Marcum & Kliegman has created a task force to advise investors who may have been defrauded by Bernard Madoff and his investment management business.

The firm's task force will concentrate on the tax and accounting as well as the non-tax issues facing people who invested with Madoff and his firm. Madoff admitted to bilking clients out of approximately $50 billion in a giant Ponzi scheme that ensnared hedge funds, charitable foundations and wealthy individuals (see SEC Says Former Nasdaq Chair Helmed $50 Billion Ponzi Scheme). A former Nasdaq chairman, he was put under house arrest on Wednesday.

"Investors and their advisers are in uncharted territory," said Marcum & Kliegman managing partner Jeffrey M. Weiner (pictured).

Michael Greenwald, partner-in charge of tax services in the firm's New York City office, will lead the task force. They plan to evaluate tax law and prior rulings to determine the appropriate tax treatment of losses incurred with the Madoff case. The firm also plans to work with its existing clients, their legal counsel, and others as these cases progress to fully document the extent of the financial fraud.

Separately, SEC Chairman Christopher Cox said he would pursue an internal investigation of why the SEC did not follow up more aggressively on warnings from whistleblowers who were skeptical of Madoff's claims.

"Since commissioners were first informed of the Madoff investigation last week, the commission has met multiple times on an emergency basis to seek answers to the question of how Mr. Madoff's vast scheme remained undetected by regulators and law enforcement for so long," said Cox in a statement.

"Our initial findings have been deeply troubling," he added. "The commission has learned that credible and specific allegations regarding Mr. Madoff's financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the commission for action. I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them. Moreover, a consequence of the failure to seek a formal order of investigation from the commission is that subpoena power was not used to obtain information, but rather the staff relied upon information voluntarily produced by Mr. Madoff and his firm."

Cox has ordered a full review of past allegations regarding Madoff and his firm and the reasons they were not found credible, to be led by the SEC's Inspector General. The review will cover the internal policies at the SEC governing when allegations such as those in this case should be raised to the commission level, whether those policies were followed, and whether improvements to those policies are necessary. "The investigation should also include all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm," said Cox. 

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