WASHINGTON – A government report says the Securities and Exchange Commission should have kept thousands of documents it destroyed from preliminary investigations of financial firms over nearly two decades. But the SEC inspector general found no evidence that any of the investigations were harmed as a result.

The inspector general says the agency violated federal rules by giving incomplete information to the National Archives last year about the records. The SEC failed to tell archives officials that the agency’s 20-year policy had been to discard all documents in closed inquiries that didn’t become formal investigations, the report says.

The report follows accusations from an SEC enforcement attorney, who said the agency improperly destroyed documents related to thousands of preliminary inquiries of big Wall Street banks, Bernard Madoff’s Ponzi scheme and other cases.

LAS VEGAS – Presidential hopeful Herman Cain says the Wall Street protestors don’t understand the economy and are misdirecting their frustrations.

Cain on Tuesday said the Occupy Wall Street activists should be camped out in front of the White House protesting President Barack Obama, not the bankers and investors in Manhattan. He says Obama and Washington politicians put in place the economic policies that the anti-greed activists dislike.

Cain says he isn’t clear what the protestors want and asks whether the protestors expect Wall Street to write them checks.

Rep. Ron Paul of Texas says both parties are to blame for the 2008 Wall Street bailouts the activists are protesting. Paul says the middle class suffered in the deal.

The candidates’ comments came during a Republican presidential candidates’ debate in Las Vegas.

WASHINGTON (Reuters) – Former Securities and Exchange Commission General Counsel David Becker had a conflict of interest when he handled Bernard Madoff legal matters for the SEC and should be criminally investigated, the agency's watchdog said on Tuesday.

In a scathing new report, SEC Inspector General H. David Kotz said that Becker "participated personally and substantially" in matters that could have "directly impacted his financial position." His report states that he is referring the matter to the U.S. Justice Department for possible criminal prosecution.

Kotz's report comes several months after news broke that Becker previously received an inheritance from his mother that included Madoff funds. An SEC ethics counsel cleared him to work on Madoff legal matters including a recommendation on how Madoff's victims should be compensated. Becker left the SEC earlier this year and returned to work for law firm Cleary Gottlieb.

(Reporting by Sarah N. Lynch; Editing by Lisa Von Ahn)

NEW YORK (Reuters) – The chairman of a House capital markets subcommittee called for a comprehensive probe into whether the liquidation of Bernard Madoff’s investment firm treats Ponzi scheme victims fairly and costs too much.

Scott Garrett (R-N.J.) and three other representatives called on the Government Accountability Office to examine the work of Irving Picard, the court-appointed trustee seeking money for former investors in Bernard L. Madoff Investment Securities LLC.

Garrett, who chairs the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, wants an examination on whether Picard and his law firm Baker & Hostetler are overcharging for their work, and on the trustee’s “net equity method” to distribute funds.

A federal appeals court in New York is expected to rule on the distribution issue.

Garrett also asked the GAO to examine the Securities and Exchange Commission’s role in the process, and the Securities Investor Protection Corp’s oversight. Madoff’s estimated $65 billion fraud was uncovered on December 11, 2008.

A thorough probe is needed “given the ongoing situation where many defrauded investors have still not received any compensation from SIPC and/or have the threat of a lawsuit from the Trustee hanging over their heads,” Garrett wrote to Comptroller General Gene Dodaro in the GAO office.

Others members of Congress signing the letter are Rep. Peter King (R-N.Y.), Rep. Carolyn McCarthy (D-N.Y.), and Rep. Ileana Ros-Lehtinen (R.-Fla.). Many of Madoff’s victims lived in the New York City area or in Florida.

Amanda Remus, a spokeswoman for Picard, declined to comment. SEC spokesman John Nester declined to comment. The SIPC did not immediately return a call seeking comment.

Picard has said he has recovered more than $7.6 billion for former Madoff customers, but that all but $272 million is tied up in litigation.

Some customers believe they should recover the amounts on their final account statements, even if those sums were made up. The trustee believes some of these customers are in fact “net winners,” meaning they withdrew more from their accounts than they invested, and should forfeit ill-gotten gains.

Through March, Baker & Hostetler, which represents Picard in his capacity as trustee, was paid $148.9 million to cover fees and expenses, while Picard was paid $3.6 million.

In March, SEC Chairman Mary Schapiro said she regretted that former general counsel David Becker took part in the agency’s work on Madoff, given that he received an inheritance that included Madoff funds. Becker is now in private practice.

(Reporting by Jonathan Stempel in New York and Sarah N. Lynch in New York, editing by Matthew Lewis)