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

have the best crooks in the business.” In fact, most of my cases began when I examined companies’ publicly reported numbers. The clues were always in their annual reports, income statements, balance sheets, and footnotes—if you knew what to look for. And knowing that required having experience in the financial industry and great math skills. To me, some of these numbers popped out like a glowing neon sign flashing in red letters, “We are a fraud. Our numbers are too good to be true.” I found these cases by analyzing the numbers, convincing some employees to speak to me, and getting information from them that gave me insight into the way their company did business. Recruiting those employees proved to be the most difficult task. Eventually I would file all 20 of those cases with the SEC, confident that in every one of those cases I had established beyond any doubt that these companies were defrauding their investors by market timing.

On paper, I was a rich man.

Early in 2004 I began to consider leaving Rampart. Not because I was rich on paper, but rather because when I woke up in the morning the thought of another day in the industry depressed me. On some level I had never felt like I belonged in the finance industry. I knew there were at least 100 people in equity derivatives who were better than me. Everybody in finance was smart, but the only way to get that edge was to be superbrilliant. I knew some of those superbrilliant people quite well, and I knew I wasn’t one of them. I wasn’t in the top 1 percent. It had been at least five years since I’d seen any exciting new math. It was just the same old repackaged stuff in a different form. I just didn’t feel the industry was providing products that people should be buying. Basically, I was getting really bored.

Investigating Bernie Madoff, as well as the work I had started doing on the market-timing cases, convinced me I could be successful at fraud investigation. And I was enjoying it. When I had started looking at Wall Street through my fraud lens, I realized how much of the business was based on deception and outright fraud. Those people who work in the industry know it is not pretty. There were times I would watch the television commercials for some of the large funds and just sit there shaking my head in disbelief. The fantasy they were selling had absolutely nothing to do with reality as I knew it to be. It isn’t every person or every firm, but the dishonesty is widespread and there is little the honest majority in the industry can do about the corrupt minority without the assistance of local, state, and federal agencies. And that support just doesn’t exist.

I was confident I knew how to weed out those frauds. My derivatives background gave me the math skills to look closely at pitch books, annual reports, and other public documents and pick them out. And I also knew there was enough fraud ingrained in the business practices of the finance industry that I wanted to be on the other side.

I discussed this at length with Faith. While the thought of losing the security of my paycheck made her very nervous, she told me simply and directly, “If you’re not happy doing what you’re doing, you shouldn’t be doing it.” We both knew that if I did this we would have to live on the money I’d managed to save, but we’d be depending mostly on her paycheck until I was able to settle some cases. I was confident that would happen pretty quickly, but there were no guarantees. Fortunately, Faith was doing very well in her career, working as a senior analyst at a very large Boston-based mutual fund company. Leaving Rampart meant we would have to survive for at least a little while on one Wall Street salary, but we finally decided it was time. Fortunately for us, we had always lived well below our means, had bought an affordable home with only a small mortgage payment, owned both of our cars, and had no debt otherwise to worry about. Thanks to our years of living frugally and wise investing, financially we could afford for me to start a new career.

When I had first casually examined Madoff’s split-strike strategy five years earlier, there was no way I could have imagined the twists it would take—or that it would lead directly to the end of my career as a derivatives portfolio manager.

In May 2004, I gave notice at Rampart and offered to stay until the end of October, giving the firm ample time to find and train a suitable replacement. I felt great loyalty to that company. I’d been there almost 13 years, and I appreciated everything my employer had done for me. I explained that I had been investigating fraud cases for some time, although I certainly never mentioned Madoff. I’d discovered there were a lot of frauds being perpetrated on investors, and thanks to my years at Rampart I had the tools, the experience, and the knowledge to stop them. At least some of them. They were gracious about it. I recommended my successor, a really smart guy named Nick Penna, and in mid-August they hired him. And two weeks later, on the last day of August, they surprised me by informing me that it was my last day.

But I’d prepared for that months earlier, gradually taking home anything personal that I would need. What was left was already stored and ready to be moved. Truthfully, like any good geek I am a little germ phobic. I’m not obsessive, just aware. At Rampart I always kept a bottle of rubbing alcohol and cotton swabs in my desk, and occasionally I’d wipe down my keyboard, mouse, and phone. George Devoe, our late senior investment officer, used to get colds, and he’d sneeze or cough without covering his mouth