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February 24, 2011 9:01 AM

Madoff Trustee Sues SEC Lawyer

Posted by Ed Shanahan

By Shannon Green, Corporate Counsel

The top lawyer for the Securities and Exchange Commission has been named as a defendant in a clawback suit (pdf) seeking the recovery of profits gained through investing with Bernard Madoff.

The New York Daily News reported that trustee Irving Picard filed suit last November, claiming the family of David Becker invested with Madoff and earned more than $1.5 in ill-gotten gains.

"I got the complaint last week," Becker told CorpCounsel.com Wednesday. "We're gonna look at it, seek legal advice on it," he said. "Afterward, we'll respond and do the right thing."

Becker, 63, and his two brothers, William and Daniel Becker, were each named individually and in their capacity as co-executors of their mother's estate. The estate included a Madoff account, which was liquidated by the brothers in 2005.

The Beckers received $2,042,845 from Bernard L. Madoff Investment Services LLC. According to the complaint, $1,544,494 of the money was fictitious profits from the Ponzi scheme. Allegedly, the "funds were nonexistent profits supposedly earned in the Account, but in reality [it was] other people's money."

Bradley Simon, a former federal prosecutor, told the Daily News: "If families of high-ranking SEC officials were heavily invested in Madoff, it may help explain why the SEC was less than vigilant in scrutinizing his activities."

Madoff is serving a 150-year prison sentence at a federal prison in North Carolina after admitting last year to committing decades-long fraud. According to the Daily News, Becker has never publicly disclosed that his family invested with Madoff. The lawsuit does not allege that Becker or his family members had knowledge of the fraud.

SEC spokesman John Nester told the Daily News, "He had no involvement with his parents' financial affairs, and no recollection of his parents' account with Madoff prior to his mother's death and subsequent liquidation of the account."

The SEC announced Feb. 1 that Becker is leaving his post as general counsel and policy director at the end of the month. In a press release from the SEC, chairman Mary Schapiro said, "Although I knew this was a two-year commitment, I am sorry this day has approached so fast."

Becker also served as the SEC's deputy general from 1998-2000 and general counsel from 2000-2002, but he had left the agency to work in private practice for Cleary Gottlieb at the time of the transactions involving his mother's estate. Becker is expected to return to private practice, but he said that at this time he has not been offered a position with his old firm.

[EDITOR'S NOTE: Stay tuned for upcoming coverage of Becker's departure from the SEC in Corporate Counsel magazine. A Q&A with the GC will appear in our April issue.]

Shannon Green can be contacted at [email protected].

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