WASHINGTON — The fraud investigation of Wall Street money manager Bernard L. Madoff took unusual twists Wednesday as the U.S. attorney general removed himself and the Securities and Exchange Commission looked into the relationship between Madoff’s niece and a former SEC attorney who reviewed Madoff’s business.
The developments reflect growing criticism that Wall Street and regulators in Washington have grown too close. Madoff himself has boasted of his ties to the SEC.
The question of Madoff’s connection to regulators goes to the heart of the investigation of the alleged $50 billion fraud, SEC Chairman Christopher Cox told reporters.
Congress jumped into the Madoff scandal, too. The chairman of the House capital-markets subcommittee, Rep. Paul Kanjorski, D-Pa., announced an inquiry that will begin early next month into what may be the biggest Ponzi scheme of all time and how the government failed to detect it.
In New York, Madoff showed up at the federal courthouse to sign some papers in his case, wearing a baseball cap and walking silently past a reporter who asked Madoff whether he had anything to say to his alleged victims. Free on $10 million bail, Madoff has a curfew and an ankle bracelet to monitor his movements.
U.S. Attorney General Michael Mukasey recused himself from the Madoff probe because his son, Marc Mukasey, is representing Frank DiPascali, a top financial officer at Madoff’s investment firm. The Justice Department refused to say when Mukasey became aware of the conflict but confirmed Wednesday he was removing himself from all aspects of the case.
DiPascali was the Madoff employee who had the most day-to-day contact with the firm’s investors. Several described him as the man they reached by phone when they had questions about the firm’s investment strategy or wanted to add or subtract money from their accounts.
The events unfolded the day after Cox delivered a stunning rebuke to his own career staff, blaming them for a decade-long failure to investigate Madoff.
