Madoff Whistle-blower to Blast SEC in Congressional Testimony Tomorrow
Trying to warn the U.S. Securities and Exchange Commission about an apparent fraud being perpetrated by Bernard Madoff was not only frustrating but potentially dangerous, a whistle-blower reportedly plans to say in testimony tomorrow before a congressional subcommittee.
Despite his repeated warnings to the SEC, starting in 1999 or 2000, that statistics compiled by a team of volunteer investigators showed Madoff couldn’t have earned the returns he claimed from options trading, “nothing was done,” says Harry Markopolos in testimony reportedly prepared for his appearance tomorrow before a House Financial Services subcommittee. “There was an abject failure by the regulatory agencies we entrust as our watchdog.”
A copy of the report (PDF) that Markopolos prepared for the hearing tomorrow is provided by the Wall Street Journal (sub. req.). The newspaper notes that Markopolos did not attempt to warn other agencies, such as the FBI or the Financial Industry Regulatory Authority about Madoff; after being “dismissed and ignored” by the SEC, he felt there was no point, he says in his testimony.
Meanwhile, given Madoff’s high profile on Wall Street, Markopolos was fearful of retaliation:
“Our analysis led us to conclude that Mr. Madoff’s fund and the secret walls around it posed great danger to those questioning and investigating them,” writes Markopolos, a former investment manager in Boston. “He was one of the most powerful men on Wall Street and in a position to easily end our careers or worse.”
Additional coverage:
ABAJournal.com: “Why Madoff Warnings Were Ignored: Regulators Had Wrong Incentives”
Bloomberg: “Madoff Tipster Markopolos Says He Feared for His Life in Probe”
DealBook: “Madoff Whistleblower Assails S.E.C. for Ignoring Him”
