No One Would Listen: A True Financial Thriller by Harry Markopolos (rainbow fish read aloud .txt) 📗

charge of the investigation were not aware that lying to officials of the federal government is a felony.

Every complaint we had made about the SEC was verified in this report. It turned out that some of the investigators “weren’t familiar with securities laws.” The only time investigators tried to verify that Madoff actually was making the trades he claimed, a letter was drafted to be sent to the National Association of Securities Dealers (NASD) to obtain the necessary trading records—but that letter was never mailed, because the investigators decided that it would have taken them too much time to actually compare those records with Madoff’s so-called trades. In fact, if they had sent that letter, just the opposite would have happened—there were no trading records, because Madoff never actually traded. They wouldn’t have spent 30 seconds trying to match orders.

Apparently none of that mattered to the SEC—for attorney Simona Suh’s work in this investigation, Meaghan Cheung gave her the highest possible performance rating, and particularly cited her “ability to understand and analyze the complex issues of the Madoff investigation.... Simona’s command of the laws, regulations and staff guidance was such that she was able to convince Madoff and his counsel that he needed to register” as an investment adviser.

I don’t know which was worse: the fact that most of the time the SEC had refused to investigate Madoff or the fact that on several occasions it actually did investigate Madoff. According to this summary, at one time, in fact, two SEC offices were simultaneously investigating the same issues—and neither of them knew about the other one.

As I read this summary, I realized this agency was more like Keystone Accountants than any kind of professional organization. And this report also confirmed what I had already been told. The New York office didn’t take my submissions seriously because they didn’t like me. They questioned my motives, claiming I was “a competitor of Madoff” who “was looking for a bounty.” And the enforcement team reported that I didn’t “have the detailed understanding of Madoff’s operations that we do, which refutes most of his allegations.”

Frank was disappointed in the summary. In his opinion it was a whitewash. He just couldn’t believe that any institution could be that incompetent. “Maybe I am wrong,” he told me later. “Maybe they really were just that stupid.”

And this was just the summary. I couldn’t wait to read the entire 457-page report, which was supposed to be issued before the Labor Day weekend. Apparently, though, someone in the SEC was not quite as excited about it as we were. There were some rumors that its release would be “delayed.” That apparently infuriated the House Capital Market Subcommittee’s chairman, Paul Kanjorski, a Pennsylvania Democrat, who contacted the SEC and expressed his concern. And then we were told it would be available at 1 P.M. that Friday afternoon.

There is an old public relations trick. When you have to release potentially damaging information and you want the fewest people to learn about it, do it Friday night after people have left for the weekend. The fact that it was finally released about 5 o’clock the Friday afternoon of the Labor Day three-day holiday weekend probably suggests how much the SEC wanted people to be aware of it. In this particular case, the Friday afternoon release had an additional benefit for the agency; so many of Madoff’s victims were members of the New York Orthodox Jewish community, and the Jewish Sabbath begins Friday night at sundown.

As soon as it was available, I sat down and read it. Even after all I knew about the investigation, this report astonished me. At least one-third of the entire document either was directly attributable to me and Neil, Frank, and Mike, or was based on information we had provided. It was as if we were reading the story of the preceding decade of our lives. Just reading the 17-page Table of Contents told the whole story:

The SEC’s 1992 Investigation of Avellino & Bienes, “SEC Contacted Avellino and Suspected That Avellino & Bienes Was Selling Unregistered Securities and Running a Ponzi Scheme.”

SEC Review of 2000 and 2001 Markopolos Complaints: “Markopolos Approached the SEC’s Boston Office in May 2000 with Evidence That Madoff Was Operating a Ponzi Scheme ... Markopolos Met with Grant Ward, a Senior SEC Enforcement [Official] ... Ward Decided Not to Pursue the 2000 Submission.”

Markopolos Made a Second Submission to the Boston Office in March 2001 ... “NERO Decided Not to Investigate Madoff Only One Day After Receiving the 2001 Submission ... Two Articles Were Published in May 2001 Questioning the Legitimacy of Madoff’s Returns.”

Markopolos Made a Third Submission to the Boston Office in October 2005 ... “Markopolos and His Team Continued to Gather Information about Madoff ... The Boston and New York SEC Offices Reacted Very Differently to the 2005 Submission ... The Matter Was Assigned to a Relatively Inexperienced Team, Particularly with Respect to Conducting Ponzi Scheme Investigations ... The Enforcement Staff Considered the Evidence of Little Value Because Markopolos Was Not a Madoff Investor or Someone Personally Involved in the Alleged Ponzi Scheme ... The Enforcement Staff Questioned Markopolos’ Credibility Because of His Perceived Self-Interest ... The Enforcement Staff Concluded That Madoff Did Not Fit the ‘Profile’ of a Ponzi Scheme Operator.”

“In April 2008, Markopolos Attempted to Send a Version of the 2005 Submission to the SEC’s Office of Risk Assessment, but It Was Not Received.”

The Table of Contents outlined an astonishing record of failure: “Madoff Testified ... Madoff Contradicted ... Madoff Denied ... Madoff Caught Lying.” It outlined an indictment of the SEC: “SEC Enforcement Staff Was Not Suspicious ... SEC Enforcement Staff Never Thought ... SEC Enforcement Staff Halted Efforts ... SEC Enforcement Staff Did Not Exhibit an Interest ... SEC Enforcement Staff Effectively Stopped ... SEC Enforcement Staff Officially Closed ...”

There were several things in this report that surprised me, especially the fact that the SEC’s director of risk assessment, Jonathan Sokobin, had never received my last-ditch attempt to expose