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

Mike, identifying them as “my eyes and ears out in the hedge fund world,” and Ed Manion, who “kept getting ignored because he was not a securities lawyer, only a Chartered Financial Analyst with 25 years of trading and portfolio management experience in the industry.... The SEC to this day holds against him the fact that he kept bringing this case to their attention, and I believe he would be fired if he ever went public.”

I was really pleased to be able to make sure Ed Manion got the credit he had earned—and the public protection he probably needed. I made sure Mike Garrity, the Boston office branch chief who had given his best efforts to convince the New York office to investigate Madoff, also received credit for his support.

And then I went big agency hunting. “The SEC is also captive to the industry it regulates, and it is afraid of bringing big cases against the largest, most powerful firms.” In their previous testimony, top SEC officials had complained that a lack of staff and resources meant they could respond to only the highest-priority matters—which of course was their attempt to excuse their failures. “If a $50 billion Ponzi scheme doesn’t make the SEC’s priority list,” I responded, “then I want to know who sets their priorities.”

I was just getting started, and while my voice was controlled, my anger was real. “You have no excuses,” I said, speaking for the victims. “But you darn well have a lot of explaining to do to the American taxpayers....

“The incoming SEC chairwoman needs to come in and clean house with a wide broom. The SEC needs a new senior staff because the current staff has led our nation’s financial system to the brink of collapse.... They haven’t earned their paychecks and they need to be replaced.”

As I was speaking I could actually hear the SEC staff behind me sucking in their breaths when I landed a body blow. I think they were very surprised I went after their senior leadership so strongly. They weren’t used to hearing these people attacked.

I was thoroughly enjoying every single minute of my testimony. I loved it. Anytime I had the slightest thought of holding back, I thought about the victims. What I did not know was that the interest in my testimony was so high that several cable stations broadcast it live. In addition to my family and team members, just about everybody on Wall Street and in the extended financial industry was watching. I suspect it wasn’t a popular program inside the SEC’s building, though. It also wasn’t very popular with my kids. Faith explained to them, “Mr. Madoff was trying to steal money from people, and Daddy caught him.” They misunderstood—they thought I had physically apprehended him. But the fact that Daddy was on TV didn’t really interest them. They watched for about 10 minutes, then wanted to play with their toys.

I had been well prepared to respond to the committee members’ questions. I certainly was no kinder to the SEC in my answers. “The SEC was never capable of catching Mr. Madoff,” I said flatly. “He could have easily gone to $100 billion if we hadn’t had the financial crisis last year and he hadn’t run out of money to pay off existing investors.”

When asked whether I felt the SEC had failed to catch Madoff because it didn’t understand my red flags or it just had a lack of desire, I replied that it probably was a mix of the two: “They were totally incapable of doing that math. They have no one on their staff probably systemwide that could do the math.... And they just looked at his size and said, ‘He is big firm and we don’t attack big firms.”’

I didn’t limit my criticism to the SEC. When asked by California Democratic Congressman Brad Sherman, who was a CPA, if the National Association of Securities Dealers (NASD), which had become FINRA, might have investigated Madoff, I replied that I would never have taken this case to those industry-created organizations. “I had a lot of bad experiences as an over-the-counter trader in the late 1980s with the NASD,” I said. “What I found them to be was a very corrupt self-regulatory organization, that if you took a fraud to them they would ignore it as soon as they received it. They were there to assist industry in avoiding stricter regulation from the SEC.”

Representative Sherman got it. “You have basically said that our two main securities regulatory agencies see their role as protecting the major institutions on Wall Street rather than protecting investors.”

That wasn’t precisely accurate. I never said, “basically.” And then I added, “I would say that FINRA is even less competent than the SEC.”

I had long ago burned any bridges that might one day lead me back to the financial industry, and I felt it was my duty to report to the American people what I had learned in my career—not just about the government, but also about Wall Street. And it wasn’t pretty. For example, Indiana Democrat Joe Donnelly wondered why all those people on Wall Street who knew something was wrong with Madoff kept silent, pointing out that these were the same people Americans trusted with their retirement savings. I agreed: “It is misplaced trust in fraudsters, especially the white-collar variety. These people are much more dangerous than any bank robber or armed robber, because these people, the white-collar fraudsters, are the most prestigious citizens. They live in the biggest and best houses and have the most impressive resumes. So when they commit a fraud scheme, they destroy companies and throw thousands of people out of work, and they destroy confidence in the American system such that capital becomes unavailable at any price. »

At times as I was responding to these questions I would glance down in front of me at the 60 Minutes cameraman. He was looking directly at the people behind me, and when I struck a particularly