Author Harry Markopolos

The whistleblower whose book on the Bernie Madoff scheme, No One Would Listen, is the basis for the new film Chasing Madoff, discusses his 10-year journey and explains why the fraud was obvious to anybody who cared to look.

For years, Harry Markopolos tried to tip off the U.S. Securities and Exchange Commission to what turned out to be the largest Ponzi scheme of all time. The former securities industry exec turned independent financial fraud investigator was working for a Boston investment firm, when he discovered Bernie Madoff's house of cards and gives an account of the scandal in the new book No One Would Listen. Markopolos has a master's degree in finance from Boston College and is past president of Boston Security Analysts Society, Inc.

TRANSCRIPT

Tavis: Harry Markopolis and his investigative team spent 10 years building a case against the notorious Bernie Madoff. The best-selling book about his ordeal, “No One Would Listen,” is now the basis for the new documentary, “Chasing Madoff.”

The film opens this weekend in select cities. Here now, some scenes from “Chasing Madoff.”

[Clip]

Tavis: I heard you say something the other day, Harry, which was a simple line, but yet poignant, which was that, “Unfortunately this is a true story.”

Harry Markopolis: That’s how I feel. I thought we should have stopped it in 2000, at the time of our first submission under $10 billion. It shouldn’t have been allowed to grow to $65 billion.

Tavis: Why was it allowed to grow to $65 billion?

Markopolis: The Securities and Exchange Commission was captive to the industry and they were busy looking the other way and not doing the big cases, and that’s the problem with government. Industries like to capture the regulators, and that’s what happened here.

Tavis: Tell me more about what the SEC wasn’t doing, what they were not looking at, what they were not paying attention to, that allowed this thing to burgeon.

Markopolis: Well, they weren’t looking at the big frauds on Wall Street by the big banks and the big brokers’ firms. There was a protected species on Wall Street, and Bernie was a titan on Wall Street and so they would look the other way. They would do cases against the little guys, crush them, but the big banks got a free pass.

Tavis: I’m not naïve in asking this question, but why look at the little guys and ignore the big guys?

Markopolis: In law enforcement in the U.S., they pad their statistics with arrests and convictions and it’s very easy to go after the little guys because their statistics look better. If you do a big case, it harms your statistics because it takes years to do a big, multi-billion-dollar case because the bad guys at that level can afford a vigorous defense and hire an army of lawyers to defend themselves.

Tavis: What we hear, though – and you’re the expert on this; I’m not – but everything I’ve read about this Madoff case over the last few years suggests that it was so obvious, though, that if anyone had just taken any significant time to look at the case it was such a house of cards, it would have been so obvious to anyone paying attention.

Markopolis: Undergrad college education in math or finance, you should have been able to figure it out. Took me five minutes. It was obvious to anybody who cared to look. Bernie was paying people so much, the big banks, the big feeder funds, so much that they were willing to look the other way.

Tavis: How did you and your team get so hooked into trying to make this case over a decade against Bernie Madoff before anyone would listen?

Markopolis: It started out I was a portfolio manager. I was managing billions of dollars in equity derivative portfolios. So Bernie was pretending to be a competitor of mine, and I couldn’t match his unbelievable performance numbers. So he was stealing customers from me, from my firm, and so if you steal from a Greek we will come after you, and that’s what I did.

Tavis: (Laughs) Well, what did you make at the time of how this guy was stealing all your clients?

Markopolis: They would go to him because his numbers were perfect. He almost never has a losing month, over 96 percents of his months are positive. That’s clearly unbelievable. It’s like a baseball player batting .960 – it doesn’t happen. Not legitimately. So I had to stop him. If we didn’t, if the four of us didn’t, there was no one else.

Tavis: Why couldn’t he just have been that good? Why was it absolutely impossible that somebody could be that good? There are baseball players who really are that good. Michael Jordan on the basketball court really was that good. Why couldn’t he have been just that good?

Markopolis: Because the consistency of returns – it would be like a player batting .960 in baseball, but only batting doubles, never singles, never triples, never home runs, it was always doubles. It was just too consistent, and that was the key giveaway.

Tavis: Tell me about the 10-year journey and how you started to gain some traction at some point with people listening to what you and your team were trying to say.

Markopolis: The first submission to the SEC was in May of 2000. There were several more over the intervening period of years. We got some traction in Boston, probably in 2005, in the fall, and they believed me. Unfortunately, the case was centered in New York and so they had to forward it down there, and the two offices did not get along.

Boston told me if that was in their jurisdiction they would have had multiple teams tearing that place apart the very next day, and they would have quickly figured it out. But New York, they didn’t have a clue.

Tavis: Why did New York specifically, you think, look the other way?

Markopolis: I think in New York the salary wages are so high that the SEC didn’t pay commensurately with industry, so all the smart people went to industry and there was nobody left in government to do this type of a case. They weren’t capable of doing a massive investigation against Bernie Madoff. They just didn’t have the skill set.

Tavis: Assess for me – I’m going to go back in a second, but assess for me now the job that the SEC is doing or not doing, as it were, post the Madoff scandal.

