Eric Swanson received a startling call last Thursday from his wife, Shana D. Madoff, who said that something was terribly wrong. Officials from the Securities and Exchange Commission and the Justice Department had swooped down on the offices of Madoff Investment Securities, where Ms. Madoff was the compliance lawyer, seizing records and asking pointed questions as they began investigating one of the largest frauds in Wall Street history.
Mr. Swanson, who only a year earlier had married into the Madoff family, had an intimate familiarity with the S.E.C. For 10 years he had been a midlevel official at the commission’s Washington headquarters. He had also occasionally worked on matters involving the Madoff firm in the years before he became romantically involved with Ms. Madoff in 2006, just as he was preparing to leave the S.E.C. Ms. Madoff is the niece of Bernard L. Madoff, the central figure in the scandal, and the daughter of Peter Madoff, who was the firm’s chief compliance officer.
As the investigation unfolds, Mr. Swanson finds himself in the unusual position of having newfound roots in the family at the center of the scandal and older ties to the government regulator that failed to uncover the scheme.
As both come under closer scrutiny for the events that have led up to the loss of billions of dollars, Mr. Swanson has been attacked in blogs and some news accounts that have suggested his relationship with the Madoffs was a central reason that the commission turned a blind eye to the Ponzi scheme.
Earlier this week, Christopher Cox, the S.E.C. chairman, appeared to make a veiled reference to Mr. Swanson when he criticized earlier botched inquiries into the firm by the commission and said that an internal investigation would look at “all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm.”
Eric Starkman, a spokesman for Mr. Swanson, said Mr. Swanson would fully cooperate with such a review. But in fact, the work Mr. Swanson did that touched on the Madoff firm was relatively minor, and no evidence has emerged that Mr. Swanson did anything involving the firm after he became close to Ms. Madoff in the spring of 2006, current and former commission officials with knowledge of his work said in recent interviews.
Moreover, in the years leading up to his involvement with Ms. Madoff, Mr. Swanson aggressively pursued an enforcement action against a company whose board included his future father-in-law, Peter Madoff, and whose chief executive was one of Mr. Madoff’s closest friends.
Former colleagues in the regulatory world and professional adversaries described Mr. Swanson as a straight arrow, earnest by-the-book Midwesterner who worked long hours and received excellent job evaluations. Several said they always saw him act aggressively but fairly in his years at the commission and that they never saw any evidence of him favoring any company, including Madoff Securities.
“I remember him as a very hard-working, dedicated and smart guy,” said Joseph Lombard, a former market regulation counsel to Arthur Levitt Jr. when he was the S.E.C. chairman in the 1990s. “You have people at the agency, like anyplace, who are more or less committed to the enterprise. Eric was all in. He believed in the ability of regulation to make markets better. He was an advocate of aggressive action against people who had fallen short.”
Jeffrey D. Spill, a deputy director of the New Hampshire Bureau of Securities involved in a case brought against Ameriprise Financial when Mr. Swanson worked at that firm, described Mr. Swanson as “straight and professional.”
Mr. Swanson, 41, arrived at the commission’s office of compliance inspections and examinations in 1996 after clerking for a federal appeals court judge in South Carolina. A native of Minneapolis, he graduated from the University of Minnesota and the Hamline University School of Law.
The office he joined is in charge of monitoring the stock markets and making sure that companies comply with an arcane set of regulations that are intended to protect investors as they execute trades. In 1999 and 2004, he played a peripheral role in examinations of the Madoff firm, current and former officials said. In the later examination, his work was reassigned to another lawyer who, after a promotion, was looking to expand his workload.
From 2002 to 2005, Mr. Swanson was involved in developing a case against the National Stock Exchange. At the time, Peter Madoff was a director and Madoff Securities was a significant investor in the company. The case, which was settled in 2005, was unusual in that it was one of the few to name a top executive of the company as a defendant. It accused David Colker, the exchange’s founder and chief executive, of violations. Mr. Colker is a close friend of Peter Madoff. The commission penalized the exchange and Mr. Colker for failing to enforce investor protection rules from 1997 to 2003. The commission concluded that the exchange had failed to properly monitor a rule that prohibited dealers from trading for their accounts ahead of customer orders.
Mr. Swanson left the commission in 2006 to become chief counsel and vice president for regulatory strategy at Ameriprise, a financial services company. Early this year, he became general counsel of BATS Trading, a new trading exchange.
Mr. Swanson has told friends that he met Ms. Madoff at a breakfast at the offices of A. G. Edwards in St. Louis in October 2003. At the time, Ms. Madoff was on a compliance committee of an industry group. It held regular meetings around the nation with regulators and industry executives and lawyers to examine market and regulatory trends.
The two maintained what one associate described as a professional relationship, occasionally seeing each other at industry meetings. In April 2006, they became romantically involved while he was visiting New York. On Dec. 8, her birthday, he proposed to her. They were married soon afterward and he had an opportunity to meet many of the members of his new family.
The scandal has taken more than a personal toll on Mr. Swanson and his wife. Ms. Madoff has told friends that she has lost a substantial portion of her assets, which she invested with her uncle.