A partner in big accounting firm PricewaterhouseCoopers has been named to head a key division of the Securities and Exchange Commission blamed for contributing to the breakdown that allowed Bernard Madoff's multibillion-dollar fraud to go undetected for 16 years.
SEC Chairman Mary Schapiro appointed Carlo V. di Florio the new director of the SEC's Office of Compliance Inspections and Examinations, which conducts inspections of brokerage firms, investment advisers, hedge fund managers, mutual funds and other entities, the agency announced Monday.
The SEC inspector general has said the division, known as OCIE, must tighten its process for deciding which investment advisers to inspect and make other changes. OCIE and the SEC's enforcement division should establish procedures for sharing tips, complaints, disciplinary history and violations regarding investment advisers, Inspector General David Kotz recommended late last year.
A review by Kotz's office found that the inspections office never undertook an examination of Madoff's investment business _ which was separate from his brokerage operation _ even after he was forced by the SEC in August 2006 to finally register the investment business.
Di Florio said in a statement that he'll work with OCIE staff "to strengthen our examination strategy, structure, training programs, processes and systems," while also recruiting new colleagues with valuable skills.
He played a leading role at PricewaterhouseCoopers in strengthening the firm's corporate governance, risk management and regulatory compliance practice and defining new industry standards, the SEC said. Di Florio also helped lead numerous assignments in which PricewaterhouseCoopers was hired to investigate corporate fraud, corruption, conflicts of interest and money laundering.
Lori Richards, who had headed OCIE since its creation in 1995, left the SEC last August. She was one of several high-level officials, including the enforcement director, who departed the agency after Schapiro took the helm in January 2009. John Walsh, who was OCIE's associate director and chief counsel, has been serving as acting director.
Di Florio, 42, has a bachelors degree in political economy from Tulane University, a master of laws from Georgetown University and a law degree (JD) from Penn State University.
Kotz has detailed how the SEC bungled five investigations of Madoff's brokerage business between June 1992 and December 2008, when the financier confessed to his sons that he was operating a fraudulent scheme. Top SEC officials have pledged to fix the problems and said they have made major changes.
Madoff pleaded guilty last March to charges that his secretive investment operation was a multibillion-dollar Ponzi scheme that destroyed thousands of people's life savings and wrecked charities. He is serving a 150-year sentence in federal prison in North Carolina.