Bernard Madoff, who has been charged with running a Ponzi scheme that may involve as much as $50 billion in losses, advised the SEC on how to protect investors from scam artists when he served on an SEC advisory committee in the early 2000s. He publicly pushed the idea that "In today's regulatory environment, it's virtually impossible to violate rules" in this October 2007 conference.

Based on information now available about the $50 billion Ponzi scheme, it appears that not only can rules be violated, but Bernard Madoff used his insider contacts at the SEC and around Wall Street to build a business that the SEC never audited between 1999, when he first received a letter from the SEC raising the question of a Ponzi scheme, until last week when the SEC conducted an examination of his business. In addition to advising the SEC, Madoff served as chairman of the NASDAQ Stock Market.

Donald Langevoort, a Georgetown University law professor, told the Washington Post, "Bernie had a good reputation at the SEC with a lot of highly placed people as an innovator as somebody who speaks his mind and knows what's going on in the industry. I think he was seen as a valuable resource to the commission in its deliberations."
Clearly this reputation Madoff built on Wall Street and in Washington allowed him to operate under the radar. Unfortunately for those now realizing how much they've lost, this lack of oversight by the SEC could result in closed charities and even more significant bank write offs. Exactly what we don't need right now.

We all must remember Warren Buffet's famous quote, "It's only when the tide goes out that you learn who's been swimming naked." Obviously Madoff and those who helped promote him were swimming naked under the waves of greed.

Lita Epstein has written more than 25 books including "Reading Financial Reports for Dummies" and "Trading for Dummies."