After Raising Madoff Alarm, Markopolos Said He Feared for His Life

A money manager who tried to raise the alarm about Bernard Madoff’s alleged Ponzi scam told the House Financial Services Committee that his repeated tips about Madoff were ignored by the Securities and Exchange Commission (SEC).  Harry Markopolos, who said he and a team of investigators spent 10 years looking into Madoff’s business, said the SEC’s inaction caused him to fear for his safety.

“Mr. Madoff was already facing life in prison if he were caught, so faced little to no downside to removing whatever threat he felt we posed,” Markopolos told the committee.

In December, Madoff was arrested on one charge of securities fraud.  According to the FBI complaint against Madoff, his investment-advisory business was largely a Ponzi scheme.  The FBI said Madoff  “deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars.”

In his testimony, Markopolos said he figured out Madoff was a fraud in “about five minutes” by looking at his promotional material.  Markopolos brought his allegations to the SEC about improprieties in Madoff’s business starting in 2000 after determining there was no way Madoff could have been making the consistent returns he claimed using the trading strategy he touted to prospective investors.

“I gift-wrapped and delivered the largest Ponzi scheme in history to them, and somehow they couldn’t be bothered to conduct a thorough and proper investigation because they were too busy on matters of higher priority,” Markopolos told the committee. “If a $50 billion Ponzi scheme doesn’t make the SEC’s priority list then I want to know who sets their priorities.”

Markopolos said that over 10 years, he and a team of investigators brought 29 specific red flags regarding Madoff’s operations to SEC offices in New York, Boston and Washington, DC,  but no one at the commission ever acted on his tips.

According to Markopolos, he was told by an SEC official that relations between the Boston and New York offices were hostile.  ” Regional turf battles definitely played a part — a determining factor, in fact — in the handling of this case,” he said.

This entry was posted in Legal News, Stock Fraud. Bookmark the permalink.

© 2005-2018 Parker Waichman LLP ®. All Rights Reserved.