Congressional investigators want to know if Mr. Becker and Ms. Schapiro took all the necessary steps outlined in government ethics rules. Under the United States code, for example, Ms. Schapiro may have been required to make a written determination that Mr. Becker’s financial interest was not substantial enough to affect his job performance. A spokesman for the S.E.C. said that such a waiver would not be required unless Mr. Becker had been found to have a substantial financial conflict.
Congress also asked Ms. Schapiro whether she discussed Mr. Becker’s Madoff account with other staff members or commissioners and if she took up the matter with officials in the federal government’s Office of Government Ethics, or the commission’s ethics counsel.
“As the government official responsible for appointing Mr. Becker to his position in 2009, what steps did you take to manage the appearance of or actual conflict of interest presented by Mr. Becker’s financial interest in the Securities Investor Protection Corporation’ liquidation?” asked a March 1 letter signed by four Republican members of the House Financial Services Committee. They are Spencer Bacchus of Alabama, Jeb Hensarling of Texas, Scott Garrett of New Jersey and Mr. Neugebauer.
In any Ponzi scheme, there are victims who withdraw money before the fraud is exposed. There are many such Madoff investors and determining how much they may keep is being sorted out in two places. Some investors are fighting in court to be entitled to the amount of money on their final Madoff statements, though they have been unsuccessful so far. Another battle involves how much customers can be compensated by the Madoff trustee and the Securities Investor Protection Corporation, a government entity that helps recover money for customers of failed brokerage firms. The S.E.C. oversees SIPC; neither matter has been decided.
Mr. Becker’s late mother, Dorothy, invested $500,000 with Mr. Madoff’s company; when she died in 2004, her three sons transferred the money into a new account at the firm. The next year, the investment was worth $2.04 million and they withdrew it. Mr. Picard said that the family should be allowed to keep the original $500,000 investment but return $1.54 million — all of the gain — to compensate other victims.
If the S.E.C. gets its way, Mr. Becker and his brothers would be allowed to keep more than that to compensate them for the time the money was invested with Mr. Madoff. How much more is unknown because details of the commission’s proposal have not been disclosed.
Both SIPC and Mr. Picard, the trustee for the Madoff estate, have proposed that the customers who withdrew funds before the fraud was uncovered should be allowed to keep only as much money as they put in. Initially, the full commission agreed and approved that approach in early 2009, according to the two people briefed on the discussions.
Mr. Becker joined the commission in February that year. By spring, he began meeting with lawyers for Madoff customers seeking a different formula. They wanted to let longer-term investors keep more money than those who had money with Mr. Madoff for shorter periods. Mr. Becker apparently dismissed arguments that investors were entitled to the amounts Mr. Madoff had listed on their final statements.
In the summer of 2009, Mr. Becker did reverse the commission’s earlier decision, however. His legal staff came up with a new proposal to reflect the length of time the money was invested, and the commissioners approved it at the end of the year. Some at the agency who worked with SIPC expressed dissent about the change, according to the people briefed on the deliberations.
Stephen P. Harbeck, the chief executive of SIPC, confirmed that his investor protection unit and the S.E.C. had initially agreed that victims should be able to keep only the money they had originally put into the Madoff firm. “Then they refined their opinion,” he said on Monday, referring to the S.E.C. He said that he did not know who had pushed for the change.
The S.E.C.’s definition, Mr. Harbeck said, would benefit anyone who withdrew more money from their Madoff accounts than they had put in. Mr. Becker’s family would be among them.