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

every time he tried to say something, but there was none of that. He answered all of our questions expansively. It seemed like he didn’t hold anything back.”

Over a three-hour period, Kotz and Frangipane took copious, nearly verbatim notes as Madoff revealed for the first time the whole story of his Ponzi scheme, claiming it had been started almost by accident and that he admittedly was astonished that he hadn’t been caught by the SEC. He was extremely critical of that agency, calling its investigators idiots, assholes, and blowhards. Kotz noted how frequently Madoff boasted of his connections in the financial industry. “He claimed to know so many important people—‘I knew this one,’ that one ‘was a good friend,’ this one he ‘knows very well,’ that one he ‘had a special relationship with.”’

But it was about halfway through this interview, when Kotz asked him about me, that his attitude changed. “So let me ask you,” Kotz said, consulting his notepad, “How much do you know about Harry Markopolos?”

Madoff immediately waved his arm dismissively. He bristled. I was nothing, he told Kotz. “This guy is getting all this press, all this attention. He thinks he’s some kind of seer. But believe me, it’s all overblown. You know what? He’s really a joke in the industry.”

Madoff continued, explaining that I was “a guy who was just jealous” of his business success. As Kotz listened to him, he began to realize that Madoff considered me a competitor and appeared to be bothered by the fact that I was getting attention that rightfully belonged to him. He wouldn’t let it go. Later in the interview he defended his investment strategy, which I had ripped apart, telling Kotz, “All you have to do is look at the type of people I was doing this for to know it was a credible strategy. They knew the strategy was doable. They knew a lot more than this guy Harry.”

No, they didn’t. They just saw the money. And they could not see through the dangerously charming exterior of a man who labeled me a “joke.”

Let me say first that I take no pride in having the last laugh. I’m Harry Markopolos, and this is the true account of my first case as a whistleblower to the SEC.

How did I become a whistleblower? It all began in 1999 when my friend Frank Casey first brought Madoff to my attention. I was confounded by the Wall Street mogul’s financial successes, and had to know more. I tried but couldn’t replicate his results. I later concluded it was impossible. One red flag led to another, until there were simply too many to ignore.

In May 2000, I turned over everything I knew to the SEC. Five times I reported my concerns, and no one would listen until it was far too late. I was a whistleblower taking on one of the most powerful men on Wall Street, and at some points through the nightmarish journey, I feared for both my safety and that of my family. I was convinced the crime he was committing was going to be the worst in market history. Ten years later, Madoff is now behind bars and we all know why.

My investigation team, as it came to be known, was comprised of four honest people with the shared belief that good ethics demands action. The four of us were the last and unfortunately only functioning line of defense between Madoff, his global organization of feeder funds, and their victims. We tried mightily to stop what we knew was wrong. As a result of our work the SEC—if it continues to exist—will be a different agency, and the way we police and regulate our markets will have been changed completely.

This is our story.

Chapter 1

A Red Wagon in a Field of Snow

On the morning of December 11, 2008, a New York real estate developer on a JetBlue flight from New York to Los Angeles was watching CNBC on the small seat-back television. A crawl across the bottom of the screen reported that Bernard Madoff, a legendary Wall Street figure and the former chairman of NASDAQ had been arrested for running the largest Ponzi scheme in history. The developer sat silently for several seconds, absorbing that news. No, that couldn’t be right, he thought, but the message streamed across the screen again. Turning to his wife, he said that he knew that she wasn’t going to believe what he was about to tell her, but apparently Bernie Madoff was a crook and the millions of dollars that they had invested with him were lost. He was right—she didn’t believe him. Instead, she waved off the thought. “That’s not possible,” she said, and returned to the magazine she was reading.

The stunned developer stood up and walked to the rear of the plane, where the flight attendants had gathered in the galley. “Excuse me,” he said politely, “but I’m going to be leaving now. So would you please open the door for me? And don’t worry—I won’t need a parachute.”

At about 5:15 that December afternoon, I was at the local dojo in my small New England town watching my five-year-old twin boys trying to master the basic movements of karate. It had been a gloomy day. Rain continued intermittently, and there was a storm in the air. I noticed there were several voice mails on my cell phone. That’s curious, I thought; I hadn’t felt it vibrate. I stepped into the foyer to retrieve the messages. The first one was from a good friend named Dave Henry, who was managing a considerable amount of money as chief investment officer of DKH Investments in Boston. “Harry,” his message said clearly, “Madoff is in federal custody for running a Ponzi scheme. He’s under arrest in New York. Call me.” My heart started racing. The second message was also from a close friend, Andre Mehta, a super-quant who is a managing director of alternative investments at Cambridge Associates, a