The Securities and Exchange Commission (SEC) is "financially illiterate", riven by internal rivalries and too afraid of major Wall Street players to effectively guard against market abuse, a whistleblower who tried to alert the agency to the Madoff scandal has said.
Harry Markopolos told the House financial services subcommittee on capital markets, insurance and government-sponsored enterprises that he had "gift wrapped and delivered" the $50 billion Ponzi scheme allegedly run by Mr Madoff to the SEC years before the broker's eventual arrest, but the tip-off was never followed up, CNN reports.
Mr Markopolos said he had provided the regulator with "dozens of red flags" regarding Mr Madoff, as well as a "road map" for the investigation and even contact details for Wall Street analysts who would confirm his work.
However, after passing the information to the SEC's Boston office, further investigation was blocked by the regulator's New York bureau. Mr Markopolos described the relationship between the two offices as "about as warm and friendly as the Yankees-Red Sox rivalry".
In December, the SEC launched an internal inquiry into its failure to investigate "credible and specific" allegations against Mr Madoff dating back to 1999.
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