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NAIC Knows How to Catch a Madoff, Vaughan Says

If Bernard Madoff had been under the jurisdiction of state insurance regulators, he would have been caught sooner, according to NAIC CEO Therese M. Vaughan....
May 12, 2009

If Bernard Madoff had been under the jurisdiction of state insurance regulators, he would have been caught sooner, according to NAIC CEO Therese M. Vaughan. Vaughan made the remark on Friday at the National Council on Compensation Insurance Annual Issues Symposium, where she argued the case for continued state regulation of insurance.

The different state regulators, she said, exercise "checks and balances" and oversee one another to catch malefactors, whereas "when the SEC [Securities and Exchange Commission] made a mistake with Madoff, nobody was there to catch it."

"In our system, we get the regulators watching each other," said Vaughan.

According to Congressional testimony, the SEC was given repeated warnings but failed to closely examine Mr. Madoff's operation, later revealed as a $50 billion Ponzi scheme. Vaughan said by comparison, when Martin Frankel stole $250 million in the course of using a quasi-Ponzi scheme to buy life insurance companies, he was looked at by three or four state insurance departments and his operation was busted when Mississippi Insurance Commissioner George Dale became suspicious. For the NAIC, "our Madoff was Martin Frankel," she remarked.

NAIC Knows How to Catch a Madoff, Vaughan Says (National Underwriter 5/11/09)