Harry Markopolos, whistleblower in the Bernie Madoff Ponzi Scheme is testifying today at the Madoff hearing in the House Financial Services Committee. (The link is to C-Span 3, which is currently broadcasting the hearing, and the video should be available in the "Latest Videos" section following the live broadcast.) His testimony shows how the SEC "roars like a mouse, bites like a flea." (emphasis mine)
"...Harry Markopolos, a former money manager who sought to convince regulators for nine years that Bernard Madoff was a fraud, said the U.S. Securities and Exchange Commission suffers from "investigative ineptitude."
"U.S. lawmakers, who began investigating Madoff’s case last month, are hearing from Markopolos for the first time as they try to determine how regulators missed his alleged $50 billion Ponzi scheme, the biggest in history. The proceeding may shape the SEC’s fate as Congress debates whether to bolster the regulator or turn its responsibilities over to another agency."
Markopolos and his team were not compensated for their hundreds of hours of work documenting Madoff’s frauds—he said he did it for the "flag" and for the people being victimized. He and his staff continued their private investigation despite fearing repercussions from Madoff:
"..Markopolos, in his testimony, said Madoff’s resume made him fear for his life as he and a team of advisers scrutinized the manager’s Bernard L. Madoff Investment Securities LLC. His testimony included 310 pages of e-mails and financial documents..."
In his testimony, Markopolos spoke of contacting the media because he was in fear for his life. He said he spoke with a reporter at the Wall St. Journal who was willing to come to Boston to speak with him, but the reporter’s Editors at the Wall St. Journal stopped him from following-up.
Markopolos had several recommendations for making it easier to catch crooks like Madoff. He said that it is necessary to establish a separate Financial Whistleblower Office with several regulators that report to a "super-regulator". He also suggested that industry whistleblowers with hard data of wrongdoing be compensated for reporting crooks in the financials.
As far as regulation, he said:
"Where there is no light, only darkness, that’s where the financial criminals tend to congregate. You can’t leave those dark corners."
The SEC, and the deregulators in Congress and the Administrations have provided a lot of "Dark Corners" for the criminals to hide, and we are all now paying the consequences.
In answering a question during the Hearing, about the competence of the SEC in investigating fraud, Markopolos said:
"If you flew the entire staff of the SEC to Boston and seated them in Fenway park for an afternoon, they could not find first base"...
Here's hoping that the House Financial Services Committe, the Congress, and the Administration follow Mr. Markopolos' recommendations and implement them ASAP. Here's a link to their Contact Page.