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We told you earlier that the niece of Bernard Madoff -- who's accused of running a "$50 billion ponzi scheme" through his investment firm -- is married to a former top SEC compliance official who had been involved in two reviews of Madoff's firm. And that Madoff bragged about the family connection last year.

But it's worth piecing together the extent of what we know about the cozy web of family ties that may have allowed Madoff to escape scrutiny for so long.

CNBC reports that the compliance department of Bernard Madoff's firm is run by Bernard Madoff's brother Peter, and by Bernard Madoff's niece, Shana Madoff Swanson, who's married to the former SEC official, Eric Swanson. That team appears to also include Bernard Madoff's son, Mark Madoff, who the Wall Street Journal last week identified as the firm's senior managing director and chief compliance officer.

The Journal added that Bernard Madoff's other son, Andrew Madoff is the firm's director of trading.

And it looks like Mark Madoff and the former SEC official, Eric Swanson, were at least acquainted with each other before Swanson married Mark Madoff's cousin Shana, and, just as important, before Swanson had left the SEC. Here's a picture of Mark Madoff and Eric Swanson appearing together on a 2006 panel organized by the Securities Traders Association. Swanson is identified as being with the SEC at the time.

It's also worth noting that Eric Swanson and Shana Madoff met through their work in that industry trade association, according to Eric Swanson's current employer. (That spokesman also said that when Swanson participated in an SEC review of Madoff's firm in 2004, he and Shana Madoff were not in a relationship. They married in 2007.)

And to cap things off, the Journal today reports that investigators are looking into the role that Bernard Madoff's wife, Ruth, may have played in the alleged scam.

It looks like the all-in-the-family nature of Madoff's business could have helped him pull off the alleged fraud -- at least before his sons fully wised up and decided to tell their lawyer.

Madoff, a former Nasdaq chair, is scheduled for a bond hearing at 2pm today.

The failure of the SEC to effectively investigate Bernard Madoff's brokerage/investment firm is shaping up as a major piece of the Madoff story.

And today Politico reports that Madoff's niece, Shana Madoff Swanson, who works as a compliance attorney at his firm, is married to a former top SEC official, Eric Swanson.

Madoff himself wasn't above bragging about his family connections to the regulatory authority that should have been watch-dogging him. ABCNews.com reports:

At a business roundtable meeting last year, Madoff boasted of his "very close" relationship with a SEC regulator, chuckling as he said, "in fact, my niece even married one."


Politico make clear that Swanson was in a key post relating to SEC's enforcement of securities law :
Swanson was the assistant director in the SEC's Office of Compliance Inspections and Examinations' market oversight unit in Washington. According to his biography, Swanson "supervised and conducted inspections and examinations that involved a wide range of issues including best execution, order handling, insider trading [and] market manipulation."


But there are some mitigating factors here. The SEC's director of compliance and examinations told Politico that Swanson participated in two investigations of Madoff's broker-dealer operation -- in 1999 and 2004 -- but not the 2005 probe*.

Swanson left the SEC in 2006, and the couple were married the following year. So were they dating when Swanson helped out on the 2004 investigation?

A spokesman for Swanson's current employer, BATS, which describes itself as the third largest stock exchange in New York, says no:
Eric Swanson worked at the SEC for 10 years and did not participate in any inquiry of Bernard Madoff Securities or its affiliates while involved in a relationship with Shana, whom he met through her trade association work in the industry.


It's impossible to know right now whether Madoff's family connection allowed him to exert any improper influence on the SEC. But something tells us we're going to hear more on this...

* A spokesman for Eric Swanson's firm tells TPMmuckraker in an email that Politico was wrong on one detail: "Eric Swanson joined the group in question at the SEC in 2000 and thus was not part of the 1999 investigation of Madoff."

So Norm Coleman has hired a lawyer in connection with the claims made in the lawsuit against his longtime supporter Nasser Kazeminy. And so has Coleman's wife, Laurie.

But notice that the Colemans hired separate lawyers. That suggests that, perhaps prompted by the news that the FBI is now involved, the Minnesota senator and his wife are taking these allegations very seriously indeed.

Laurie Coleman is central to the allegations involving her husband. The lawsuit claims that Kazeminy used a company he owns, Deep Marine Technologies, to pass money to Norm Coleman, by making payments to the insurance broker, Hays Insurance, that employs Laurie Coleman. The hiring of separate lawyers could also mean that the Colemans' interests in the case diverge. But we'll have to wait to see how this plays out before drawing any firmer conclusions...

