Bernard Madoff

Looking For A New Career? Try Fraud Investigator.

Zachary Roth | March 26, 2009, 11:14AM

One of the few growth industries in the current economic climate? Fraud investigators.

Allegations of fraud are increasing, as the financial crisis drags on. As a result, reports the New York Times, people who are skilled at following the money have rarely been more in demand.

The FBI is recruiting new hires to work on a glut of cases -- it had more than 1600 open mortgage-fraud investigations at the end of fiscal 2008, almost twice as many as two years earlier.

Read more »

Bernard Madoff

Markopolos To Mobsters: "I'm the Good Guy Here."

Zachary Roth | February 4, 2009, 1:03PM

Harry Markopolos, the Bernard Madoff whistleblower, ended his testimony about an hour ago. But before he did, he fleshed out his thoughts about Madoff's ties to organized crime.

In a remarkable moment, Markopolos even addressed the mobsters directly, arguing -- in an apparent effort to convince them not to go after him -- that he was protecting them Madoff's scheme.

Here's the exchange with Rep. Gary Ackerman:

ACKERMAN: I'm talking about, when you talk about the Russian mob and organized crime, these are people who invested through European investors or European feeder funds?

MARKOPOLOS: Correct. And I didn't fear of them, and I didn't think they were going to come after me, I want to make this perfectly clear to all those Russian mobsters and Latin American drug cartels out there...

ACKERMAN: You're talking directly to them.

MARKOPOLOS: I was acting on your behalf trying to stop him from zeroing out your accounts. I'm the good guy here. Just like to make that clear.

ACKERMAN: Uh, yeah I think we registered that.

Here's the video:

Bernard Madoff

Markopolos: SEC Couldn't Find First Base In Fenway Park

Zachary Roth | February 4, 2009, 12:16PM

Throughout his testimony, Harry Markopolos seemed to be refining his effort to express, in one crisp sound byte, his low opinion of the SEC's investigative powers.

And right at the end, he seemed to hit on it. He told the committee (the exact wording may be a little off here, we're going from memory):

If you flew the entire SEC staff to Boston, and sat them in Fenway Park, they wouldn't be able to find first base.

Might be hard to top that.

Bernard Madoff

Markopolos: SEC Has Just One Bloomberg Terminal Per Office

Zachary Roth | February 4, 2009, 11:58AM

A stunning claim just made by whistleblower Harry Markpolos helps further explain how the SEC failed to catch Madoff.

Referring to Bloomberg computer terminals, Markopolos said that the agency "might have one per regional office."

Bloomberg's terminals sit on the desk of almost every trader on Wall Street, providing a steady stream of live market data. It would be extremely difficult to detect sophisticated financial fraud without this basic tool of modern trading.

We've contacted current and former SEC sources to ask whether Markopolos' claim is accurate, and we'll keep you posted.

Late Update:
Reader FH writes in to say that Bloomberg terminals aren't useful for detecting fraud:

I'm a quant at a hedge fund, and have a bloomberg terminal that I share with a colleague.

You detect fraud by runnnig statistical tests on data, or I suppose by forensic accounting (which I don't know anything about). Not by watching live scrolling news feeds or flickering prices on a terminal.

I would say you should take as your model the 1994 paper by Bill Christie and Paul Schultz that detected implicit nasdaq market maker collusion as how enforcement research is going to be done.

In my view, it does not help his credibility if Markopolos is talking about the paucity of Bloomberg terminals at SEC offices.

Late Late Update:

Robert Fusfeld, who retired in 2006 as a senior enforcement lawyer in the SEC's Denver office, confirms to TPMmuckraker that when he left, that office had only one terminal.

Bailout

Markopolos: Madoff's Mob Ties Made Me Fear For My Life

Zachary Roth | February 4, 2009, 11:45AM

For a while now, there have been suggestions that Bernard Madoff had ties to organized crime. And Harry Markopolos just told Congress that those alleged connections made him fear for his life as a whistleblower working to expose Madoff's scheme.

