MICHELE NORRIS, host: From NPR News, this is All Things Considered. I'm Michele Norris.
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And I'm Melissa Block. The disgraced money manager Bernard Madoff has been allowed to remain out on bail, but today a judge decided that for the time being Madoff will have to stay in his Manhattan apartment and wear a monitoring bracelet. Authorities say he defrauded his investors out of billions of dollars, and SEC Chairman Christopher Cox is acknowledging that the alleged Ponzi scheme might have been discovered sooner, but his agency missed the clues. NPR's Jim Zarroli has the latest.
JIM ZARROLI: Law enforcement authorities were plugging away with their investigation again today. They say they have already had several long conversations with Madoff in which he has walked them through what happened. And his cooperation is one reason why authorities didn't object much when a judge decided to ease Madoff's bail terms a bit. Among those pouring through documents at Madoff's Manhattan office these days are examiners from the Securities Investor Protection Corporation. It's a watchdog group that's been charged with overseeing the liquidation of the trading firm's assets and returning what's left to investors. Stephen Harbeck is the corporation's president.
Mr. STEPHEN HARBECK (President, Securities Investor Protection Corporation): We are in the absolute first stages of this, getting physical control of the premises, making sure that the bank accounts are locked up, things like that.
ZARROLI: Harbeck said examiners have already found evidence that Madoff kept a bogus set of records of his investors' holdings.
Mr. HARBECK: The records don't reflect reality. There are missing securities. The records don't reflect all of the securities that are owed to customers.
ZARROLI: These documents will help investigators understand how Madoff was able to hide his activities from regulators. The chairman of the Securities and Exchange Commission, Christopher Cox, acknowledged today that his agency had serious evidence of wrongdoing by Madoff for a long time but failed to act on it.
Mr. CHRISTOPHER COX (Chairman, Securities and Exchange Commission): I was very concerned to learn this week that credible allegations about Mr. Madoff had been made over nearly a decade and yet never referred to the commission for action.
ZARROLI: Cox said he had no evidence of wrongdoing, but he did say he wanted to investigate ties between SEC staff members and Madoff's firm. Madoff had a high profile on Wall Street and had cultivated close relations with regulators. Madoff's niece, who worked at the firm, is married to Eric Swanson, a former SEC official who played a role in examining Madoff's firm. Swanson said in a statement that their romantic relationship began long after his own involvement with the firm.
Still, critics say that kind of conflict of interest is all too typical at the SEC. Gary Aguirre is a former SEC attorney who says he was fired after pushing the agency to investigate a hedge fund. Aguirre says big law firms and trading firms frequently hire former SEC officials who then use their influence to squelch investigations of elite Wall Street firms.
Mr. GARY AGUIRRE (Former SEC Lawyer): It's a cultural issue. You might call it a disease. The connection between Wall Street and the SEC has been far too cozy for far too long.
ZAROLLI: Aguirre says it's a good thing that the SEC is promising to investigate these ties, but it took far too long. And he says there's no excuse for the SEC's failure to investigate Madoff sooner. He says investment fraud is a critical part of the SEC's mandate.
Mr. AGUIRRE: The SEC has major experience. That's their strong suit. How they missed a $50 billion Ponzi scheme, if that's what it is, is amazing.
ZARROLI: A lot of people agree, and it now appears virtually certain the scandal will lead to a long-term reassessment of how the SEC operates. Congressman Paul Kanjorski, who heads the House Capital Markets Subcommittee, says he will hold hearings into the Madoff scandal as soon as Congress returns in January. Kanjorski said the scandal is weakening already battered investor confidence in the markets. The investigation is expected to focus on how Madoff was able to get away with his fraud for so long and what, if anything, can be done to discourage similar frauds in the future. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.
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