A lawsuit brought against Donald Rumsfeld by former detainees at Guantanamo Bay will be given a second look by a federal appeals court at the request of the Supreme Court. The former detainees, who are British subjects, charge that they were tortured and subjected to religious persecution at the camp. (New York Times)

Another midnight rules change by the Bush administration: a proposed new regulation for the Department of Energy would eliminate a rule of thumb encouraging the department to release information, even if not legally required to do so, if the information would benefit the public interest. (Federation of American Scientists)

A new report issued by the Inspector General of the Department of the Interior charges that a senior official mishandled nearly every decision she was responsible for with respect to the Endangered Species Act. Julie McDonald, a deputy assistant secretary in the Fish and Wildlife Service from 2002 until her 2007 resignation, was found to have exerted "improper political interference" throughout her work for the department, ruling in favor of industry and against environmental protection. (AP)

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More signs that Norm Coleman is taking the allegations in the Nasser Kazeminy lawsuit very, very seriously.

The Minneapolis Star-Tribune reports that all four of the principals in the alleged scheme to pass money to Coleman -- Kazeminy, Coleman, his wife Laurie Coleman, and Jim Hays of Hays Insurance -- have hired high-powered Minnesota lawyers.

The Strib runs down the details:

Norm Coleman has hired Doug Kelley, Laurie Coleman is represented by Earl Gray, Hays is aligned with Doug Peterson and Kazeminy has secured the services of Joe Friedberg.

Kelley, Gray and Peterson are former federal prosecutors now engaged in criminal defense and white-collar litigation. For years they have been mainstays in the federal judicial system in Minnesota, working cases ranging from fraud to drugs to homicide.

In the past, Friedberg has been the attorney representing Winthrop & Weinstine law firm in Minneapolis, which once employed Coleman and currently claims Kazeminy as a client.


The paper adds:
[T]he attorneys have retained a Twin Cities-based private investigations company composed of former FBI agents to gather information about the case, according to two people with knowledge of the developments.


Last week it was reported that the FBI had launched an investigation into the allegations in the lawsuit, which revolve around charges that Kazeminy, a longtime friend and supporter of Coleman, tried to pass money to the senator by having a Kazeminy-owned company, Deep Marine Technologies, make payments to Hays Insurance, which employed Laurie Coleman. The lawsuit was filed by Paul McKim, the former CEO of Deep Marine.

Back in February, Senator Hillary Clinton cosponsored legislation calling for the Secretary of State to ban the use of private contractors like Blackwater from guarding State Department employees -- a position that takes on new significance now that she is Secretary Of State designate.

It was about three weeks after Super Tuesday in the heat of the Democratic primary -- and five months after the killing of 17 Iraqi civilians at Nisour Square by now-indicted Blackwater employees working for the State Department -- when Clinton took an aggressive stand against the use of private forces. A strongly-worded statement issued by her office lashed out at "private mercenary firms":

From this war's very beginning, this administration has permitted thousands of heavily-armed military contractors to march through Iraq without any law or court to rein them in or hold them accountable. These private security contractors have been reckless and have compromised our mission in Iraq. The time to show these contractors the door is long past due.


And in late February, Clinton became the sole Senate cosponsor of a bill, S.2398, the Stop Outsourcing Security Act that had been introduced by Sen. Bernie Sanders (I-VT).

In a major speech on Iraq a couple of weeks later, Hillary reiterated her support for removing private contractors from "combat-oriented and security functions in Iraq."

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Karl Rove may be relegated to Fox News appearances and hoping to avoid prosecution once President Bush leaves office -- but the political career of one of his proteges, Tim Griffin, may just be getting started.

The Associated Press reports that Griffin, a former White House and RNC staffer, is mulling a run for the US Senate from Arkansas against Democrat Blanche Lincoln in 2010.

"I am certainly thinking about it," Griffin told the AP. "I'm going to spend some time going around the state and talking to folks and getting an idea of the interest level. ... I'm going to try and hit all 75 counties as soon as possible and I know that's a tall order trying to hit all of those in the next few months."

A DOJ report released this fall found that the department improperly fired Bud Cummins as US Attorney for the eastern district of Arkansas in order to make room for Griffin, thanks in part to pressure from the White House political office. Wrote Kyle Sampson, the DOJ point man for the round of politically motivated firings of which Cummins' was a part: "Getting [Griffin] appointed was important to Harriet, Karl, etc."

Griffin served six months as interim US Attorney but was never confirmed by the Senate.

Griffin has a long trck record as a partisan political knife-fighter. He has been accused of participating in a scheme to cage black voters in Florida in 2004, and was paid by the RNC to dig up dirt on both John Kerry in 2004 and Barack Obama this year.

After leaving the interim U.S. Attorney job last year, a tearful Griffin said public service was "not worth it" and that he had no plans to return to politics.

He appears to have reconsidered. And as someone who, the evidence suggests, consistently puts partisan advantage over the public interest, Griffin should fit right in with his Senate GOP colleagues if he wins the seat.

Four days after Bernard Madoff was arrested for allegedly running a "$50 billion ponzi scheme" disguised as an investment advisory business, attention is beginning to focus on what looks like a glaring failure of oversight by government regulators.

Let's step back for a second. Part of what may have helped Madoff escape scrutiny is that his company consisted of two separate arms -- a securities brokerage, which acted as a middleman between buyers and sellers of shares, and a straight investment business. According to the SEC complaint filed last week, Madoff ran the investment arm as a secretive business separate from the brokerage, and it was this arm that was used to perpetrate the alleged fraud.

