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The inspector general at the Securities and Exchange Commission has recommended that the Justice Department examine whether to prosecute former SEC general counsel David Becker for helping shape the agency’s policy toward victims of Bernard Madoff’s investment fraud despite having a personal stake in the matter.

Becker was an heir to and executor of his mother’s estate, which included a $2 million account with Madoff. Months ago, a trustee trying to recover money for Madoff’s investors sued Becker to recover fictitious profits paid out when his mother’s account was liquidated.

Becker “participated personally and substantially in particular matters in which he had a personal financial interest,” and “the matters on which he advised could have directly impacted his financial position,” SEC Inspector General H. David Kotz wrote in a report.

Kotz said he is referring the findings of his just-completed investigation to the public integrity section of the Justice Department’s criminal division.

Becker at one point advocated a method of valuing investors’ claims in the Madoff bankruptcy that might have precluded lawsuits like the one filed against him, the report said. The purpose of so-called clawback suits was to reclaim fictitious profits from people who got more money out of Madoff’s Ponzi scheme than they had invested so that the money could be redistributed among the net losers in the fraud.

However, the report also cited an instance of Becker acting against his apparent self-interest. When Becker was asked to weigh in on proposed legislation that would have prevented lawsuits like the one filed against him, Becker stated that the proposal did not seem fair, the report said.

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