Fallen financier put under electronic tagging

Fallen US financier Bernard Madoff was today forced into the humiliation of wearing an electronic tag as part of his bail conditions.

A judge also imposed a curfew on the man who only a few days ago was enjoying life at the pinnacle of US society.

However the court agreed to allow Madoff to remain free on bail, with his wife and brother standing guarantee.

Madoff, accused of masterminding a $50bn (€35bn) pyramid scam that has left people in ruin around the globe, has already surrendered his passport, and now will be required to be at his $7m (€4.9m) Manhattan apartment from 7pm to 9am.

Meanwhile in a stunning rebuke the chairman of the financial watchdog the Securities and Exchange Commission blamed his staff for a decade-long failure to investigate Madoff properly.

Christopher Cox ordered an internal investigation of what went wrong and lambasted the conduct of his lawyers. He said they never bothered to seek a formal commission-approved investigation that would have forced Madoff to surrender vital information under subpoena. Instead, the staff relied on information voluntarily produced by Madoff and his firm.

It also emerged that there is to be an investigation into former SEC lawyer Eric Swanson who married Madoff’s niece, Shana, last year. Swanson had been part of a team that looked into Madoff’s securities brokerage operation in 1999 and 2004.

The SEC said it had “strict rules” prohibiting employees from participating in cases involving firms where they have a personal interest.

The SEC’s inspector general, David Kotz said he intends to examine the relationship between the couple.

A spokesman for Mr Swanson said his relationship with his wife began years after the compliance team he helped supervise made an inquiry about Madoff’s securities operations.

“Mr. Swanson is aware of the SEC’s internal investigation and he intends to fully co-operate,” the spokesman said.

Shock waves from the Madoff affair have radiated around the globe as a growing number of prestigious charitable foundations, big international banks and individual investors acknowledge falling victim to an unprecedented fraud.

Mr Cox’s statement is sure to fuel a new criticism of the SEC, an agency increasingly seen as incapable of carrying out its basic mission: to ensure a level of honesty on Wall Street.

The Madoff scandal is just the latest instance in which SEC regulators have overlooked clear warning signs of possible fraud.

An earlier review by the SEC inspector general found that the agency’s monitoring of the five biggest Wall Street firms, which included Bear Stearns, was lacking.

Mr Cox himself has come in for strong criticism.

In March, a few days before Bear Stearns nearly collapsed into bankruptcy, he said the agency was closely monitoring the five investment firms and had “a good deal of comfort” in their capital levels. Then, as federal officials orchestrated the rescue, Bear Stearns was bought by rival JPMorgan Chase with a $29bn (€20bn) government guarantee.

As for Madoff, the SEC’s enforcement division looked into his business last year. Until Tuesday night, the SEC had refused to criticise the inaction that followed last year’s probe.