CREW today issued a report (PDF) that shows the Securities and Exchange Commission (SEC) is instituting its promised post-Madoff-scandal reforms at a slow pace and with limited progress.

Following the agency’s embarrassing 16-year failure to detect Bernard Madoff’s massive Ponzi scheme, SEC Chairman Mary L. Shapiro promised to make fundamental reforms to the Enforcement Division, ranging from the creation of a central database to manage tips, complaints and referrals, to the establishment of specialized units better able to analyze highly specialized and complex areas of security law.

CREW monitored these promised reforms by filing an October 2009 Freedom of Information Act (FOIA) request for documentation showing progress in seven key areas.

CREW found that despite the urgent need for significant structural reform, the SEC has not rushed to implement many of the promised changes. The agency has made the most progress in filling new staff positions and adding new offices, but given how long this has taken, the impact of these steps is not yet discernable. At bottom, the central question of whether the SEC has instituted meaningful and effective reforms to address the systemic problems revealed by the agency’s failure to uncover Mr. Madoff’s blatant criminal conduct still cannot be answered.

CREW’s Executive Director, Melanie Sloan, said today:

Despite its historic failure to prevent Bernie Madoff’s staggering fraud, the SEC is dragging its feet on some of the most urgent structural reforms needed. The SEC may be headed in the right direction, but not at the speed Americans have the right to expect given the agency’s monumental failures.

She continued:

The slow pace of reform is hard to fathom. If we’ve learned anything from the agency’s failure to stop Bernie Madoff and subsequent swindlers, it’s that the country needs an aggressive SEC working to protect Americans’ hard earned dollars.

Click here to read CREW’s report, “Reform at the SEC, Fiction or Reality?”

Click here to read a summary of the report’s findings.

The travel costs for employees of the federal government add up to a hefty sum. In 2009, for example, taxpayers spent $2.8 billion on hotel rooms alone for federal employees.

Although the government should strive to manage its costs, this editorial in the Washington Times points to a broader issue -- namely, are the feds publishing the data required to determine if some of those costs are unreasonably high? The Times writes:

Of course, some government travel is necessary. The problem is that the system does nothing to prevent taxpayers from being ripped off to bankroll trips that double as vacation junkets.

The Securities and Exchange Commission, for example, frequently sent employees overseas on first- or business-class airplane tickets that cost taxpayers up to $10,000 each. It's unclear how much travel of this sort is unnecessary because the agency "does not maintain data on premium travel in a format that allows it to readily identify the population of premium travelers and note patterns and trends that may be indicative of abusive travel," according to a 2008 report by the SEC's inspector general.

Every federal agency should break out its travel costs in ways that make them more transparent. Doing so will allow taxpayers and lawmakers to monitor which employees traveled where -- and how economically they traveled.

As 2009 draws to a close, CREW is looking back at what quickly became a busy year for ethical lapses in our federal government. Today, CREW released its list of the Top Ten Ethics Scandals of 2009 – a roundup of the year’s most outrageous government scandals.

The unranked list includes:

Believe us – we had a plethora of scandals to choose from.

Melanie Sloan, CREW’s executive director, explained CREW’s hopes for the new year:

It would be nice if 2010 proved to be the year politicians put Americans’ interests above their own, but I won’t hold my breath.

Click here (PDF) to read CREW’s Top Ten Ethics Scandals of 2009.

Since the Madoff scandal story broke last December, there have been questions about the role of the Securities and Exchange Commission (SEC). Today's Washington Post reveals that an investigator at the SEC became aware of issues with Madoff's company, but was pulled from the case.  And, her supervisor, according to the Post, went on to marry Madoffs niece:

An investigator at the Securities and Exchange Commission warned superiors as far back as 2004 about irregularities at Bernard L. Madoff's financial management firm, but she was told to focus on an unrelated matter, according to agency documents and sources familiar with the investigation.

Genevievette Walker-Lightfoot, a lawyer in the SEC's Office of Compliance Inspections and Examinations, sent e-mails to a supervisor, saying information provided by Madoff during her review didn't add up and suggesting a set of questions to ask his firm, documents show. Several of these questions directly challenged Madoff activities that much later turned out to be elements of his massive fraud.

But with the agency under pressure to look for wrongdoing in the mutual fund industry, she wasn't able to continue pursuing Madoff, according to documents and two people familiar with the investigation, and her team soon concluded its work on the probe.

Walker-Lightfoot's supervisors on the case were Mark Donohue, then a branch chief in her department, and his boss, Eric Swanson, an assistant director of the department, said two people familiar with the investigation. Swanson later married Madoff's niece, and their relationship is now under review by the agency's inspector general, who is examining the SEC's handling of the Madoff case.

From the Washington Post, we get an examination of former Congressman Christopher Cox's tenure as Chair of the Securities and Exchange Commission (SEC).  It's pretty clear that enforcement and punishment weren't high on the agenda.  They were barely on the agenda at all:

The five enforcement officials caught a morning Acela train bound for Washington. Based at the New York office of the Securities and Exchange Commission, the team was seeking agency approval to impose tens of millions of dollars in fines on a drug company, Biovail, which had allegedly used the crash of a truck hauling depression medicine to cover up financial losses.

But when the group arrived at SEC headquarters on that winter day early last year, it was barred from the room where the commission was meeting, according to a person familiar with the case. Chairman Christopher Cox and his colleagues reviewed the case inside. When the doors opened, the enforcement officials learned the commission had knocked down the penalty to a small fraction of what they had sought.

The outcome, though discouraging to the team, was not a complete surprise, sources said. After Cox became SEC chairman in mid-2005, he adopted practices that undermined the enforcement division's efforts to investigate cases of corporate wrongdoing and punish those involved, according to interviews with 19 current and former SEC officials.

During Cox's tenure, investigators who wanted to subpoena documents or compel interviews faced an increasingly cumbersome process to win the commission's approval for each case, according to current and former agency officials.

Cox also required enforcement officials to see the commissioners before approaching a company about a civil settlement. In several high-profile cases, when SEC lawyers were ready to ask the commission to authorize lawsuits or approve settlements, Cox postponed the decisions at the last minute, leaving cases unresolved for months, the sources said. At times, as in the Biovail case, the commission eventually weakened the sanctions sought by the enforcement division.