Madoff determined to strike in the US

by twit

An Op-Ed in the New York Times on January 3, 2009 says that on Nov. 7, 2005, the SEC received a seventeen page document laying it all out about Madoff, including this:

In the “Highly Likely” scenario, wrote Mr. Markopolos, “Madoff Securities is the world’s largest Ponzi Scheme.”

and 2005 wasn’t the first time:

Harry Markopolos sent his report to the S.E.C. on Nov. 7, 2005 — more than three years before Mr. Madoff was finally exposed — but he had been trying to explain the fraud to them since 1999.

I am curious about whether Mr. Markopolos tried to contact anybody else.

Congress sure sounds ready to listen to him now:

At the House hearing in Washington, both Democrats and Republicans said that the Securities and Exchange Commission had failed to follow up on warnings and red flags that might have uncovered Mr. Madoff’s scheme years earlier.

… the star witness who had warned the S.E.C. for nearly a decade about Mr. Madoff, Harry Markopolos, a former investment manager, declined to appear at the last minute.

A lawyer for Mr. Markopolos, Philip R. Michael, said that his client was suffering from a sinus infection and had taken bed rest. Furthermore, Mr. Markopolos will testify as a friendly witness, seeking no bounty or compensation for his testimony.

“He’s ready to tell them what he knows,” Mr. Michael said.

update:  The Boston Business Journal says that the SEC has a rewards program for folks like Markopolos:

… those payoffs can reach the millions of dollars if a regulator, such as the Securities and Exchange Commission or Internal Revenue Service, successfully recovers financial penalties or back taxes linked to a fraud investigation triggered by a whistleblower.

For example, the IRS recently said it paid $13 million in rewards to “informants” in fiscal year 2007. Those payouts should increase substantially in the years ahead, since the agency recently doubled the awards available to up to 30 percent of the government’s recovery, the IRS said.

The SEC offers similar incentives linked to penalties and recoveries tied to financial fraud, namely insider trading violations.


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