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Madoff Tipster Faults SEC for Ignoring Warnings

By MARCY GORDON
,
AP
posted: 292 DAYS 22 HOURS AGO
comments: 12
filed under:
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WASHINGTON (Feb. 5) -The man who waged a decade-long campaign to alert regulators to problems in the operations of now-disgraced financier Bernard Madoff is assailing the Securities and Exchange Commission for ignoring his warnings and saying he feared for his physical safety.
His repeated warnings to SEC staff that Madoff was running a giant pyramid scheme have cast Harry Markopolos as an unheeded prophet in the scandal. Madoff, a prominent Wall Street figure and money manager, was arrested in December after confessing to his sons that he had lost more than $50 billion of investors' money in a Ponzi scheme, according to federal authorities.
Markopolos, a securities industry executive and fraud investigator, brought his allegations to the SEC about improprieties in Madoff's business starting in 2000 or earlier. He fruitlessly pursued the quest through this decade with agency staff from Boston to New York to Washington, but the regulators never acted.
Now thousands of victims who lost money investing in Madoff's fund, which was separate from his securities brokerage business, have been identified. Among them are ordinary people and Hollywood celebrities — as well as big hedge funds, international banks and charities in the U.S., Europe and Asia. Life savings have evaporated, foundations have been wiped out and at least one investor apparently was pushed to commit suicide.
And the SEC has been sustaining volleys of criticism from lawmakers and investor advocates over its failure to discover Madoff's alleged fraud, which could be the biggest Ponzi scheme ever, despite the credible allegations brought to it over years.
Markopolos has said he determined there was no way Madoff could have been making the consistent returns he claimed using the trading strategy he said he used. Markopolos was slated to come before Congress for the first time on Wednesday at a hearing by a House subcommittee. He had canceled planned appearances at two congressional hearings held last month.
"There was an abject failure by the regulatory agencies we entrust as our watchdog," he said in testimony prepared for the hearing that was posted Tuesday night on The Wall Street Journal's Web site.
Despite the detailed evidence he submitted to the SEC between 2000 and 2008, Markopolos said, the regulators did nothing. Because of their inaction, he said, "I became fearful for the safety of my family."
Madoff, who was at one point chairman of the Nasdaq Stock Market, and sat on SEC advisory committees, was "one of the most powerful men on Wall Street and in a position to easily end our careers or worse," Markopolos said in his prepared testimony.
He didn't respond to a request for comment Tuesday from The Associated Press.
Markopolos also is providing recommendations for revamping the SEC, which he called "nonfunctional" and harmful to the reputation of the U.S. as a global financial leader.
Also due to appear Wednesday before the House Financial Services subcommittee were five top SEC officials, including the agency's enforcement director, Linda Thomsen and the head of its inspections division, Lori Richards.
In December, Christopher Cox, then the SEC chairman, pinned the blame on the agency's career staff for the failure over a decade to detect what Madoff was doing. He ordered the SEC's inspector general, H. David Kotz, to determine what went wrong. Kotz has expanded his inquiry to examine the operations of the divisions led by Thomsen, who has been the enforcement chief since mid-2005, and Richards, who has held that position since mid-1995.
Thomsen and Richards were put on the defensive at a Senate hearing last week over the SEC's failure to uncover Madoff's alleged fraud scheme. Members of the Senate Banking Committee were scarcely satisfied with explanations given by the two officials and by Stephen Luparello, the interim chief executive of the brokerage industry's self-policing organization.
That organization, the Financial Industry Regulatory Authority, was headed until December by Mary Schapiro, President Barack Obama's new SEC chairman. She has said that because Madoff carried out the scheme through his investment business and FINRA was empowered to inspect only the brokerage operation, it wasn't possible for the organization to discover it.
Copyright 2009 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.
2009-02-04 00:49:11
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12 comments

Dadsgrl211 03:22:12 PM Feb 07 2009

if any of you ppl think that this man will ever serve prison time think again. hes been on HOUSE arrest since december. If he was any normal joe shmuch he would already be in prison. considering he was on the SEC board its no wonder they turned a blind eye. this man should be in jail, not sitting in some million dollar penthouse while some of the ppl he robbed are homeless and hungry.. FRY HIS SORRY ASS

Tcromagnon14 09:16:47 AM Feb 04 2009

Well, we can see that the swindles will continue and the swindlers will be rewarded, people who invest money with such crooks will continue to do so, and now the taxpayers will pick up the tab.

Vinnymb 07:35:11 AM Feb 04 2009

THIS S.O.B. DID NOT PLAN THIS SO CALLED ///// ponzi scheme //////////////ON HIS OWN, THIS //////// low-life //////// HAD TO USE THE POWER OF THE MAFIA TO BACK HIM UP.REASON BEING IT WAS TO WIDE SPREAD TO CONTROL THIS scheme HIMSELF.SOMBODY IS GOING TO BE A cannary AND START TO SING, WHEN THAT HAPPENSYOU WILL SEE HOW MANY PEOPLE INVOLVED FROM THE s.e.c. TO THE TUFF GUYS. KILL OR HANG THIS low-life bastard HE DESERVES IT. //case closed ///

N2U MICRO 06:42:31 AM Feb 04 2009

Bernard Madoff mad sure that he had rigt people at every door to the SEC TO GUARD AGAINST PRYING EYES all the while the fleecing of America was going on. Madoff is a gangster at the lewel of BUGZY ,MONIA ELSON, MICHAEL MILKEN OR IVAN BOKEY.The difference between them and Gotti is that they are much smarter . No one there acuse him of being a crook wihout loosing high paying Wall st. job

MR and NEW 05:34:18 AM Feb 04 2009

YOU WATCH THE AMERICAN TAXPAYER WILL END UP BAILING THESE GREEDY PEOPLE OUT.

Davevallison 05:28:09 AM Feb 04 2009

I hope Madoff trashed all of the money that he got from CEOs who stole from there companys while laying off thousands of people !!!

Davevallison 05:12:02 AM Feb 04 2009

CEOS SHOULD ONLY BE ABLE TO GET BONUSS FROM COMPANY PROFIT!LAYING PEOPLE OFF , REPORTING HUGH LOSSES AND THEN TAKING AUNBELIEVEABLE BONUS IS STEALING !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Artsbyamy 04:28:41 AM Feb 04 2009

The Madoff case is a claasic example where the punishment does not reflect the crime. As I understand it the maximum time Madoff can spend behind bars for his crime is 10 years and a $ 5,000,000 fine. Now 10 years is a very long time for a man who is 70. A younger man say in his 40's may see the rewards of the ponzi over the possible conviction a resonable risk. Also considering with good behavior Madoff may only spend a couple of years behind bars. The book shold be through at him, each individual loss a case, with the sentence back to back. That would be fair.

Hsolobay 01:49:53 AM Feb 04 2009

It boggles the mind that Madoff's "Ponzi scheme" was discovered a decade before anyone finally paid attention to the discoverer's cry of alarm. The pain and suffering to Madoff's victims is too immense to render a satisfactory punishment on Madoff or his cohorts on this earth. One can only hope that they justice will be served when they stand before the Judgement Seat.

Hsolobay 01:45:46 AM Feb 04 2009

It boggles the mind that Madoff's "Ponzi scheme" was discovered a decade before someone finally paid attention to the discoverer's cry of alarm. The pain and suffering of Madoff's victims will be too immense to bring sufficient punishment upon Madoff or those who may be guilty of aiding and abetting his lengthy crime spree. One hopes justice will be served when Madoff and his cohorts stand before the Judgement Seat.

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