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U.S. Won’t Investigate Former S.E.C. Lawyer Over His Madoff Ties

Date: Thursday, November 10, 2011
Author: Louise Story

The Justice Department has decided not to pursue an investigation into the role played by a former top lawyer at the Securities and Exchange Commission in the calculation of payouts to victims of Bernard L. Madoff’s Ponzi scheme.

The potential investigation was referred to federal prosecutors this fall after a report by the inspector general of the S.E.C. That report raised questions about why David M. Becker, the agency’s general counsel from 2009 until early this year, was allowed to participate in commission discussions about the compensation of Madoff victims, despite Mr. Becker’s own financial interest in the result. Mr. Becker inherited money in a Madoff account from his mother several years before Mr. Madoff’s fraud became public.

The Justice Department contacted Mr. Becker’s lawyer last Thursday to say that the department was not opening an investigation into the matter, said William R. Baker III, a lawyer at Latham & Watkins, who represents Mr. Becker.

“We’re gratified,” said Mr. Baker. “It’s consistent with our view that Mr. Becker discharged his obligations in a very responsible fashion.”

A spokeswoman for the Justice Department declined to comment. A representative for H. David Kotz, the S.E.C.’s inspector general, said in an e-mail that the commission had been informed by the Justice Department that it had reviewed the material but “decided not to pursue a criminal prosecution with respect to the Becker matter.”

Mr. Becker joined the commission as general counsel early in the Obama administration, returning to a role he previously held. He announced in February that he would return to private practice, and he now works as a partner at Cleary Gottlieb.

Shortly after Mr. Becker announced that he was leaving the commission, it became public that he had been named in a lawsuit filed by the trustee for the Madoff estate. That trustee is working to reallocate money among Madoff victims. Because Mr. Becker and his two brothers closed their mother’s account before the fraud was discovered, they received more money than they were entitled to, according to the trustee’s suit.

The trustee, Irving H. Picard, is seeking to recover about $1.5 million of the roughly $2 million the Beckers received from the account.

Mr. Becker was involved in discussions at the commission about the formulas that should be used to determine payouts to Madoff victims. When his financial stake became public this year, Mr. Becker said that he had disclosed his financial interests to the commission’s chief ethics officer and to the commission’s chairwoman, Mary L. Schapiro.

Still, the potential conflict was not disclosed to all the S.E.C. commissioners, according to the inspector general’s report.

The potential conflict became the subject of a Congressional hearing in the fall, and Ms. Schapiro said that she should have handled the matter differently. She agreed to a new vote on the Madoff payout formula.

A spokesman for the S.E.C. said the date for the vote had not been set.