David Kotz has had a front row seat for some of the largest scandals of our time, including the Bernie Madoff Ponzi scheme.
Kotz became the inspector general for the Securities and Exchange Commission in Dec. 2007. He stepped down on Friday to join the private sector.
Kotz said the IG office’s relationship with SEC “really changed after Madoff.”
A 2009 report from the IG office found the SEC received “more than ample information” that should have led to a thorough investigation of Madoff.
“There were some issues of competence, in terms of the training and experience that the employees had,” Kotz said in an interview with The Federal Drive with Tom Temin in his first interview since stepping down as IG.
“The other thing was, they just never believed Bernie Madoff would operate a Ponzi scheme. They just didn’t fathom it,” he said.
Kotz said SEC investigators could have taken “relatively simple steps.”
“There are ways that you can determine if trades are actually made,” he said. “And you go, you make a phone call, and if they had done that, they could uncovered the fraud much before 2008.”
The Madoff scandal and the subsequent IG probe of SEC’s investigation caused Kotz to be placed squarely in the public eye. However, Kotz said it’s “not ideal for [IGs] to be so public.”
“A lot of the reports that I issued became big news, and so that causes an added strain,” he said. Particularly after the Madoff IG report, some SEC employees “became nervous” their names would appear in public.
“But at the end of the day I have to do my job,” Kotz said. “And if I found wrongdoing, I had to be aggressive about it.”