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

We met in her new office. It was large, comfortably decorated, and brightly lit. Rather than sitting at her desk or around a conference table, we joined Chairman Schapiro, her newly appointed general counsel, David Becker, and another attorney, Steve Cohen, in a casual seating area. It was sort of like a living room. It was a nice setting, but the atmosphere in the room was very tense. It wasn’t exactly like signing a treaty of surrender on the deck of the Missouri, but there was an uncomfortable feeling in that office.

Mary Schapiro immediately made it clear that she intended to do whatever was necessary to restore public confidence in the SEC. The SEC that I had fought was out of business. It was going to be replaced by a tougher, more aggressive organization. If anything at all positive had come out of the Madoff disaster, this was it. Sitting there, I didn’t feel like I had won anything. I certainly didn’t gloat, but at least my overwhelming sense of frustration was gone. I liked Mary Schapiro’s words, but until she followed up by making real changes, those words meant nothing. And if she was asking for my help in transforming the SEC, well, I was very pleased to offer it. As my team well knew, I did have an opinion about the SEC.

After a brief discussion about the Global Financial Alliance, we began talking about Mary Schapiro’s desire to create a serious whistleblower program. I handed her a copy of the Certified Fraud Examiners’ 2008 Report to the Nation on white-collar fraud that proved the effectiveness of whistleblowers. She picked up the report and quickly read through the whistleblower data. “We need to do more of this,” she said. “We need to reach out to whistleblowers to get the big cases to show the public we’re serious about fighting fraud.”

Well, I certainly agreed with that. “Yes, you do.”

The difficulty, she explained, was that the SEC received as many as 800,000 tips a year. Although the majority of them were along the lines of “I think my broker is stealing from me because my account was down 20 percent last month” while the entire market was down 20 percent, there was no standard for separating the frivolous from the Madoffs. There were just too many tips and not enough people to follow up. In response, Gaytri recommended at information technology (IT) solution using keywords to limit the number of leads the SEC staff should pursue. Mary Schapiro said she was in the process of hiring a consultant to try to find a workable technological solution.

That was impressive. Clearly she was in a crisis response mode. I recommended several people I knew who had successfully developed whistleblower programs. Obviously Pat Burns was at the top of that list. When I mentioned one woman whom I greatly respected, Mary Schapiro’s face lit up and she told me, “I know her—she’s actually a friend of mine.”

Then I explained that the best way to attract those big cases is to create a whistleblower program similar to those of the Department of Justice and the Internal Revenue Service that makes the guilty companies pay the government back treble damages and pays the whistleblowers between 15 percent and 30 percent of the settlement amount. And those bounty payments should not come out of the government’s pocket. They should always be paid by the bad guys.

Until that point the meeting had been going very well. She had agreed that the SEC needed to develop a whistleblower program and needed to offer an incentive for people to take the risks. But then I told her that I had developed several whistleblower cases involving securities, and given my history with the SEC I had decided to file them with the Department of Justice, the IRS, or other government agencies.

David Becker interrupted, “You’re telling me you know about securities law violations and you’re withholding evidence from a government agency?”

“No,” I responded. “I’m just withholding them from the SEC. I’m a citizen and I turn in my cases to the agency I think can best handle them, and at this point that’s not the SEC. The government has the information, but it’s just with another agency. If they’re not bringing you into the case they have their reasons. Maybe they’ve lost confidence in you, too.”

Becker was visibly angry. Until that moment he hadn’t said a word. I began to discuss the specific reason I hadn’t brought a case to the SEC, and I used another case as an example. When I mentioned a key player in that case, Becker put up his hands. “I have to stop you,” he said. “I can’t talk about this because I may have a conflict here.”

I heard him, but it didn’t really register. This was a case I had nothing to do with. It had been reported on extensively. I thought maybe the problem was the way I had described it, so I tried again.

Becker stopped me again. “I’ve already told you, you really need to stop because I may have a conflict here.”

Mary Schapiro didn’t say a word. At that moment, and it turned out that Gaytri felt the same way, it appeared to me that David Becker was really the person in charge of this meeting. Gaytri spoke up, saying, “I’m not sure what the problem is. I think he’s just giving you an example. This isn’t anything we need to get involved in.” She looked at me. “Harry, I think you should just go on to something else.”

So I did—for a least a few minutes. The one thing on my mind was avoiding that topic, so naturally I stumbled onto it again. It certainly was not my intention, but I mentioned the key player’s name again.

David Becker stood up. Until that moment I didn’t realize how large he was. We were about five or six feet apart, separated by a coffee table, and Gaytri’s first thought was that he was about to