I hesitate to bore you with another story about Bernie Madoff as I’m sure most of you are suffering from over exposure at this point. But the more I read, the less any of it makes sense.

Right now there are all sorts of accusations floating around about how the SEC was asleep at the switch and how this guy pulled the wool over every one’s eyes. I was swallowing that for awhile until this part of a New York Times article this morning caught my eye.

Fairfield boasted about its investigative skills. On its Web site, the firm claimed to investigate hedge fund managers for 6 to 12 months before investing. As part of the process, a team of examiners conducted personal background checks, audited brokerage records and trading reports and interviewed hedge fund executives and compliance officials.

In 2001, Mr. Madoff called Fairfield and invited the firm to inspect his books after two news reports questioned the validity of his returns, according to a person close to Fairfield. Outside auditors hired to inspect Mr. Madoff’s operations concluded that “everything checked out,” this person said.

The Fairfield Greenwich Group “performed comprehensive and conscientious due diligence and risk monitoring,” Marc Kasowitz, a lawyer for Fairfield, said in a statement. “FGG, like so many other Madoff clients, was a victim of a highly sophisticated massive fraud that escaped the detection of top institutional and private investors, industry organizations, auditors, examiners and regulatory authorities.”

Now, Fairfield is seeking to recover what it can from Mr. Madoff.

The Fairfield quoted above refers to the Fairfield Greenwich Group, one of the biggest and reputedly savviest of money managers. If we are to believe the article, Fairfield conducts extremely detailed due diligence reviews of firms to which it entrusts money and did so in 2001 with respect to Madoff’s operations. Apparently everything checked out at that time though the news reports so far would lead one to believe that he was already deep into his fraud.

Now either this guy was incredibly brilliant and somehow duped Fairfield as well as a lot of other smart investors or something else is cooking here. Based on everything I’ve read, there were red flags flying everywhere yet no one, let me stress that no one, not even the best and brightest, caught on. Call me a skeptic but I have trouble swallowing that line.

I’m probably being way too paranoid but I can’t square the circle right now.