NEW YORK - "My name is Harry Markopolos. It's Greek. I'm a Chartered Financial Analyst and a Certified Fraud Examiner, which makes me a proud Greek geek. And this, then, is the complete story of how my team failed to stop the greatest financial crime in history, Bernie Madoff's Ponzi scheme."
So writes Markopolos in the first chapter of his No One Would Listen: A True Financial Thriller. Another good title for the book could have been "I Told You So," as it is a blow-by-blow account of Markopolos' efforts to get the word out on strange goings on in Madoff's "investment" company - as early as 2000 - while the media and an incompetent Security and Exchange Commission (SEC) turned a deaf ear.
Today, Markopolos, 53, is riding high. In an interview at a midtown Manhattan restaurant, he says he can't wait to finish with book promotion and return to "normal civilian" life in Massachusetts. Life has changed. He's gone from someone who was ignored by bureaucrats to someone invited to testify in Congress and someone the SEC turns to for advice on reforming itself. "My undercover days are over," he says with regret, but also proudly points to a documentary that's coming out in the fall and his recent scrutiny of some Hollywood offers. He adds: "The biggest positive that I've gotten, is the government actually takes my casework very seriously now."
Markopolos - whose business card actually reads "Whistleblower Specialist" - likens investigating the Madoff case, in which clients around the world were defrauded of $65 billion, to a "twilight zone," "a sewer," and "hell." He explains, "Nothing ever made sense the entire investigation. If fact, if something made sense, we immediately knew it wasn't part of the Madoff case …. If it was irrational, if it was something masquerading as something else, if it was deceptive, if it had layer after layer of secrecy associated with it, that was Madoff. It was pure evil. If you felt an evil presence, it was Madoff."
As he explains in No One Would Listen, Markopolos got on the case after being challenged by his Rampart Investment Management bosses to come up with an investment scheme that would offer them the remarkable returns Madoff's clients were getting. "We weren't looking for a crime; we simply wanted to see how he made his numbers dance," writes Markopolos. Before long, he and a team also including Rampart's Frank Casey and tenacious number cruncher Neil Chelo, as well as investigative journalist Michael Ocrant found things didn't add up.
This meant that, as Markopolos explains, while "the rest of the world saw a saint, 'Uncle Bernie,' a nice guy, a respected citizen, a philanthropist," he and his team disagreed. "We saw an evil monster. We saw the devil," says Markopolos describing how Madoff would hunt at bar mitzvahs, weddings and funerals for his prey. Though the members of the team had different faiths, says Markopolos, "We had one common belief - we knew right from wrong and we knew that this was a wrong that we couldn't tolerate. We needed to stop it."
In the book, Markopolos repeatedly credits his father, who owned diners and bar-lounges in Erie, Pennsylvania, with his business ethics. "I never saw my father back down," he writes, of his father's confrontations with even vicious thugs. One of Markopolos' earliest "cases" was uncovering dishonesty at one of the family's Arthur Treacher's Fish & Chips. "The numbers told me that something was fishy in one of our fish and chips stores," writes Markopolos.
People still don't understand the scale of Madoff's swindle, he believes, noting: "People mistakenly think that this was an American Jewish tragedy and it is - but it's more than that. He went to Europe - he cut a wide swath through Europe." Markopolos observed this first hand, when he traveled, in 2002, into the world of the European aristocracy with investment professional ReneThiery Magon de la Villehuchet, a friend who would commit suicide after losing $1 billion of his family and others' funds in Madoff's scheme. Even in Greece, investors - including the Fix family - may have lost $1 billion, says the author.
Madoff pulled it off, explains Markopolos, because "he stole the least amount for himself - and that was actually his brilliance." He adds, "He had helpers," though these feeder fund people, who benefited from his swindle, are laying low. "You're not hearing them speak, are you?" Markopolos says, with a hint of impending comeuppance.
"Greed overcame common sense," Markopolos explains, still amazed at people's docility. "They never asked any questions. They just willingly went along and invested their money," he says, admitting: "If you were an individual investor, you had no prayer of figuring this thing out. None." But he adds: "If you were an institution, you have no excuse … Madoff would not pass the most cursory of inspections. He offered no transparency. And his returns were mathematically impossible." He holds up his arm at a 45% angle noting that investments can't follow "this kind of angle" forever. Nine years of making these kinds of mathematical oversimplifications to SEC staffers must have been frustrating.
With his non-stop rattling off of facts and figures, Markopolos is the $65 billion dollar answer to the question "Why do we have to learn this stuff?" He's as proud of his number crunching as of his past National Guard service. He writes: "I'm a quant, which is the slang term for a quantitative analyst. Basically, that means I speak the language of numbers. Numbers can tell an entire story. I can see the beauty, the humor, and sometimes the tragedy in the numbers."
There was plenty of tragedy in Madoff's numbers. Markopolos says, "This was a book that I wish I had never written. I wish that I'd stopped Madoff in May of 2000, my first submission [to the SEC], that we'd stopped him in under $10 billion." In 2005, when Markopolos filed an even more extensive report with the SEC, suspecting Madoff of wrongdoing, he was ignored, but Markopolos started fearing for his life - and carrying a loaded gun.
Ghost writer David Fisher didn't spice up the story with any exaggerated drama, says Markopolos. The father of three still stands by his claim, at the end of one chapter, that he'd kill Madoff if he comes after him. (Fortunately for both, Markopolos never met Madoff). Of sharing all his feelings in the book, Markopolos says: "I wanted to be accurate. I wanted people to know what a whistleblower goes through." He's no longer afraid. He says: "All the fear disappeared in December 11, 2008 when Madoff turned himself in, because he's the one who stole from the most powerful people around the globe."
Of his team, he says, "Our behavior should not be considered eccentric. It should be considered expected. Standard." The alternative makes no sense, in Markopolos' world: "By people being silent, by people being politically correct and looking the other way, that led this nation to the edge of bankruptcy."
Because there is no compensation for uncovering Ponzi cases, Markopolos underlines that he was not out for financial gain in uncovering the scheme. However, he adds, "I do other bounty cases where I get paid. A lot of money." He specializes in uncovering corporate scams of "$1 billion and up." Markopolos' cases include the State Street currency transaction fraud. A mix of math and detective work is needed. For each case, he does the math first, recruits a whistleblowing team - and attacks. "I feel like it's a productive use of my time and I like chasing bad guys," says Markopolos.