David Becker, the top lawyer at the Securities and Exchange Commission, is suddenly an embarrassment to his employers. He and his two brothers inherited more than $1.5 million in phony profits from their mother’s investment in $65 billion Bernard Madoff’s Ponzi scheme. Since the S.E.C. was famously asleep at its post regarding Madoff, its negligence and incompetence allowing him to destroy individual lives, charities and more, having a key lawyer at the regulatory agency profit from Madoff’s scheme, even by inheritance, looks corrupt and unconscionable.
Bankruptcy trustee Irving Picard is suing various beneficiaries of the fraud, including Becker and his brothers, demanding the phony profits back. Becker and his brothers, who are co-executors of their mother’s estate (she died in 2004, long before Madoff’s scam was revealed), are going to fight the lawsuit, as they have every right to do.
The lawyer was named S.E.C. general counsel and senior policy director in 2009, shortly after Madoff’s arrest in December 2008. He had previously served in the same role from 2000-2002, but apparently wasn’t involved in the S.E.C.’s failure to detect and stop the scam. The agency had ignored financial analyst Harry Markopolos in 1999, when he warned the S.E.C. that it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver, before Becker arrived on the scene. The Boston SEC also ignored similar warnings in 2000 and 2001, but there is no indication that they were ever relayed to Becker.
His mother didn’t know that her profits from Madoff had been earned illicitly. As her son, Becker inherited her money with no taint of misconduct. He has done nothing wrong. And it is far from certain that he and his brothers are legally obligated to give back the so-called “dirty money.”
Nonetheless, in a key government post in which Becker is obligated to “avoid the appearance of impropriety,” he has a major appearance of a conflict of interest that never existed. Still, what the public sees is an S.E.C. general counsel getting a lot of money from the investment scam his own agency allowed to occur.
Becker has an obligation to resign, for the good of the agency and to preserve the public’s trust—even though he did nothing wrong, and even though some people will take his resignation to mean that he did. In fact, I think Becker had an obligation not to take the appointment in the first place, because this appearance problem could have been anticipated. In 2009, Becker knew he had inherited money that came from Madoff, and that this would embarrass the S.E.C. if he was working there when the story came out.
He is leaving the S.E.C. now, bound for private practice, the victim, along with the S.E.C., of an imaginary conflict of interest.
And the human wrecking ball called Bernie Madoff continues to swing.