The SEC was repeatedly and explicitly warned about the Madoff Ponzi scheme for 10 years by a forensic accountant. Over and over again they ignored the warnings and did nothing.
On March 12, 2009, Bernard Madoff pleaded guilty to operating the biggest Ponzi scheme in history.
It was redemption of a sort for Harry Markopolos, a financial analyst-turned-investigator who spent nearly a decade on Madoff’s trail — and whose warnings were largely ignored by securities regulators.
Markopolos writes about his crusade in No One Would Listen: A True Financial Thriller. It’s a chronicle of what Markopolos and many other critics see as ineptitude at the Securities and Exchange Commission.
Madoff didn’t leave any footprints in the market because he never traded stock, Markopolos explains: “It was all made up and his story was so fanciful and far-fetched that the SEC should have seen through it immediately. And they didn’t.”
The SEC’s Office Of Investigations issued a report last August on why they overlooked Bernard Madoff and Markopolos’ tips for so long.
Regional Turf Wars At The SEC
Markopolos tells NPR’s Steve Inskeep that one of the problems with the SEC was “regional turf rivalries” between the Boston and New York offices that resulted in a lack of communication between the two: “They got along about as well as the Yankees and Red Sox did, unfortunately.”
He also says the SEC is staffed by lawyers who don’t understand the mathematically complex financial products that are traded on the markets these days.
Finally, Markopolos describes poor investigative ability at the SEC. One staffer at the agency wouldn’t follow up on his tips because he wasn’t an employee of Madoff’s, and she therefore didn’t consider Markopolos an insider.
“That same person in her deposition said that the only way I would qualify as a whistleblower was if I came in with a tape recording of Bernie Madoff admitting he was running a Ponzi scheme,” Markopolos says. “Obviously I didn’t have that tape and if I did I wouldn’t have needed the SEC.”