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Markopolos Has Been Telling The SEC About Madoff Since 1999
Josh's post on the front page brings up a guy named Markoplos who has been telling the SEC Madoff was running a Ponzi Scheme for years. Here's the report Josh linked to that Markopolos sent to the SEC in 2005 http://www.slideshare.net/hblodget/markopolos-madoff-complaint-presentation?type=document .
Was the SEC compliant in the scheme? Will anyone investigate? I hear Madoff was very well connected politically and I see Chucky Schumer has given back contributions from him. Will anyone investigate to see if anyone pulled strings for him?
This is pretty damning stuff. Markopolos tried but no one would listen. Read that document. He lays out how it was totally obvious to many in the industry that Bernie Madoff couldn't possibly be getting the returns he had been getting legally.
Shouldn't someone in the SEC be in prison over this too?
Was the SEC compliant in the scheme? Will anyone investigate? I hear Madoff was very well connected politically and I see Chucky Schumer has given back contributions from him. Will anyone investigate to see if anyone pulled strings for him?
This is pretty damning stuff. Markopolos tried but no one would listen. Read that document. He lays out how it was totally obvious to many in the industry that Bernie Madoff couldn't possibly be getting the returns he had been getting legally.
Shouldn't someone in the SEC be in prison over this too?
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Good post. And the WSJ brings up a very good point today that it was the PRIVATE SECTOR that raised the red flags. It was also the private sector (ie investors) that spotted the Enron fraud way before the auditors or regulators did.
The SEC's budget is almost ONE TRILLION DOLLARS. If anyone thinks more regulation (ie more money) should be part of the solution they should think again.
December 18, 2008 7:51 AM | Reply | Permalink
I've read it. It's sickening.
There's nothing surprising about the private sector spotting fraud before the auditors and regulators did. One of the dirty little secrets among comptrollers is that,if not most, a very large % , of the faults discovered by auditors results from their having been tipped off by employees.
But there still have to be auditors and regulators whom the employees can tip off.Self-regulation which this administration espoused is an oxymoron. Crooks don't catch crooks.
In fact Madoff demonstrates the effect of Private Sector vigilance in the absence of regulators. Because in fact for all intents and purposes they were absent. Neither the 2001 Barrons' article nor Markopolos's persuasive analysis stopped Madoff .
And as I blogged yesterday I agree, up to a point, that the SEC could have caught Madoff without any increase in budget. But not without better leadership.
I note that Markapolos's first submission to the Commission was made during the last year of Clinton/Levitt. But the lion's share of the blame attaches to this Administration.
My guess is that ,to turn the phrase on its head,
it's worse than a blunder, it's a crime. Clearly Bush's appointees were incompetent. And I'm prepared to believe that's the sum of their
guilt. But given the road map with which Markolos provided my guess is that there was criminal conspiracy within the Commission.
And almost as worrying ,it was probably known about by non conspirators who chose not to blow the whistle. For starters,they all read Barrons.
That also needs to be investigated.
December 18, 2008 8:40 PM | Reply | Permalink
I wasn't suggesting that we don't have auditors and regulators. And it's hard to argue your incompetence point. But to say that the administration espoused self-regulation when the SEC's budget doubled over the last 8 years AND the % of full-time staff devoted to enforcement is at record levels. Those items don't jive with an administration that's into de-regulation or self-regulation.
Should they have caught him? Even Arthur Levitt thinks so. But that's neither here nor there at this point. The key question is what changes to do we make to the SEC to try to prevent it from happening.
Ronald Cass made a very good point today that "the SEC's failure to pursue complaints...wasn't the result of inadequate regulations but of disbelief that someone so well entrenched in the industry (former Nasdaq chairman and SEC advisor) was capable of committing such a callous crime".
It's a poor analogy - but it would be like telling a 10-year old baseball fan that Pete Rose was betting on baseball. Nobody would believe it.
December 18, 2008 9:03 PM | Reply | Permalink