SEC chief regrets the handling of lawyer with Madoff link

The head of the Securities and Exchange Commission said she wished the SEC’s former top lawyer had removed himself from the agency’s work on the epic Bernard Madoff fraud.

In an affair that is undermining the agency’s pleas for more funding, SEC Chairwoman Mary Schapiro told a congressional panel that, in hindsight, former SEC General Counsel David Becker’s ties to Madoff should have been handled differently.

“I wish that Mr. Becker had recused himself,” Schapiro said Thursday at the third of a trio of hearings on Capitol Hill where she and other officials were grilled over Becker, the Madoff episode in general and the SEC’s budget.

The Becker issue is proving to be a major distraction at a time when the SEC is laboring to meet tight deadlines to implement dozens of new financial regulations under 2010’s Dodd-Frank Wall Street reforms.

The matter may be “one of the greatest challenges to the SEC’s credibility since Bernard Madoff managed to dupe so many Americans,” House Oversight Committee Chairman Darrell Issa (R-Vista) said at the hearing.

Becker left the SEC at the end of February, as previously planned. He has told lawmakers that the agency’s ethics counsel advised him he could participate in Madoff matters even though he inherited funds his mother invested with Madoff.

Schapiro said she was informed that Becker’s mother had a Madoff account, but could not recall whether Becker specifically told her that he inherited money from that account. Madoff trustee Irving Picard is suing Becker and his brothers to claw back $1.5 million in phony profits from their mother’s estate.

Regardless, Schapiro said, it was her responsibility to see “around the next corner” on such matters, especially when the public’s trust in the SEC could be on the line.

“The sad part about it is one of these little incidents can almost destroy that trust,” Schapiro told the hearing.