Madoff case 'important lesson'

The arrest and conviction of Bernie Madoff on securities fraud charges earlier this year resulted from one of the more high-profile examples of an investment scam ever perpetrated in America. Approximately 16,000 investors were affected, losing billions of dollars, including some individuals who lost their life savings.

The grand scope of the scheme reached all 50 states and prompted harsh criticism toward federal agencies charged with monitoring investment activities.

But an official of the U.S. Securities and Exchange Commission said Friday that there is plenty of blame to go around regarding why it took so long for authorities to uncover the Madoff Ponzi scheme.

John Polise, SEC assistant director for the division of enforcement, told an audience of the Utah State Bar at the Salt Lake City Marriott Downtown that rather than harp on the past, the experience could become an important lesson for law enforcement.

"We have to continue to be vigilant, develop new techniques and to adapt to technology and other changes that the bad guys are using so we can be a credible and effective regulator and also learn from the mistakes we've made," he said.

Polise noted that while his agency does share in the responsibility for monitoring the activity of potential "fraudsters," investors should perform as much "due diligence" as possible to avoid being taken advantage of by criminals "trying to separate you from your money."

During his presentation, Polise said Madoff and other criminals often use affinity to perpetrate their fraud scams. Affinity fraud includes investment schemes that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly or professional groups.

"The basic rule is that if something sounds too good to be true, it is," Polise told the Deseret News. "One should not assume because of a personal relationship … that is a guarantee that the investment is actually legitimate."

He said there is no substitute for one's own due diligence when investigating a possible investment opportunity. He suggests that people check the SEC's Web site and their state's securities department, as well as conducting other Internet research.

"Find out whether the person is registered (federally and locally). Find out if the person has a criminal history," he said. "These are all things that are easily done within a matter of minutes."

Polise said something positive is coming out of the Madoff fiasco, as regulators become more cautious about how they do their jobs.

"We are dedicating a huge amount of resources to restructuring the enforcement division to make it more effective and put more boots on the ground to become less bureaucratic … and to help investors," he said.

e-mail: jlee@desnews.com