Interesting developments in the Madoff Scandal.
AG takes himself out of Madoff fraud probe
By Pete Yost and Marcy Gordon, AP
House subcommittee will investigate Madoff scandal; AG takes himself out of criminal probe
WASHINGTON (AP) — The fraud investigation of Wall Street money manager Bernard L. Madoff took unusual twists Wednesday as the U.S. attorney general removed himself and the Securities and Exchange Commission looked into the relationship between Madoff’s niece and a former SEC attorney who reviewed Madoff’s business.
The developments reflect growing criticism that Wall Street and regulators in Washington have grown too close. Madoff himself has boasted of his ties to the SEC.
The question of Madoff’s connection to regulators goes to the heart of the investigation of the alleged $50 billion fraud, SEC Chairman Christopher Cox told reporters…
U.S. Attorney General Michael Mukasey recused himself from the Madoff probe because his son, Marc Mukasey, is representing Frank DiPascali, a top financial officer at Madoff’s investment firm. The Justice Department refused to say when Mukasey became aware of the conflict but confirmed Wednesday he was removing himself from all aspects of the case.
DiPascali was the Madoff employee who had the most day-to-day contact with the firm’s investors. Several described him as the man they reached by phone when they had questions about the firm’s investment strategy, or wanted to add or subtract money from their accounts…
The events unfolded the day after Cox delivered a stunning rebuke to his own career staff, blaming them for a decade-long failure to investigate Madoff.
Credible and specific allegations regarding Madoff’s financial wrongdoing going back to at least 1999 were repeatedly brought to the attention of SEC staff, said Cox. 
Cox said he was gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate the allegations or at any point to seek formal authority from the politically appointed commission to pursue them…
SEC Inspector General David Kotz is looking into the agency’s failure to uncover the alleged fraud in Madoff’s operation. One area Kotz said he will examine is the relationship between a former SEC attorney, Eric Swanson, and Madoff’s niece, Shana, who are now married…
Full article here.
