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Clash between House and SEC in Madoff scam

UNITED States House law makers on Wednesday accused the Securities and Exchange Commission of impeding their probe into how the agency failed to uncover the alleged US$50 billion fraud perpetrated by Bernard Madoff.

The clash between law makers and high-ranking SEC officials came at a hearing after the whistleblower, Harry Markopolos, said he had feared for his physical safety and would turn over new evidence to the agency showing Madoff had not acted alone.

Markopolos said he had discovered a dozen additional funds that funneled money to Madoff, "hiding in the weeds" in Europe. Managers of investment "feeder" funds that relayed money to Madoff willfully turned a blind eye to his improprieties because they were paid generous fees, Markopolos said.

He was due to present his findings to the SEC's inspector general yesterday. If proven, they would substantiate the assertions of many analysts that the alleged fraud was far too large for Madoff to have conducted alone.

Madoff, a prominent Wall Street figure who had been chairman of the Nasdaq Stock Market, was arrested in December after allegedly confessing to his sons that he had bilked investors in what the authorities say may be the largest Ponzi scheme ever.

Markopolos also planned to provide information on what he called a "mini-Madoff," another Ponzi scheme he said he's uncovered that may have defrauded investors of as much as US$1 billion.

In loud, angry exchanges, law makers threatened to issue subpoenas to SEC officials to compel their testimony.

Republican Paul Kanjorski, the House Financial Services subcommittee's chairman, vented frustration after the SEC's acting general counsel said the five officials appearing before the panel couldn't answer law makers' questions about the Madoff case because it's under probe. The five SEC commissioners voted earlier to assert a privilege in not having officials answer questions from Congress.

Kanjorski accused the agency of impeding the panel's investigation, calling it an "abuse of authority."

It was a blistering escalation of criticism of the SEC, which has been blasted by lawmakers and investor advocates over its failure to discover Madoff's alleged US$50 billion Ponzi scheme.


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