As quickly as fortunes disappeared in the shock waves of the $50 billion Bernard Madoff fraud case, reports started generating that the Securities and Exchange Commission (S.E.C.) ignored warnings about the alleged deceptive scheme. If the enormous Ponzi structure were not enough of an insult to our collective senses, charges that government regulators failed to heed warnings about crucial warning signs of a systemic problem with the investment advisory business serve as an extra sucker punch right in the face of society.
But perhaps this fortune wrecking affair could have been avoided or mitigated, with aggressive investigative journalism based on alerts and help from investors and analysts.
If those who perceived a problem with the former Nasdaq Chairman’s organization did not get the attention and required scrutiny from the S.E.C., did they go to the press for an investigation? That’s what the Fourth Estate is all about…exposing fraud, corruption, mismanagement and and other societal failings. Old and new media alike are uniquely capable of going where bureaucratic investigators fail to tread…and expose what’s wrong after a process of careful investigative journalism.
In short, the Madoff scandal reminds us, once again…we cannot rely on Washington agencies to take action. We do have, nevertheless, a uniquely patriotic instrument to utilize…the power of the pen and keyboard. The impact of American media is an underutilized tool when we find something wrong. This episode teaches us that without a strong press (print and electronic), we can be caught unaware, to our detriment.
At a time when Washington news bureaus are being closed and cut back by many long-established media outlets, the loss of resources for investigative reporting in the spirit of Watergate should make us all a bit uncomfortable. As the U.S. media itself struggles with its own economic crisis, you and I have a responsibility to alert the press about what we hear, by responsibly providing documented and substantiated information to help bring a story out of the dark and into the national consciousness.
Then, if the S.E.C. or any other arm of the government fails to act, or lacks the resources, we can still use the powers of the morning paper, websites, television news and blogs to try to avoid gut wrenching shock, before it is too late, and society is harmed.
Update: The New York Times reported on December 25 that federal prosecution of stock fraud cases has dropped sharply over the past eight years. According to the report, S.E.C. “agency investigations that led to Justice Department prosecutions for securities fraud dropped from 69 in 2000 to just 9 in 2007, a decline of 87 percent…”