No One Would Listen: A True Financial Thriller, Harry Markopolos [graded readers .TXT] 📗

Madoff, to be inappropriately attired. Effective regulation must mean that the skinny-dippers are stopped while the tide is still in.

As you will see, the SEC has taken some steps toward reform, and Harry Markopolos is optimistic that the agency will do better. I’d hold off judgment until the SEC brings cases that matter against large corporations that haven’t gone bankrupt (taking action before the money is lost) and against institutionalized Wall Street.

The silver lining in the Madoff collapse, if there could be such a thing, is that for at least one moment in time, the SEC has been exposed. And for his role in making that happen, Harry Markopolos deserves all of our thanks.

DAVID EINHORN

December 2009

Who’s Who

Investigation Team and Advisers

Frank Casey

Neil Chelo CFA, CAIA, FRM

Gaytri Kachroo, personal attorney

Harry Markopolos CFA, CFE

Phil Michael, qui tam (whistleblower) attorney

Michael Ocrant

Madoff and Advisers

Nicole DeBello, Madoff’s attorney

Bernard Madoff, founder, Madoff Investment Securities LLC Ira Lee Sorkin, Madoff’s attorney

Wall Street Feeder Funds

Access International Advisors and Marketers

Francois de Flaghac, marketing

Patrick Littaye, Founder

Prince Michel of Yugoslavia, marketing

Tim Ng, junior partner (and husband of Debbi Hootman)

Rene-Thierry Magon de la Villehuchet, Chief Executive Officer

Fairfield Greenwich Group

Douglas Reid, Managing Director

Amit Vijayvergiya, Chief Risk Officer

Financial Wizards and Wall Street Brains

Dan DiBartolomeo, Founder, Northfield Information Services

Jeff Fritz, Oxford Trading Associates

Leon Gross, Head of Equity Derivatives Research, CitiGroup

Andre Mehta, CFA, super-quant and Managing Director of Alternative Investments at Cambridge Associates

Chuck Werner, math wizard from MIT

Markopolos’s Friends and Colleagues

Harry Bates, sergeant, Whitman, Massachusetts, Police Department

Pat Burns, Director of Communications, Taxpayers Against Fraud (whistleblower organization)

Boyd Cook, major general in the National Guard, Maryland dairy farmer

George Devoe, CFA, Chief Investment Officer, Rampart Investment Management Company

Elaine Drosos and family, owners of the Venus Cafe in Whitman, Massachusetts

Dave Fraley, managing partner, Rampart Investment Management Company

Scott Franzblau, Principal, Benchmark Plus

Bud Haslett, CFA, Chief Option Strategist, Miller Tabak Securities

Dave Henry, CFA, Chief Investment Officer, DKH Investments in Boston, Massachusetts

Chuck Hill, CFA, succeeded Markopolos as president of the Boston Security Analysts Society

Daniel E. Holland III, Managing Director, Goldman Sachs in Boston

Debbi Hootman, Darien Capital Management

Greg Hryb, CFA, Darien Capital Management

Louie Markopolos, Harry’s younger brother

Matt Moran, Vice President of Marketing, Chicago Board Options Exchange

Peter Scannell, Putnam Investments’ Quincy employee who filed a claim with the Securities and Exchange Commission

Rudi Schadt, PhD, Director of Risk Management, Oppenheimer Funds

Diane Schulman, False Claims Act fraud investigator

Jeb White, President, Taxpayers Against Fraud

Burt Winnick, Managing Partner, McCarter & English in Boston

Bill Zucker, attorney, McCarter & English

Journalists

Erin Arvedlund, Barron’s magazine reporter

Reuben Heyman-Kantor, 60 Minutes

Andy Court, 60 Minutes

John “Front Page” Wilke, Wall Street Journal reporter

Greg Zuckerman, Wall Street Journal reporter

Government Officials

Securities and Exchange Commission (SEC)

