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

Although my testimony was serious, there certainly were a few humorous moments. When I told West Virginia Republican Congress-woman Shelly Capito about some of the firms that my team had warned, she asked me, “Could you explain to me what the theater funds, what that entails?”

I began, “A feeder fund ...”

“Oh feeder fund,” she interrupted. “I thought you were saying ‘theater fund.’ ”

During this hearing several members took time to compliment me, using terms that would have made me blush if I hadn’t been so focused. But I did appreciate the fact that a number of those people also acknowledged the real danger my whole team faced. As Texas Democrat Al Green said, “I and many others can understand why you were in fear for your life. And I believe that fear to have been well-founded because you were dealing with a ruthless person who was in bed with other ruthless people. And when you deal with the kind of characters that you were trying to bring to the bar of justice, you have to be concerned not only about yourself but about other family members that are near and dear to you.”

And as I had told the reporters before the hearing began, I used this opportunity to emphasize the importance of whistleblowers. Among the changes that I said had to be made if the SEC was to become an effective organization was the creation of a program that rewarded whistleblowers for reporting illegal or unethical practices. The government has to make it worthwhile for people who are risking their careers, and sometimes their personal safety, by putting the public good before their employers. Good wishes and congratulatory letters aren’t enough. I got the opportunity to make that point when my own Congressman, Massachusetts Democrat Stephen Lynch, related a conversation he’d had recently about a hotline the SEC had set up—for industry use. As he said, “I was told that senior management had actually gone to an industry—a financial services industry conference and basically said to the firms out there, ‘If you feel that you are being too aggressively investigated, then I want you to call this office.’ And that was a senior person, two senior people at the SEC.”

Imagine that. The SEC actually had set up a whistleblowers’ hotline—so companies being investigated could stop or slow down that investigation! That was incredible—although not really surprising. We already knew that the SEC was a captive of the industry. The point that I wanted to make was that whistleblowers in this country generally have a very difficult time, but they perform a tremendous service. As I told Congressman Lynch, “I brought with me the Association of Certified Fraud Examiners’ 2008 Report to the Nation, and it lists in here the best way to find fraud. Fifty-four percent of the frauds get discovered by tips, whistleblower tips; only 4 percent by external auditors, which—the SEC is an external auditor. Therefore, whistleblower tips are 13 times more effective than external auditing. So why wouldn’t we want the SEC to be 13 times more effective? Lord knows, this agency needs to be more effective.”

When I concluded my testimony, I was satisfied that I’d made all the points I’d intended to make. The only question I was asked that I hadn’t been prepared for was, “Who’s going to play you in the movie?”

Rather than fighting our way through the media horde lined up outside the hearing room, we went into the Democratic anteroom to watch the SEC’s leadership testify. This was a good place to blow off some nervous energy, talk with my attorneys, have lunch—and watch the SEC get ripped apart by Congress.

The SEC had five representatives there to read its nonsensical opening statement. In real life it was actually worse than it had been on the printed page. It was basically a recitation of the SEC’s mandate that could be read on its web site. They made no attempt to explain what had happened, to apologize, or even to admit why they were sitting there in the first place. It was disgraceful. Any doubts I might have had that Congress would allow them to get away with it were quickly dispelled by Chairman Kanjorski’s angry response. As I heard him berating the agency I wanted to stand up and cheer. “In terms of hearing the testimony today of Mr. Markopolos, I have tentatively come to the conclusion that the Securities and Exchange Commission has been anointed by God to be all-righteous. I hope I can disabuse the members of this panel of that fact, because, quite frankly, we are about to decide in what nature and how the Securities and Exchange Commission should continue to exist. And the lack of cooperation shown in the last several weeks, and I think the abuse of authority, or the attempt to bring a protective shield over an executive agency or independent agency of this government is not acceptable. And if that is going to be the process, the easiest thing to do is follow Mr. Markopolos’s advice and just do away with the entire regulatory system as it is presently constructed and start anew....

“And as I have heard the testimony, I mean, you know, I like oatmeal, and that is about how I classify the testimony I heard today.... We did not call you up here for us to hear a traveler’s guide of the Securities and Exchange Commission.”

It got progressively worse and worse for the SEC. Linda Thomsen, the director of enforcement, claimed she could not respond to many questions because it might jeopardize prosecutions. When Chairman Kanjorski asked her how long those prosecutions might take, she replied, “I honestly don’t know the answer.”

Chairman Kanjorski erupted. “Well, if it is years, and you do not intend to say anything, if I listen to your statement and how your counsel structured the statement, there are three things. You cannot help if it is a pending criminal investigation; you