Bloomberg reported yesterday that since Madoff registered the investment arm with the Securities and Exchange Commission in 2006, that agency hadn't got around to looking at the business's books. The SEC usually tries to go through the books of newly registered firms in their first year.

"If the SEC didn't come in and inspect (the Madoff hedge fund), then they have a hell of a lot to answer for," one expert told the Associated Press.

But the problem doesn't appear to have started in 2006.

As early as 1999, an executive in the securities industry had urged the SEC to probe Madoff, on the basis of the remarkably steady returns that his investment business seemed to provide. The executive, Harry Markopolos, argued that Madoff must be generating those returns by "front-running" -- that is, using the brokerage arm of his company to illegally provide information to the investment arm.

The SEC said in a statement that it had conducted two investigations into the brokerage arm -- not the investment arm -- of Madoff's company, in 2005 and 2007. The first, begun in response to allegations of front-running, found three violations of rules requiring brokers to obtain the best possible price for customer orders. That investigation appears to have led to Madoff agreeing to register with the SEC the following year, giving the agency access to far more information than it previously had. But the 2007 probe, conducted after Madoff registered, found no evidence of anything improper.

It's unclear why the probes focused on the brokerage arm when it was the investment arm that had generated complaints in the past -- and which apparently would have been the arm that improperly profited from any front-running activity.

So there are still far more questions than answers, including in regard to the performance of government regulators. But so far, the SEC doesn't appear to have covered itself in glory on this one.

When Congress was writing the bailout bill back in September, one of the major sticking points was its insistence on including limits on executive compensation for the banks that were going to be taking taxpayer money. The issue nearly derailed the bill, as Treasury argued that such limits would dissuade banks from participating. But Congress eventually won out.

Or at least it appeared to have. The Washington Post reports today that Treasury succeeded in getting a rather important loophole added in to the bill at the eleventh hour. It said that the pay limits would apply only to banks that participated in the bailout under the original plan in which Treasury would purchase the banks' troubled assets. Since the department quickly switched to a different approach, in which it simply injects equity into banks, the pay limits no longer apply.

"The flimsy executive-compensation restrictions in the original bill are now all but gone," said Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, told the Post.

Questioned by the Post, Treasury insisted it has "all the remedies available to us for a breach of contract," should banks refuse to abide by the limits.

But legal experts appear to disagree.

David M. Lynn, former chief counsel of the Securities and Exchange Commission's division of corporation finance, said courts have sometimes placed limits on the government's ability to impose penalties if there was no fair warning.

"Treasury might find its hands tied down the road," said Lynn, who is also co-author of "The Executive Compensation Disclosure Treatise and Reporting Guide."


It seems fair to conclude that there is strong internal resistance at Treasury to instituting the pay limits in a serious way. In addition to fighting Congress's efforts to impose them in the first place -- then adding the loophole which the Post highlights, there also some at Treasury who support a voluntary system of compliance, according to a finding of the recently released GAO report on the department's bailout spending, which we highlighted at the time.

And more broadly, Treasury appears uninterested in requiring banks to track what they do with the taxpayer money they're getting. And the House last week passed an amendment to the auto bailout bill that would require banks to say more about what they're doing with the bailout money -- a second bite at the apple after the rush to pass the bailout legislation in September.

It looks like Republicans on the Senate Judiciary committee have won at least a partial victory in that battle with Judiciary chair Pat Leahy over the timing of confirmation hearings for Eric Holder, Barack Obama's nominee for Attorney General.

In a press release sent moments ago, Leahy wrote the he was delaying the hearings, and made clear he wasn't happy about it:

The Committee has not yet received the names of other designees for high-ranking Department of Justice officials that we had anticipated and more time is now available to the Judiciary Committee. Therefore, to accommodate the Republicans on the Judiciary Committee, at their request we are delaying the hearing, again, until January 15. ...

It is disappointing to me that they are insisting that we delay at a time when the nation needs its top law enforcement officer and national security team in place and working.


The delay is only a week, since Leahy had been planning to begin the hearings on January 8. He had argued that, after the politicization of the Bush years, it's particularly important for fresh leadership to be installed quickly.

The committee's GOP minority, led by Arlen Specter, has been arguing that Leahy's schedule doesn't allow enough time to review documents pertaining to Holder's role in the controversial pardon of Marc Rich in the waning days of the Clinton administration.

The dispute had gotten unusually pointed for an intra-committee disagreement. Leahy, in a letter to Specter, implied that the Republican's trip to Europe and the middle east this month was a congressionally sponsored junket. Leahy also dredged up a year-old quote from Republican Jon Kyl, arguing for a speedy confirmation of Michael Mukasey as Attorney General, which appears to contrast with today's GOP position on Holder. In announcing the delay today, Leahy again brought up Kyl's quote on Mukasey.

The full release follows after the jump...

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