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

he could have been investigating for illegal activities were members of the SEC’s own staff. I had no objection to that. That certainly raised the stakes, and it was obvious that the rest of the day was going to be chock-full of surprises.

As the meeting progressed, I felt more and more comfortable. David explained that he had watched the congressional hearing, and he was stunned and ashamed that his people could perform so badly. The fact that he would criticize his own agency broke the ice. In fact, very early in the meeting I mentioned that after Madoff had surrendered I had been afraid that the SEC might come into my house and confiscate my computers and my documents to prevent me from making my case against the agency. I knew the SEC didn’t have subpoena power, I said, but with careers at stake I was afraid people might dummy up a subpoena to get them into my house.

One of the SEC attorneys in the room couldn’t resist laughing. “You were afraid of our agency?” she asked with incredulity. “After you saw how incompetent and slow moving we are? You saw how long it takes us to make a decision, and you actually believe we were capable of organizing a plan that quickly?” She glanced at her colleagues, who were also laughing and slapping their knees while doing so. “Wow!” As a trained Certified Fraud Examiner I knew this was not on the approved list of interviewing techniques. We’re trained to never show weakness during witness interviews. But I have to admit that the SEC inspector general’s unorthodox questioning techniques were effective. They knew how to make a friendly witness feel comfortable and gain total cooperation.

David Kotz and each of his staff members were well prepared for this meeting. You can tell from the questions how serious the people asking them are, and the inspector general’s office was serious. Rather than simply responding yes or no, I was giving lengthy, detailed answers to those questions. I wanted to shed light on this entire investigation. The people who had things to hide were in his agency, and I didn’t want to leave any dark corners for them to hide in. Kotz’s people didn’t challenge my answers; they were probing to find out why the SEC had failed, who was responsible, and what should be done to make certain that nothing like this ever happened again. I began to feel like we shared common objectives. I went through my red flags with them. They had a whiteboard in the room, and several times I got up and showed them the math. The inspector general brought in a camera and took pictures of each of my formulas, explaining that they intended to hire a forensic accounting firm to review my math for accuracy. That seemed like the best way to handle it.

At one point late in the morning, Phil Michael took the unusual step of asking Kotz if he could step in and take over the questioning. He said, “I want to run by some points that we’re not hitting.” Phil had spent decades involved in criminal investigations and he knew the entire story, so he made sure we got out the pertinent information. After finishing his questions, he left the meeting to get a midafternoon train back to New York. As soon as he walked out the door, I knew there was going to be a problem. Somehow it seems that every time Phil leaves a meeting something dramatic happens. This time was no exception.

We had been working late into the afternoon when David Kotz asked me to explain how the total damages could be assessed and calculated. That actually was a difficult question because it had several answers. There were several different formulas that could be used to determine that, I explained, and all of them were correct. It was really a question of what counted as a loss. Is it simply the actual dollars handed over to Madoff minus the money he returned? What about the interest that supposedly was accruing—does that count as a loss? This was a decision the SEC had to make. Then Noelle Frangipane asked me, “When you made your first submission to the SEC, how big did you estimate Madoff was?”

I said, “We had him at somewhere between three billion dollars and seven billion dollars.”

“And how big was he when he finally turned himself in?”

“His number was fifty billion dollars.”

“And so if the SEC had acted in 2000, when you made your first submission, how much money would have been saved?”

“We could have shut them down at under seven. So forty-three billion dollars.”

“So forty-three billion dollars would have been saved if the SEC had listened to you in May of 2000?”

“Correct.”

A split second later I heard a loud thud. I turned to Noelle. Her head was down on the table and she was sobbing uncontrollably. During my long pursuit of Bernie Madoff I’d seen a lot of strange things, but this certainly was one of the most unusual. It was an incredibly human moment, and I think we were all touched by it. Across the table from me was a gorgeous, talented deputy inspector general crying her eyes out, but I had no idea what it was all about. Again, I knew collapsing and crying were not on the approved list of interviewing techniques, at least not as I was taught. The investigator is definitely not supposed to have an emotional breakdown and cry in front of the witness. Gaytri responded, saying, “I’m taking my client outside for a sidebar.” It was the only decent thing to do.

We walked down a very long corridor until we reached a public area, and sat down. “Harry,” she said, “did you see the same thing I did? Noelle just collapsed.”

I nodded. “Oh, yes, she did. What do you think that was all about?”

“It think it’s a liability issue,” she said. “Noelle is obviously a really sharp attorney, and