By Kara Scannell in New York
The US Securities and Exchange Commission said it would reconsider its position concerning Madoff customer claims after its internal watchdog issued a report finding the agency?s top lawyer may have violated conflicts of interest rules and referred the findings to the Department of Justice for review.
The report, by SEC inspector-general David Kotz, found David Becker, the commission?s former general counsel, ?participated personally and substantially in particular matters in which he had a personal financial interest . . . and that the matters on which he advised could have directly impacted his financial position?.
Federal law prohibits a government employee from participating in any matters that would have a ?direct and predictable effect on the employee?s own financial interest? or those related to him.
Mr Kotz said the referral followed a recommendation from the Office of Government Ethics, which considers conflicts of interest.
The report followed congressional scrutiny of Mr Becker?s role after a lawsuit filed earlier this year by the trustee representing Madoff customers seeking $1.5m in alleged fictitious profits held in an account he inherited from his mother.
A lawyer for Mr Becker said in a statement that Mr Becker notified at least seven senior SEC officials about his mother?s account, including Mary Schapiro who chairs the SEC, and was the first to raise the issue after becoming general counsel in February 2009. He also said Mr Becker was cleared by the agency?s ethics officer who found he did not have a financial interest and could participate in discussions on the Bernard Madoff fraud case.
?The inspector-general?s report contains a number of critical factual and legal errors that lead to erroneous conclusions. Mr Becker looks forward to testifying before Congress,? his lawyer said. A congressional subcommittee is holding a hearing on Thursday on the report?s findings.
The government ethics office suggested that the DoJ review Mr Becker?s role advising the SEC on policy matters that affect how much money the Madoff customers would be able to claim.
and his opinion about an amendment that would limit how much trustees liquidating frauds could claw back from customers.
The report said Mr Becker had testified that he ?absolutely? did not make any attempt to put himself in a better financial position.
? The Financial Times Limited 2011<