No One Would Listen: A True Financial Thriller

Let me define executive privilege:

Leaders of the U.S. Securities and Exchange Commission testified on February 4, 2009 before the United States House Committee on Financial Services subcommittee including Linda Chatman Thomsen S.E.C. enforcement director, acting General Counsel Andy Vollmer, Andrew Donohue, Erik Sirri, and Lori Richards and Stephen Luparello of FINRA. The subject of the hearings were on why the SEC had failed to act when Harry Markopolos, a private fraud investigator from Boston alerted the Securities and Exchange Commission detailing his persistent and unsuccessful efforts to get the SEC to investigate Bernard Madoff, beginning in 1999. Vollmer claimed executive privilege in declining to answer some questions. Subcommittee chairman Paul E. Kanjorski asked Mr. Vollmer if he had obtained executive privilege from the U.S. attorney general. “No … this is the position of the agency,” said Vollmer. “Did the SEC instruct him not to respond to questions?” Mr. Kanjorski asked. Vollmer replied that it was the position of the Commission and that “the answer is no.” The SEC announced Vollmer would “leave the Commission and return to the private sector,” just 14 days after making the claim.

If you are a fan of CSPANJunkie and DLed the Madoff congressional hearings, might I suggest you stick to the first two parts. There’s no need to listen to the SEC’s rendition of Abbott and Costello Meet the Three Stooges broadcast for the sole purpose of diversion and entertainment for that part of the world’s populace who suffered the fallout of the economic crisis as well as the Madoff scandal. Which is about 99%.

A little known quant turned fraud investigator out of Boston named Harry Markopolos stated, “The SEC couldn’t find a steak at an Outback.” And it’s not because his family ran a chain of Arthur Treacher’s. It started back in ’99 when, during his tenure at Rampart Investment Management Company, his colleague and friend Frank Casey handed the Erie, Penn native math wizard Madoff’s returns portfolio and said if he could concoct a copy of Bernie’s secret potion they could make a fuckload of galleons. Five minutes later Harry, The-Man-Who-Knew, told him:

“Either he’s front-running, or this is a Ponzi scheme.”

“Ponzi scheme… that’s a strong word.”

Well nearly a decade, $65 billion dollars, and a few suicides later I’d say Harry was strongly right.

As a card-carry Dem I firmly believe that the GOP is full of it… and that the Dems are a little less full of it. But there are a couple of guys I’d like to see in office, Harry Markopolos (I) and Professor William K. Black (?) for their respective states on the US House Committee of Financial Services. I like to believe that there is common sense capitalism. I like to believe that the Rust Belt, dead malls, ghost towns, buyouts, and offshoring are unintentional byproducts of a few malicious people in our financial sector. But in Frontline’s documentary “The Warning”, Alan Greenspan was to have allegedly said there was room in the market for fraud. Or at least that the market’s ability to self-regulate would naturally weed out fraud. Either way, this mummy has yet to lay down and be embalmed because in one of his latest interviews he blamed international deficiencies for the overall world recession.

Try telling that to Iceland and Dubai.

Anybody could look up the Madoff scandal on Wikipedia and get the gist of the operation and the SEC failure, but while in the press Harry tried to downplay his personal and professional dilemmas. In his book, when this guy wasn’t trying every trick in the bag to sound the alarm he seemed ready for a nervous breakdown because of paranoia! His wife Faith truly lives up to her name, I mean who would allow a growing family to exist solely on her paycheck (she works or Fidelity) as her husband is toiling as an independent fraud investigator for NOTHING! Harry’s ultimate message is to help us learn, or rather unlearn a lot of myths that we have come to believe in the last couple of decades:

1) If it sounds too good to be true, it is.

2) All that glitter’s isn’t gold, and that men with accents and in $3,000 suits aren’t always the smartest in the boardroom.

3) Risk comes with consequences. Morally and statistically speaking we cannot escape that.

The pluck and mettle of Harry and his team, Frank Casey, Michael Ocrant, Neil Chelo, and Ed Manion have proved that while they were up against the big green wall of silence, slow destruction, and the possibility of living under the gun, perseverance will always win out. With a little help of algorithms and a 12 gauge shotgun (yes Harry had the epic backup plan of actually taking Madoff out should the bastard make a less than friendly move on him). The best part about this book is that it’s technologically non-threatening. He uses plain, concise English (something that your investment broker has never heard of) when describing- for example- what swaptions are- and how they were used fraudulently. This book will also make you laugh (and it’s not because of Harry’s childhood love of fruit flies and dog soap), because it proves Dilbert’s management theory correct: they’re all assholes! No matter how many times Harry was jumping up and down screaming to his Rampart bosses that Madoff’s strategy was shit, they still wanted to know when his copy was going to be ready… until they were swindled out of a mere $100,000 by a so-called investor who claimed to have won a Master’s race and was on the US Olympic sailing team. They couldn’t even do due diligence on that!

Ah lady justice, you just aren’t blind… you’re deaf and dumb too. Thankfully we have Harry.

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