Madoff Whistleblower Assails S.E.C. for Ignoring Him

A former investment manager is prepared to tell a House hearing on Wednesday that the Securities and Exchange Commission ignored his repeated warnings about the dealings of the disgraced financier Bernard L. Madoff.

The manager, Harry Markopolos, asserts that he submitted warnings about Mr. Madoff since 2000 and he assails the agency for ignoring his warnings or brushing them aside. “Nothing was done,” he declares, in what Dow Jones Newswires and Fox Business report is his prepared testimony.

“There was an abject failure by the regulatory agencies we entrust as our watchdog,” Mr. Markopolos says in his testimony. Mr. Madoff was arrested in December and accused of running a $50 billion Ponzi scheme.

Mr. Markopolos says his experience with most S.E.C. officials “proved to be a systemic disappointment, and lead me to conclude that the S.E.C. securities lawyers, if only through their investigative ineptitude and financial illiteracy, colluded to maintain large frauds such as the one to which Madoff later confessed.”

Mr. Markopolos describes Mr. Madoff as “one of the most powerful men on Wall Street” and says there was “great danger” in raising questions about him.

During his years of investigation, “my team and I surmised that if Mr. Madoff gained knowledge of our activities, he may feel threatened enough to seek to stifle us,” he says in the testimony.

He also says, “I became fearful for the safety of my family until the S.E.C. finally acknowledged, after Madoff had been arrested, that it had received credible evidence of Madoff’s Ponzi scheme several years earlier.”

Mr. Markopolos says he began his investigation of Mr. Madoff after his superior at Rampart Investment Management asked him to try to match the returns of Mr. Madoff’s firm. Mr. Markopolos says his analysis showed it was impossible for Mr. Madoff to consistently outperform the markets and other managers.

Mr. Markopolos is scheduled to appear before a House Financial Services subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises on Wednesday morning. He will be followed by a panel of six securities regulators.


Source: dealbook.blogs.nytimes.com