Last Thursday I was at Utah State in Logan, where I delivered the luncheon address at the annual Partners in Business conference there. It is the first time I’ve been invited to speak before a group of professional accountants. Beautiful setting in the mountains.
In the morning session, the chief accountant of the Securities & Exchange Commission (SEC) from 2007 to 2011 (he’s now works for Price Waterhouse but said he wants to come back as an SEC commissioner) spoke for nearly an hour on the “Current Developments of the SEC” and not once mentioned the $64 billion Bernie Madoff scandal or how it has affected SEC policy (new whistleblower program, etc.).
Needless to say, I was incensed.
After his talk, he took questions, and I asked, “I’m amazed that in your entire talk you never once mentioned the biggest scandal in SEC history and biggest financial fraud ever committed on Wall Street. Is it because you are too embarrassed to talk about it? Do you think that investors who lost money in the Madoff scandal should have the right to sue the SEC for negligence?”
The SEC man looked shaken and visibly unset. He strongly defended the SEC and said he sacrificed his salary to work for the SEC, and the SEC gets hundreds of letters about potential fraud cases, and can’t police them all, but the SEC does a highly competent job for the American people.
He made no attempt to express sympathy for the victims of the Madoff crime ($64 billion fraud), or what changes the SEC has made because of its massive failure. When I brought up Harry Markopolos and his book “Nobody Would Listen,” about how Markopolos the repeatedly warned the Boston and New York offices about Madoff’s ponzi scheme, he was silent.
“Is that your apology?” I asked.
“Apology? I don’t need to apologize and will never apologize for what happened. In fact, you should be thanking us for what we did,” he said with considerable emotion.
Half the audience applauded!
Can you believe the arrogant of this guy? The SEC is out of control, I fear. Why couldn’t he just acknowledge that the SEC made a huge blunder and has adopted a number of policies and rules to make sure it never happens again? Instead, he adopted the “no apology” and “let’s not talk about it” routine.
Needless to say, my tough questioning was the talk of the conference, and I believe my luncheon speech was energized by the earlier confrontation with the SEC man.
The new “whistleblower” program of the SEC — in direct response to the Madoff scandal — awards up to 30% of the fines to anyone who directly leads to the conviction of anyone engaging in insider trading or other financial fraud, with a minimum payment of $1 million. I fear this new aggressive whistleblower program at the SEC will be abused and will create spy networks throughout corporate America and Wall Street, thus hampering more the long-term recovery of the economy.
All in all, I was surprised at how defensive the accounting profession has become. I may be misjudging the profession based on just one conference, but it seemed to me that the accountants focused primarily on compliance, auditing, detecting fraud, etc., rather than ways to make companies more profitable and fiscally sound.
Your in (Financial) Liberty, AEIOU,