The Washington Post recently reported that eight employees of the Securities and Exchange Commission have been disciplined for filing to take action on repeated warnings connected to Bernard Madoff's fraud scheme.
Each of the employees was accused of not taking the necessary steps to determine whether Madoff was misrepresenting his trading. In response, the agency's human resources department apparently recommended termination of one of the eight employees, but that employee was ultimately not fired so as not to "harm the agency's work." All eight of the employees, though, were disciplined. In addition, a ninth employee-who had been facing a possible seven-day suspension-resigned before disciplinary action was taken against him.
In addition to the disciplinary action, the SEC also issued suspensions, pay cuts and demotions to the employees. The employee who was recommended for termination reportedly received a 30-day suspension and a reduction in pay and grade. The others received lesser consequences.
The disciplinary process was reportedly concluded some months ago, but one of the disciplined employees has appealed the action to the agency.
The Madoff case, considered by many to be the biggest embarrassment in the history of the SEC, is still causing many to doubt whether progress has been made in cleaning up the industry.
Earlier this month, the SEC was blasted by a federal judge for allowing firms settle fraud charges without having to admit or deny wrongdoing.
Critics say the agency has not been serious enough in addressing the failings of employees.
Source: Washington Post, "Eight SEC employees disciplined over failures in Madoff fraud case; none are fired," November 11, 2011.