David Becker, General Counsel

Steve Cohen, attorney

Christopher Cox, former Chairman

David Fielder, Assistant Inspector General

Noelle Frangipane, Deputy Inspector General

Robert Khuzami, current Director of Enforcement

David Kotz, Inspector General

Lori Richards, former Director, Office of Compliance, Inspections and Examinations

Mary Schapiro, current Chairman

Jonathan Sokobin, Deputy Chief Economist, Office of Economic Analysis, and Director of Risk Management

Heidi Steiber, Senior Counsel

Linda Thomsen, former Director of Enforcement

Andrew Vollmer, former Acting General Counsel

John Walsh, Chief Counsel, Office of Compliance, Inspections and Examinations

Chris Wilson, Senior Counsel

David Witherspoon, Senior Counsel

Boston Regional Office

Jim Adelman, former senior enforcement attorney

David Bergers, former New England Regional Director of Enforcement, who replaced Grant Ward, current Regional Administrator

Michael Garrity, Assistant Regional Director

Edward Manion, Senior Staff Accountant

Juan Marcelino, former Regional Administrator

Joseph Mick, Assistant Regional Director

Walter Ricciardi, former Regional Administrator

Grant Ward, former New England Regional Director of Enforcement

Northeast Regional Office in New York

Doria Bachenheimer, Assistant Director of Enforcement

Meaghan Cheung, Branch Chief

Peter Lamoure

Simona Suh, enforcement attorney

Senate

Jeff Merkley (D-OR)

Chuck Schumer (D-NY)

House of Representatives

Gary Ackerman (D-NY)

Shelly Capito (R-WV)

Joe Donnelly (D-IN)

Barney Frank (D-MA), Chairman of the House Financial Services Committee

Scott Garrett (R-NJ), Ranking Member, House Capital Markets Subcommittee

Al Green (D-TX)

Paul Kanjorski (D-PA), Chairman of the House Capital Markets Subcommittee

Carolyn Maloney (D-NY)

James Segel, Special Counsel to the House Financial Services Committee

Brad Sherman (D-CA)

Other

Andrew Cuomo, current New York State Attorney General

William Galvin, Massachusetts Secretary of the Commonwealth

Eliot Spitzer, former New York State Attorney General

Kathleen Teahan (D, Plymouth), Markopolos’s former local Massachusetts state representative

Introduction

On the rainy afternoon of June 17, 2009, David Kotz sat patiently in a small room with a single barred window at the Metropolitan Correction Center, a prison in lower Manhattan, waiting to interview Bernard Madoff, the mastermind behind the greatest financial crime in history. Kotz, the Securities and Exchange Commission (SEC) inspector general, was investigating the total failure of his agency to expose Madoff’s $65 billion Ponzi scheme—even after I’d warned the SEC about it in five separate submissions over a nine-year period.

Kotz and his deputy, Noelle Frangipane, sat across from an empty chair, and on either side of it sat Madoff’s two attorneys, Ira Lee Sorkin and Nicole DeBello. Eventually Madoff was escorted into the room by a guard, who carefully unlocked and removed his handcuffs. Bernie Madoff had been a king of the financial industry, the widely respected cofounder and former chairman of NASDAQ, the owner of one of Wall Street’s most successful broker-dealers, and a prominent New York philanthropist. Now, wearing a bright orange prison jumpsuit that glared against the drab gray walls of the room, he sat down between his impeccably dressed lawyers.

Madoff had agreed to this interview with the single stipulation that it not be taped or transcribed. Kotz began by explaining to Madoff that he had a legal obligation to tell the truth. The fact that he was to be sentenced a week later may have influenced his decision to talk openly to Kotz. Or it may simply have been his ego making a last grasp for attention. When it comes to assigning motives to Madoff’s actions, who can really say? His motives make him an enigma, even to this day.

As Kotz later recalled, Madoff was overly polite and seemed forthcoming. “I guess we were concerned that all the answers to our questions would be one or two words or he wouldn’t provide much information or his lawyer would cut him off