By Sarah N. Lynch
WASHINGTON (Reuters) - Some Democratic lawmakers expressed skepticism on Thursday that a former top Securities and Exchange Commission lawyer may have violated criminal law for failing to recuse himself from handling Bernard Madoff legal matters for the agency.
Former SEC General Counsel David Becker and his brothers inherited $2 million in Madoff funds from their mother's estate. Becker informed the SEC of the fact and received clearance from the agency's ethics counsel.
SEC Inspector General David Kotz issued a report this week saying Becker should have nevertheless recused himself and referred the matter to the Justice Department for possible criminal investigation.
"There was no indication... of any criminal wrongdoing," in the report said Representative Michael Capuano at a lengthy hearing held Thursday to dissect Kotz's findings. "Maybe it was kicked up simply to pass the buck along. We'll see."
Still, some lawmakers questioned why Becker failed to make his own decision not to participate in Madoff matters.
Becker, now a partner with law firm Cleary Gottlieb, was sued shortly before departing the SEC in February by Madoff trustee Irving Picard. The trustee filed a clawback lawsuit against Becker and his two brothers for $1.5 million in alleged phony profits their mother's estate received.
Becker told lawmakers he did nothing wrong and simply followed the advice he was given by the agency's former ethics counsel, who advised him on two occasions he had no conflict.
"If you could rewind the tape, would you recuse yourself?" asked Patrick McHenry, the chairman of a House Oversight panel.
"I would have recused myself if I knew I was going to be sued," replied Becker, who added that the criminal referral did not really "move the needle."
"I have seen Inspector General Kotz do this before, make a big fuss... about sending reports to the Justice Department," Becker said. "Nothing has happened in any of them, and some of them that I recall from my time at the SEC were laughable."
Elijah Cummings, the ranking Democrat on the Oversight Committee, asked Kotz whether he had found any evidence that Becker made false statements to anyone at the SEC about his family's financial tie to Madoff, an issue on which a criminal case could turn.
"Mr. Becker did not provide any false statements per se," Kotz acknowledged.
The Ponzi scheme being run at Bernard L. Madoff Investment Securities LLC was uncovered on December 11, 2008, and Madoff, 73, is now serving a 150-year prison sentence.
Prior to the trustee's lawsuit, Becker participated in several important legal matters related to Madoff, including recommending a method to calculate compensation for investors in Madoff's scheme.
Kotz's report argued that Becker stood to gain financially from his participation, especially because he advocated for a calculation method that benefited longer-term investors by adjusting accounts for inflation.
SEC Chairman Mary Schapiro told the hearing that she has apologized to fellow commissioners for failing to disclose what she knew of Becker's conflict of interest ahead of a vote on a recommended recovery formula for Madoff victims.
"It did not frankly occur to me to direct him to tell the commissioners," SEC Chairman Mary Schapiro said. "I wish I had told them."
(Reporting by Sarah N. Lynch; editing by Carol Bishopric and Tim Dobbyn)