New report reveals the tricks Madoff used to evade authorities

Bernie Madoff could have written a scammers guide to ripping off investors. He excelled at being likeable, well connected, being a great salesman, working a network and being seen to follow the rules which allowed him to pull off a massive scam; landing him in jail and leaving many of his investors destitute.

But there was one remaining mystery in the story of how Bernie Madoff and his financial advisory firm pulled off the biggest fraud in history.

How did he escape the attention of the US watchdog, the Securities and Exchange Commission?

When the scandal first broke, there were reports that the SEC had called on Madoff several times over the years and found nothing worth following up.

Now a report released yesterday shows exactly how Madoff got around the SEC.

Apparently, inexperienced investigators were in thrall of the powerful name dropping story telling Madoff. He obviously used many of the same techniques on them that proceed successful with investors.

One of his main tricks was to control who the investigators talk to. When one of Madoff’s employees was talking to investigators in 2005, someone burst in, explained it was time for lunch and broke up the chat.

Another trick was to prey on the inexperience of the SEC investigators and bamboozle them with detail. The watchdog received six substantive complaints against Madoff which sparked three investigations and two examinations. But the SEC never verified Madoff’s trading through a third party.

In fact, a staff lawyer at the SEC actually received the highest performance rating in part for her ability to understand and analyse the complex issues of the Madoff investigation. Ironically Madoff then used the inquiries to show that the SEC had looked into his businesses and found nothing wrong.

Madoff also used something as simple as old fashioned charm to put the SEC off his scent. One investigator described Madoff as a wonderful story teller and a captivating speaker

The SEC has been extremely embarrassed by the Madoff scandal. Better training, more attention to outside information and recruitment of new skill sets will help the situation every occurring again, the SEC says.