As the list of victims continues to grow and investigators examine how Bernard Madoff allegedly ran his massive scam, some are questioning how Madoff avoided detection for so long. As a registered investment advisor since 2006, he was subject to scrutiny by the Securities and Exchange Commission, yet he managed to maintain a clean record even after complaints from whistleblowers started nine years ago.
"The Securities and Exchange Commission is letting down the American people," Sen. Charles Grassley (R-Iowa) said of the SEC. "They failed. This person was registered as a broker dealer, they should have known what he was doing all the time, and particularly if you have whistleblowers."
The head of enforcement at the SEC attempted to duck questions about the failure of the agency to detect what may be the biggest investment fraud in history.
"It is hard to directly respond given the fact that so much of what we have done historically is non-public and needs to remain non-public until someone decides otherwise," said Linda Thomsen.
Meanwhile, the list of Madoff's victims keeps growing. European banks have lost billions, as have charities run by Elie Wiesel, director Steven Spielberg, and New York billionaire Mort Zuckerman, whose charitable trust lost $30 million.
Authorities say Madoff didn't hesitate to scam even close friends and fellow members of the Palm Beach Country Club.
"They're going to have to sell their 20, 30 million dollar mansions," said Larry Leamer, author of "Madness Under the Royal Palms". "It's all over. Some of these people crazily put all their money with him so they're finished."
While many trusted Madoff with their life savings, others were sending out a warning signal. The research firm Aksia, which also provides advice to pensions, endowments, foundations and insurance companies, says it has long been steering clients away from Madoff's hedge fund based on a "host of red flags."
According to a letter to its clients, Aksia "published extensive reports on several of the 'feeder funds' which allocated their capital to Madoff Securities ... Our judgment was swift, given the extensive list of red flags."
Aksia said in its letter that when the firm checked the auditor of Madoff's fund they found the operation was quite small, given the amount of money being handled.
The accounting firm, says Aksia, had just three employees, "of which one was 78 years old and living in Florida, one was a secretary, and one was an active 47-year-old accountant (and the office in Rockland County, N.Y., was only 13 ft x 18 ft large)."