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

ground to be able to ask me questions. If possible, I would have liked to prep the team before they went in to make sure they asked the right questions and demanded the right documents. Garrity gave me his word he would do the best he could to make that happen.

As I learned later, the regional administrator of the Boston office, Walter Ricciardi, wanted to keep this case for himself. He knew what it was; he knew it was potentially a career maker. He wrestled with the decision to turn it over to New York. He felt it was the strongest case he’d seen in his entire career. But as he told the SEC’s inspector general, he had spent his career preaching cooperation between the different regions, and it was up to him to take a leadership role in making that happen. He knew that if he turned over to New York a case that would generate headlines and promotions, everyone would know how serious he was about regional cooperation. I knew that if Boston had kept the case they would have investigated thoroughly and I would have been right there to advise them.

The last thing any of us expected was that the New York office would take the evidence and basically bury it. In retrospect, I don’t know why I was surprised. Expecting the New York office to respond any differently than it had in the past was sort of like handing the Three Stooges a rubber mallet and expecting them not to hit each other over the head with it.

Ironically, two days after my initial presentation, Ricciardi was appointed a deputy director of the SEC’s Division of Enforcement in Washington. In that position, his job was to “assist in planning and directing the Commission’s investigations and other enforcement efforts.” He was the right guy in the perfect position. I’m not certain I ever told Neil or Frank that we finally had Bernie, but that’s what I was thinking. His empire was tottering financially and I was confident the SEC was about to launch an investigation. There was no way he could remain standing after this barrage.

Ah, that was just me being an optimist again.

The two names Garrity gave me were New York Branch Chief Meaghan Cheung and Assistant Director Doria Bachenheimer. I had never heard either name before. Meaghan Cheung was the New York equivalent of Mike Garrity, but as it turned out that was in title only. As Garrity had suggested, in early November I called Meaghan Cheung and identified myself as the Boston whistleblower. I guess I expected some kind of reaction from her, even something as obvious as “I read your report and I have a couple of questions.”

Instead, the most she would acknowledge was that she had read the report. She didn’t ask me a single question about it. Not one. The strongest impression that I got from her was that I was bothering her. There was no excitement, no enthusiasm, no recognition that I had just put in her hands the biggest case she would ever have in her career. I had to draw every sentence out of her. When I asked her if she had any questions about my report or if there was anything in it she didn’t understand, she acted as if I were insulting her intelligence. I remember asking her, “Well, do you understand derivatives?”

She responded, as if answering my question, “I did the Adelphia case.”

When I pointed out that the Adelphia case was basically a $3 billion accounting fraud case, a case in which executives cooked the books to loot the company for their personal use, and that this was many times bigger and substantially more complicated, she seemed offended. I told her that a derivatives fraud required a much higher level of financial sophistication than an accounting fraud. It wasn’t necessary for her to understand derivatives, she said, telling me that the SEC’s Office of Economic Analysis in Washington, D.C., was staffed with PhD’s who were capable of understanding derivatives.

When this conversation began I was hoping we would have a collaborative relationship; instead it was turning confrontational. I explained to her that the formulas used by PhD’s in academia were completely different from those used in the industry. I wasn’t trying to be insulting; I was just trying to explain to her that the math was different and the way it was used in practice was very different than in academic institutions. I spent the previous decade of my career taking these financial instruments apart backward and forward. I’d done it so often I could do it in my sleep. Those people working in her Office of Economic Analysis just wouldn’t have that experience.

The point I was trying to make was that I could help her; the point she was trying to make was that she didn’t want my help. That was the way our relationship progressed. Over the next few months I would call her or e-mail her from time to time. She would always take my call, but she never initiated a conversation or followed up a discussion. She seemed totally disinterested in speaking with me. No matter what questions I asked, she remained noncommittal. “What’s the status of the investigation?”

“I can’t tell you.”

“Has it gone to a formal investigation yet?”—meaning that the SEC has decided to issue subpoenas to get the information it needs.

“No.”

“Can you tell me anything about what’s going on?”

“No.”

“Is there anything you need from me?”

“If we do, we’ll call you.”

I tried everything I could think of to convince her to investigate Madoff. I told her that I had a list of 47 respected professionals in the industry who would speak with her if she called and every one of them could confirm everything I said. Among the people on that list were Citibank’s head of global equity derivatives research, Leon Gross; Bud Haslet, who was the chief option strategist at Miller Tabak Securities; and Mike Ocrant. As far as I know,