate as to the determination of a customer’s net equity," which would be used to determine the amount of funds that the Trustee would seek to clawback in the Liquidation. In addition, Mr. Becker "provided comments on a proposed amendment to [the Securities Investor Protection Act of 1970] that would have severely curtailed the Trustee’s power to bring clawback suits against individuals like him in the Madoff Liquidation." The Inspector General is referred the results of the investigation to the Public Integrity Section of the Criminal Division of the United States Department of Justice.
Mr. Becker, SEC Chairman Mary Schapiro and Inspector General David Kotz testified before a joint session of two Congressional Subcommittees about these events in September 2011 as previously discussed here. Mr. Becker vigorously denied any wrongdoing and emphasized that he sought and followed the advice of the SEC Ethics office (a fact acknowledged by the OIG Report) and "was advised that [he] had no conflict of interest in providing legal advice to the SEC" on these issues.
In discussing DOJ’s decision not to further investigate the matter, counsel representing Mr. Becker told Law360: "[I]t’s consistent with our view that Mr. Becker did exactly what he was supposed to do at the time."
It is interesting to note that in his Congressional testimony, Mr. Becker testified that he was "confident that the [Madoff] Trustee would never find it necessary to sue me. If it turned out that there were indeed fictitious profits in my mother’s account, all the Trustee had to do was notify me and explain his calculations, and I would return any excess funds in my possession. …" According to the Law360 article, Mr. Becker "is in settlement talks" with Madoff trustee Irving Picard over these funds eight months after that complaint seeking the clawback of $1.5 million was served.
