For five years America has been fed a line of bull that absolved the regulators at the NASD and its offspring at FINRA from their oversight responsibilities in the operation that encompassed Bernie Madoff’s Ponzi scam.

I never believed it for a second when regulators and assorted sycophants said that Madoff’s broker-dealer operation was fully separate and distinct from the Ponzi scheme.

I challenged former SEC chair Harvey Pitt in September 2009 when he tried to provide cover for the NASD/FINRA on its oversight and responsibilities related to Madoff. (Those interested can review that engagement and a lot more on the 20-minute video within this commentary.)

We awake this morning to learn startling new evidence from WSJ coverage of the ongoing Madoff trial,

The trial has highlighted how investigators have reversed their view that, as Mr. Madoff had insisted, the market-making and trading operation was walled off from the fraud. They now believe that busy trading desk became Mr. Madoff’s front, actually losing tens of millions of dollars a year and kept alive with hidden subsidies from the Ponzi scheme, according to Bruce Dubinsky, a forensic accountant with Duff & Phelps LLC, who was hired by the bankruptcy trustee.

Recall that Madoff’s investment management practice was not formally and legally structured as a separate registered investment advisor subject to SEC oversight until 2006. Prior to that, the scam was embedded within his overall broker-dealer operation primarily regulated by the NASD.

The question begs — and the answer is widely known — just what the hell were the regulators from the NASD doing when they were reviewing Madoff’s books and records. Any sort of rigorous review would have exposed Madoff’s trading desk as a money losing front and opened the doors for what should have been an expose of the Ponzi scheme.

We are only 5 years removed from the Madoff scandal having been exposed. It is not like there is some sort of statute of limitations in going back and opening the doors into the NASD and now FINRA to expose the real relationships between Madoff and the individuals running the self-regulatory organization. In doing so, we can pull back the blankets and reveal the cozy cronyism if not corruptible relationships at play. Why hasn’t this happened? Here’s why. Let’s not forget that just as the WSJ highlights this morning Madoff

. . .  had served on Securities and Exchange Commission advisory committees and been vice chairman of the National Association of Securities Dealers.

The new evidence presented by the forensic accountant Dubinsky warrants a robust review of the Madoff relationship with the regulators at the NASD at the time, including Mary Schapiro. What say you, Mary Jo White?

Those within the offices at the SEC and atop Capitol Hill who profess that they want to rebuild trust and confidence in the oversight of Wall Street now have a huge chance to do just that.

When will the crony capitalism end?

Navigate accordingly.

Larry Doyle

Please pre-order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy, that will be published by Palgrave Macmillan on January 7, 2014.