WASHINGTON (AP) _ The official at the Securities and
Exchange Commission who later would marry Bernard Madoff's
niece told investigators this year that if he had carefully
reviewed a complaint about the disgraced financier's
business, he would have investigated more deeply, a new
report shows.
    The admission by Eric Swanson, who was an SEC attorney and
inspections official during a 2003-04 exam of Madoff's
operations, is among a trove of revelations in the report
by SEC inspector general David Kotz.
    Swanson told a colleague in April 2004 that the inspection
of Madoff's business was ongoing, after the exam team had
stopped working on it, according to the report. It said
Swanson recently explained that an inspection would be
considered ongoing even if it were put on hold.
    Kotz's investigation found no evidence that the
relationship between Swanson and Madoff's niece, Shana, who
married in 2007, influenced the SEC exams of Madoff.
    But the Madoff inspection «was put on the back burner»
even though the exam team still had unresolved questions,
the report says.
    The 477-page document, released Friday evening, paints in
excruciating detail how the SEC probes of Madoff were
bungled over 16 years _ with disputes among agency
inspection staffers over the findings, lack of
communication among SEC offices in various cities, and
repeated failures to act on credible, specific complaints
that formed a sea of red flags.
    Madoff «attempted to intimidate and impress examiners,»
and he dropped names to them of top officials in the
agency, the report says. One of the examiners quoted
describes him as «charismatic» and «charming» _
«except when he was angry with us.»
    Among the disclosures: At one point during an agency
investigation in May 2006, Madoff feared that he had been
caught.
    «I thought it was the end game, over,» Madoff was quoted
as saying when SEC investigators queried him about what
account he was using to clear certain trades.
    He said he felt very fortunate when there was no follow-up
call to check on the account number he had given the
investigators.
    «After all this, I got away lucky,» he told Kotz in a
prison interview, though added he thought it was just a
matter of time before he would eventually be caught.
    That «narrow escape» in 2006, enabled by the SEC
enforcement staff neglecting to verify Madoff's account at
a securities industry clearinghouse for trades, allowed his
fraudulent scheme to flourish for another 2 1/2 years, the
report says.
    Madoff, who pleaded guilty in March, is serving a 150-year
sentence in federal prison in North Carolina for a pyramid
scheme that could be the biggest in U.S. history. It
destroyed thousands of people's life savings, wrecked
charities and gave investors' already shaken confidence in
the financial system yet another big jolt.
    Revelations in December of the SEC's failure to uncover
Madoff's massive scheme touched off one of the most painful
scandals in the agency's 75-year history.
    «It is a failure that we continue to regret, and one that
has led us to reform in many ways how we regulate markets
and protect investors,» SEC Chairman Mary Schapiro said in
a statement Friday. «In the coming weeks we will continue
to closely review the full report and learn every lesson we
can to help build upon the many reforms we have already put
into place since January.»
    Schapiro, appointed by President Barack Obama, took the
helm in January. Enforcement efforts have been
strengthened, and the agency has started a number of
initiatives meant to protect investors in the wake of the
financial crisis, officials say.
    Swanson acknowledged in his testimony to the IG's office
this year that if he had carefully examined complaints
about Madoff's business, he would have dug more thoroughly,
according to the report.
    Swanson said a complaint from outside the SEC and
financial articles on Madoff published in 2001 «mean
something different to (Swanson) today than they did at the
time of the (SEC) examination» in 2003-04, the report
says. It quotes Swanson as saying, «I didn't know
anything, very little anyway, about hedge funds and mutual
funds and how they operated.»
    Swanson now is general counsel of BATS, a major securities
trading exchange. His spokesman, Eric Starkman, said Friday
that «the report speaks for itself.»
    The SEC enforcement staff «almost immediately caught
Madoff in lies and misrepresentations but failed to follow
up on inconsistencies» and rejected whistleblowers' offers
to provide additional evidence, the report says. Kotz's
investigation, begun the week before Christmas last year,
involved interviews with 122 people and reviews of
thousands of documents.
    Among those interviewed were former SEC chairmen
Christopher Cox and William Donaldson, as well as Lori
Richards, the former director of the SEC inspections
office, who was Swanson's boss, and Linda Thomsen, the
former enforcement director.
    Kotz's probe found no evidence of improper ties between
agency officials and Madoff, nor of senior SEC officials
trying to influence the agency's probes of his business.
    ^__=
    AP Economics Writer Martin Crutsinger contributed to this
report.