Saturday, December 13, 2008

The Signs Were Everyhere, But Where Was the SEC?

Reuters reports:

Societe Generale refrained from buying a business with exposure to Bernard Madoff's funds in 2003, reflecting widespread Wall Street suspicions well before the U.S. brought charges against the long-time industry fixture.

The French bank was considering buying parts of alternative asset management and derivatives company Zurich Capital Markets in 2003, two people familiar with the matter said. Zurich Capital's parent, Zurich Financial Services Group, was selling off units not related to its main business at the time.

Parts of the Zurich Capital Markets business were eventually sold to SocGen rival BNP Paribas . Zurich Financial spokesman Sean Kevelighan and BNP Paribas spokeswoman Kerrie McHugh declined to comment. A spokesman for SocGen did not immediately return a call seeking comment.

To SocGen, there was at least one problem with the Zurich Capital business: significant exposure to Bernard Madoff's asset management operations.

The bank could not figure out how Madoff generated such strong returns so consistently given its strategy, said one of the people familiar with SG's decision.

Also, there were close ties between Madoff's business and his family members.

And Madoff's fund management business executed its trades through his market-making operations, which could create a conflict of interests.

No comments:

Post a Comment