When a committee member referred to Markopolos' "paranoia" about his safety, he responded by referring to Madoff's "dirty money."

Here's the full quote:

I don't consider it paranoia. And the reason is, Mr. Madoff was running such a large scheme of unimaginable size and complexity, and he had a lot of dirty money. And let me describe dirty money to you. When you're that big and you're that secrective, you're going to attract a lot of organized crime money, and which we now know came from the Russian mob and the Latin American drug cartel, and when you are zeroing out mobsters, you have a lot to fear. And he could not afford to get caught, because once he was caught. And if he would've known my name and knew he had a team tracking him, I didn't think I was long for this world.

Bernard Madoff

Congresswoman To Markopolos: You're A "Modern-Day Greek Hero"

Zachary Roth | February 4, 2009, 11:31AM

The open worship of whistleblower Harry Markopolos by members of the House committee, which had already emerged at times this morning, has reached its apotheosis.

Rep. Jackie Speier just told him:

I would like to say for the record that I see you as a modern-day Greek hero.

Bernard Madoff

Markopolos Wanted To Go Under Cover, Wear A Disguise, To Catch Madoff

Zachary Roth | February 4, 2009, 11:23AM

Harry Markopolos, the whistle-blower on the Berrnard Madoff case, just offered a remarkable cloak-and-dagger tidbit in his testimony before a House committee, demonstrating his commitment to bringing Madoff to justice.

He said he offered to go under cover, "as I was trained to in the army," -- and wearing a disguise -- in order to catch Madoff.

Here's the full quote:

In fact, I made an offer to the SEC in my October 2001 submission, if you look closely, you'll see, I offered to go undercover for the SEC, under their command and control, and have no one know where I was, except my wife, and have no contact with my family, during this time. And I would have assumed a disguise, as I was trained to in the army, and gone under cover and led that team to a successful result very quickly. I don't know what more I could do to put it on the line.

We don't either. Though the wife exception makes it seem like maybe he wasn't really committed enough.

Late Update:
And here's the video:

Bernard Madoff

Markopolos Plans To Turn In A Mini-Madoff Tomorrow

Zachary Roth | February 4, 2009, 10:48AM

Harry Markopolos just warned that he's got another alleged fraudster in his sights.

"I plan to turn in a $1 billion mini-Madoff to the SEC's inspector general tomorrow," he said.

That may have put a scare into some on Wall Street.

Bernard Madoff

Markopolos: SEC Was "Captive Regulator"

Zachary Roth | February 4, 2009, 10:39AM

Markopolos identifies another problem with the SEC:

"They were a captive regulator. Mr. Madoff was too big," he just told Congress. "They looked at Madoff and said: 'he's a big firm, we dont attack big firms.'"

Bernard Madoff

Markopolos: SEC "Had No Idea How To Do The Math"

Zachary Roth | February 4, 2009, 10:34AM

Markopolos just put his finger on perhaps the key problem in the SEC's failure to catch Madoff:

"We need a highly trained finance team that is highly incentivized to look for frauds. Derivatives are too complicated otherwise," he said. "They had no idea how to do the math."

In other words, today's sophisticated Wall Street deals are simply too complex for the SEC's enforcement staff, as currently composed, to properly understand.

The only way to fix the problem, it appears, is to hire staff with more expertise.

Bernard Madoff

Markopolos: SEC "Couldn't Be Bothered"

Zachary Roth | February 4, 2009, 10:15AM

"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," he just told Congress, referring to the SEC's performance on the Madoff case.

Bernard Madoff

Markopolos On SEC Staff:

Zachary Roth | February 4, 2009, 10:06AM

"They haven't earned their paycheck, and they need to be replaced."

The whistleblower on the Madoff case, Harry Markopolos, just gave his oral testimony, in which he ripped the SEC in unusually direct language. More to come.