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Great Britain just took the definition of America’s strongest ally to a whole new level. How so?

News this morning that the U.K.’s Serious Fraud Office (SFO) will not pursue legal action against the local operations of Bernard Madoff Investment Securities is just another kick in the balls to investors everywhere and the innocent Madoff investors especially.

The New York Times highlights this breaking news story in writing, Britain Will Not Pursue Legal Action Against Madoff:

Britain’s Serious Fraud Office said Tuesday that it would not pursue legal action against the local operations of Bernard L. Madoff, the U.S. financier now in jail in the United States.

In a statement, the S.F.O. said its investigation had found “insufficient evidence to provide a realistic prospect of conviction” against either the company or its directors.

What did investigators find? Given the size and scope of this fraud, investigators should be compelled to share with the public exactly what they found and did not find. This release is nothing more than sweeping this scam under the rug. I find that unacceptable. Who is the SFO protecting? Let’s navigate further.

The British arm of Bernard Madoff’s investment empire was Madoff Securities International Ltd., based in a small office in the swanky London suburb of Mayfair.

Madoff Securities International was a separate legal entity with a staff of 28 people, including 14 traders who had a narrow remit to trade British and European equities. According to public filings, the unit had £100 million, or $1.42 million, in assets and a £2 million profit in 2007.

28 people and $1.42 million in assets? Sound like a front to you? It certainly does to me, and it is widely believed that Bernie used it as such to launder money.

It was far removed in size and business scope from the New York headquarters of his trading and fund management operations, from where the financier oversaw his fraudulent financial empire. In June, Mr. Madoff was sentenced to 150 years in prison, for masterminding the largest, longest and most widespread Ponzi scheme in history.

The S.F.O., which investigates financial crime, had been investigating Mr. Madoff’s activities since late 2008. The agency said in March 2009 that the London office of Mr. Madoff had played a large part in his sweeping Ponzi scheme.

So, let’s get this straight. In March 2009, investigators assert the London office played a large part in Madoff’s scam. In February 2010, investigators find there is insufficient evidence to proceed. I call bulls&%t on that. I repeat, who and what are they protecting?

In its statement Tuesday, it said that it would continue “to provide assistance to international partners in law enforcement on aspects of the continuing worldwide investigation and is continuing its own enquiries into wider aspects of the fraud which may give rise” to charges in Britain.

If this statement is to be believed, then why is the SFO releasing the original statement that it would no longer be pursuing legal action against the local office? Do you find these statements to be inconsistent and disingenuous? I do.

My gut continues to tell me the Madoff scam was the ultimate ‘inside’ job. I am not stating that financial regulators actually participated in the development and perpetration of the fraud. I am saying that I believe regulators were ingratiated to the point of being bamboozled by Madoff himself so that the regulatory oversight of Madoff was reduced to a joke.

This joke will continue if real answers are not provided to the American public. Do not tell me that the internal reviews by the SEC and FINRA provide those answers. They don’t.

Let’s start with FINRA addressing the allegation put forth by Richard Greenfield this past September that the FINRA investment portfolio had invested its own money with Madoff. Details on this allegation can be found in my commentary from September 4th, “Attorney Representing Amerivet Securities Makes Claim FINRA Insider Confirms Investment in Madoff.”

So, lets pick this rug up and unearth the true depth of the relationship between Bernie Madoff and the financial regulators. Who’s being protected? It certainly does not feel like it’s the investing public.

Wall Street and Washington may want to sweep the Madoff story under the rug, but I want answers.

Disclosure: no positions