Harry Markopolos, an independent financial fraud investigator and former money manager, on Capitol Hill. Photo: Jay Mallin/Bloomberg News
by Frank James
Harry Markopolos, the financial fraud expert who repeatedly warned the Securities and Exchange that Wall Street big man Bernard Madoff was running an alleged Ponzi scheme, is testifying on Capitol Hill this morning and his testimony is fascinating.
Among the things he's said this morning is that it took him five minutes to suspect that Madoff was running a scam. He looked at Madoff's results which on a graph was a curve going up on a 45 degree angle with no variation.
And it took him 20 minutes to look at the Wall Street Journal's financial pages and to see that Madoff couldn't have been doing all the trading Mafdoff's documents suggested.
His obvious point was that Madoff was hiding in plain sight, that the SEC should have been able to see what he saw but they didn't.
Markopolos says the SEC was blind to the fraud because the agency is overflowing with young lawyers eager to punch their career tickets but not knowledgeable enough about the financial markets and the sophisticated financial instruments being traded. He claimed that senior SEC staffers suffered the same ignorance.
He recommended that the agency be completely overhauled, with those lawyers replaced by "gray-haired or bald" Wall Street types who know the intricacies of the markets and who've made so much money that they would do oversight of the markets as a public service.
Markopolos also said he had feared for his life because Madoff was running such a large scam -- estimated to be about $50 billion --- that he assumed Madoff would be capable of doing anything to cover his tracks, including killing him.
When one lawmaker said that came across as a little paranoid, Markopolos alleged that Madoff was attracting money from organized crime, the Russian mob and drug cartels, and that worried him.
Markopolos comes across as a real character. He said at one point he made an offer the SEC apparently refused: he said he'd go undercover, with only his wife knowing what he was doing, to ferret out what Madoff was doing but got nowhere with the agency.
Clearly this guy is not your run-of-the-mill whistleblower.
Comments
Frank, your right about this guy but it is scary that the SEC with its internal politics and good ol' boy network of insiders just ignored him. Sometimes I believe the whole market is a insider scam just sucking up the money from the ignorant average investor. I have little faith that Congress, government regulators of the SEC, or the SEC itself can fix these problems. Due diligence in investment does not cut it anymore, you almost need to be a crook to get ahead. Who can we really trust?
Posted by: Bubba Porter | February 4, 2009 12:25 PM
Oh my!! I agree with a lot of what Bubba Porter said.
Mark it on your calendar Bub.
Posted by: Flo | February 4, 2009 1:30 PM
Think about it. We have all of these politicians that don't pay taxes (Dashle, et.al.) who are regulating the various industries and the public is crying for govt. oversight? It's the wolf, fox and coyote all watching the hen house! Now start thinking about taxes and all of the public office/employee pensions we have to fund on top of this mess!
Posted by: Jimbo | February 4, 2009 4:53 PM
Think about it. We have all of these politicians that don't pay taxes (Dashle, et.al.) who are regulating the various industries and the public is crying for govt. oversight? It's the wolf, fox and coyote all watching the hen house! Now start thinking about taxes and all of the public office/employee pensions we have to fund on top of this mess!
Posted by: Jimbo | February 4, 2009 4:53 PM
Roubini and Markopolos.
Prophets without honor.
Now we need some U of C "behaviorial economist" to tell us why such folk are never listened to, but Milton Friedman is.
Posted by: ornery | February 4, 2009 5:21 PM
Harry deserves a Presidential Medal of Freedom and lifetime witness protection. He's a hero, truly.
Posted by: sue | February 4, 2009 6:05 PM
Why isn't this guy in charge of the SEC?
Bubba Porter; (Not the real Bubba)
You are just figuring that out? The Wall Street insiders just shorted our 401k stock funds by about 41% in 08.
Just keep repeating; 'Free market, free market'.
Yeah, 'free' to screw us in the 'market'.
Posted by: C.Morris✈ | February 4, 2009 9:01 PM
THE “MADOFF LETTER”:
THERE IS MUCH TO BE LEARNED FROM BERNIE MADOFF, don’t give up on him.
--
http://pacificgatepost.blogspot.com/2009/01/bernie-madoff-letter-of-explanation.html
-
….in his own words? Now get the subpoena requests out.
Posted by: James Raider | February 4, 2009 9:32 PM
Amazing hearing in House committee today.
Gary Ackerman practically was climbing over the dias to attack the suits from the SEC.
Who sounded just like Bush Admin.
Intoning "executive privilege" when they admitted they hadn't even consulted the executive.
Intoning "ongoing investigation".
Stonewalling the oversight committee.
Incredible.
The committee is entitled to see the original documents, the submissions of Markopolos and the initials of the functionaries in the SEC who "reviewed" them and deep-sixed them. And then to grill them.
I think they may find someone up in the Bush WH wired this and induced SEC to look the other way.
Posted by: ornery | February 5, 2009 1:48 AM
THE SEC
(the Adam's Family)
WilliamBanzai7
They're sleepy and they're stupid,
Delirious and maybe even crooked,
They're all together shaky,
Their called the SEC.
Their office is a brain dead mausoleum
Where people come to see 'em
They really are a scream
Their called the SEC.
(Naive)
(Incompetent)
(Useless)
So get your undercover shawl on
And a whistle you can blow on
We're gonna pay a call on
The United States SEC.
RIDDLE:
Q: WHAT DO YOU CALL A MONKEY SITTING IN A TREE WITH A LAPTOP?
A: A BRANCH CHIEF
Posted by: williambanzai7 | February 5, 2009 9:19 AM
Lester Thurow is a great economist who was a dean at MIT.
I'll never forget years ago he was on a panel and just mentioned casually, as if it were a given and common knowledge,
The reason most investors don't have any confidence in the stock market(s) is that they are rigged.
Who would have confidence in rigged markets?
Obviously he was right.
So, again, why has the "financial press" flooded us for years with the wit & wisdom of Milton Friedman, a worthless shill for the fat cats who control the U of C, when the ones who tell the truth are ignored?
They being, inter alia, Roubini, Markopolos, Lester Thurow.
Maybe that library at U of C won't be named after Uncle Miltie after all.
Or, perhaps, they'll instead make Rockefeller Chapel do double duty.
Put busts of John D. Rockefeller (sans wig, in his alopecia totalis glory) and baldie Uncle Miltie Friedman up on the altar.
Rename the joint the "Rockefeller Friedman Chapel".
Go back to requiring students, or at least the B School students, to attend daily chapel.
Worship John D. and Miltie.
Posted by: ornery | February 5, 2009 10:14 AM
Was it possible that Madoff pulled of the largest ponzi scheme in history alone? I think that is unlikely considering how much money was changing hands.
Eventually somebody had to notice that the only money coming in was from investors.
Or were too many people simply blinded by their greed? If that is the case, Madoff’s employees and associates should have noticed that something fishy was going on long before now. Seventeen years is a long time.
http://www.weeklypoint.com/2009/02/06/how-many-people-knew-about-madoff-scandal/
Posted by: DanD | February 6, 2009 6:38 PM
This whistle blower is a hero. Madoff belongs in jail. He stole from everyone, regardless of race or religion or ethnicity. Yet, I can't consider him an equal opportunity thief. He's just a thief.
Posted by: reza santorini | February 9, 2009 6:55 PM