It was a relationship rife with potential conflicts, and, from day one, everyone involved recognized that.

When Bernard Madoff's $60 billion Ponzi scheme came to light in December 2008, critics immediately seized on marriage of his niece, Shana Madoff, a compliance officer at his firm, and Eric Swanson, who had been assistant director of compliance at the Securities and Exchange Commission. How, critics asked, could the SEC effectively regulate a firm when parties on both sides were in a relationship?

In fact, according to dozens of e-mails released by David Kotz, the SEC's inspector general, the agency itself was aware of the potential conflicts, and the internal drama prompted Swanson to join the private sector rather than break off the relationship.

In the end, Kotz determined that Swanson's relationship didn't influence the conduct of any examinations by the SEC into Bernard Madoff. Yet, the emails released paint the picture of a romance that was impossible to keep hidden, and a human drama that threatened both friendships and careers.