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Harry Markopolos Gets His Day With The SEC

February 4, 2009 RSS Feed Print

Harry Markopolos is mad as hell, and he's not going to take it anymore! The man who tried to warn the Securities and Exchange Commission back in 2005 about Bernie Madoff's massive $50 billion fraud (he called Madoff's company "the world's largest Ponzi Scheme") has been testifying today before a House Financial Services subcommittee about what regulators simply refused to do in identifying one of the largest cases of fraud in the history of finance.

Markopolos says he and others pursuing Madoff were at great personal risk given Madoff's powerful spot as a Wall Street market maker with a sterling reputation right up until his arrest in December. Also, the SEC comes off looking entirely bush-league when it came to uncovering this fraud, even with Markopolos' help. He calls his interactions with the SEC a "systemic disappointment." Highlights from the testimony:

“There was an abject failure by the regulatory agencies we entrust as our watchdog."
"Every bit of information we obtained was in the public domain. We never had any secret insider documents or smoking gun e-mails."
"What troubles us is that dozens of highly knowledgeable men and women also knew that (Madoff) was a fraud and walked away silently, saying nothing and doing nothing."

The scariest feature of this entire scandal is that it's unlikely anyone would've stopped it at all had the credit crisis and market upheaval of late 2008 not sent one too many Madoff investors running for the exit. Clusterstock notes Markopolos is also set to name a "mini-Madoff" to the SEC tomorrow now that he's got their attention. Maybe next time they'll find on their own.

(Link to Markopolos' written testimony is here, via the WSJ)

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Muser muses that adding flesh to the grossly bloated federal bureaucracies will somehow effect change in the regulation of bad boys like Madoff. If you inspect the efficacy of government by size and cost, you quickly find there’s no correlation. For example, the Department of Education, using words like “performance” and “accountability”, has had their federal budget doubled in the past 10 years. Guess what the mean test scores look like over that period? A slight decrease. There are already so many employees in the me-first, process-second, outcomes-last, where’s my piece of the pie Washington culture, the last thing we need is to throw god money after bad!

Practical of PA 8:08AM February 07, 2009

Enforcing laws is not "easy" in the age of complicated businesses. It's not to be left to Barney Fife or even Columbo.
A "jobs" program in America could and should be the beefing up of dozens of agencies. The American people could have "afforded" $50 billion just to prevent Madoff---and he (while eggregious) is the tip of the iceberg on the many ways corporations are screwing the public. They say there are 154 criminal investigations going on as to military contractor fraud in the Iraq/Afghanistan wars. Why aren't they "done" with people in jail? Lack of will and lack of manpower, that's why.

Muser of NM 2:12PM February 04, 2009

Bush and the GOP extended their deregulation philosophy into intentional non-enforcement, conspicuously now in the SEC but throughout agencies like the IRS, FDA and a myriad of acronym institutions.
Maddoff had a major accomplice in his Ponzi scheme - the SEC. What many of us have considered a criminal regime should get exposed for being a big catalyst in ushering in our recession.

Pablo of WA 1:58PM February 04, 2009

Harry Markopolos Gets His Day With The SEC

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