SEC Official Married into Madoff Family

Dec. 16, 2008— -- A top Securities and Exchange Commission compliance official who worked for the SEC when it found no problems at Bernard Madoff's firm in 2005, later began to date and married Madoff's niece, who was a compliance lawyer for the company.

A spokesman for Eric Swanson, who has since left the SEC, said Swanson "did not participate in any inquiry of Bernard Madoff Securities or its affiliates while involved in a relationship" with Shana Madoff.

The failure of the SEC to detect the alleged fraud carried out by Madoff, estimated by Madoff himself at $50 billion, has raised questions about the SEC's performance.

"The Securities and Exchange Commission failed the American people," said Senator Charles Grassley (R-IA).

Since 1992, the SEC has at least twice dismissed concerns about Madoff's firm, following complaints.

At a business roundtable meeting last year, Madoff boasted of his "very close" relationship with a SEC regulator, chuckling as he said, "in fact, my niece even married one."

A spokesman for Swanson, the former SEC official who married Madoff's niece and compliance lawyer, said Swanson met the niece "through her trade association work in the industry. Throughout his career, Eric has displayed the highest ethical standards and his reputation has been – and continues to be – above reproach."

Madoff formally registered with the SEC as an investment adviser in 2006, but the SEC failed to conduct the standard review that normally follows such a new registration.

Madoff made headlines last week when an unsealed criminal complaint in federal court in New York charged that he has been running a decades long Ponzi scheme that defrauded investors of $50 billion dollars.

A former chairman of NASDAQ, Madoff was an investment advisor who catered to a handful of high net worth clients, one of whom told ABC News that Madoff was so sought after that, as recently as two months ago, he was turning down potential new business. His handful of clients routinely expected -- and received -- double digit returns, up market or down.