Markopolis: The Madoff scandal took the SEC to the lowest point in its then 75-year history and they knew they needed to become competent very quickly or go out of business overnight. So they chose to become competent. They sent people away to become certified fraud examiners. I think they have over 800 on staff currently.

They’re very aggressive, doing big cases against the big firms that were formerly on the protected species list. The only way to restore their reputation is to do big cases, and that’s what they’re setting about to do.

Tavis: To your book and specifically now the documentary, what left is there to know, to learn about Bernie Madoff that we don’t know from years of being dragged through this Madoff scandal?

Markopolis: I’d say one thing that the American press gets wrong is they think it’s an American Jewish tragedy, which it is, but it’s a global tragedy. This case, I think, was far bigger in Europe. There were more feeder funds over there. But the Europeans swept it quietly under the rug. There was a quiet settlement in May of 2010 for $15.5 billion to pay back 75,000 account holders.

That got almost no coverage over here in the United States because the Europeans don’t want this to see the light of day. Only in the United States are people being brought to justice.

Tavis: When you say “an American Jewish tragedy,” I think I know what you mean. Actually, you didn’t say that, you said that the media sees this and has portrayed this as an American Jewish tragedy. I think you’re right about that.

But when you say that, putting a finger on the media for that, what do you mean by that?

Markopolis: There were far more non-Jewish victims. There were far more Catholic and Protestant. There were certainly a lot of victims in Asia that are not Christian, that are not Jewish. So it affected all faiths. It really was a global tragedy, and you certainly didn’t need to be a millionaire, either. You could be a pension-holder in a laborer’s union in upstate New York and you’d still be wiped out.

You didn’t need to be wealthy and you certainly didn’t need to be Jewish. All you had to do was be in the path of Bernie Madoff.

Tavis: It is true, though, that there was a certain type of clientele that he went after. There were people who had money who he would not take – Larry King was on this program some months ago. As you know, Larry King got burned in this Madoff scandal. Larry King, of course, is Jewish.

But Larry said to me, sitting in this very chair, that he knew a woman in Florida who had more money than he had who Madoff would not take on as a client. So there was a whole methodology to who he would take on and who he would not take on as clients.

Markopolis: He used a perverse dating strategy from high school where you always like the person the most that turns you down. So he’d make a point to turn down certain people. So if people were sitting at a table and there was 10 of them there, he might take three as clients and turn down seven because the other seven would be begging to get in, and the word-of-mouth advertising from that would lead to new clients coming in.

When they did come in finally, they wouldn’t come in small. They would give Bernie everything they had because he would say, “I’m only open for a short period of time,” and so they’d give him everything. They wouldn’t diversify their portfolios and they would lose everything.

Tavis: You made a comment earlier about being Greek, and since you’ve gone there I wonder what your sense is, having written the book and now doing the documentary, of how – strange question, because I don’t want to put you in the situation of speaking for the Jewish community.

But what’s your sense, at least, of how the Jewish community has been embarrassed by this, not just because many of them lost money, but because the worst scam in the history of the world, the worst kind of financial scam, was run by a Jew?

Markopolis: I don’t think they feel embarrassed, I think they feel betrayed and are ostracizing the Madoff family, the ones that are not in prison yet, if they’re even going to go to prison. They come up to me and I think they bore it very well, a lot of the victims.

Only one team member on my team was Jewish, so we were four men of four different faiths, but we had one strong belief that Bernie stood for everything we stood against, and so we stood up and we did an investigation.

So the Jewish community has been very thankful and I get embarrassed when they come up to me and thank me – people come up as victims and thank me – because we didn’t stop Bernie Madoff. The markets stopped Bernie Madoff.

Tavis: In the news of late, of course, in the news – matter of fact, today I was reading a story about this, what’s going to happen to the Mets owner regarding this Madoff scandal, what he knew and when he knew it and et cetera.

Markopolis: That’s going to be interesting, to see how it plays out. They take their baseball very seriously in New York and on the East Coast in general. We’ll see. He says he did not know it was a Ponzi scheme, and I believe him. No one willingly invests in a Ponzi scheme.

But I’m sure he was like many others – he assumed that Bernie was stealing from his legitimate clients on the 19th floor, he was stealing from his broker-dealer clients and giving him the benefit of those returns. So I’m not too sure that he’s guilt-free, but we’ll find out. I’m sure there’s an investigation ongoing, and the truth will eventually come out.

Tavis: Two other questions right quick. One, has anybody gotten any money back as yet from this tragedy?

Markopolis: Yes, the European investors, many of them have been made whole. In the United States it’s going to be hit or miss. If you came in through a SIPC, or a securities investor protection corporation entity that was insured, you may get all of your money back, but if you didn’t come in through a SIPC-insured entity, you may be wiped out. It just depends on how you got into Bernie Madoff.

Tavis: Finally, speaking of Bernie Madoff, he has given one or two interviews since he’s been on lockdown. Has he said anything that caught your attention or your ire? Anything Bernie Madoff has said in prison that you want to reference right now?

Markopolis: Most of what he says is lies. There were some things that he said that were true – very few things – but one is that the big banks were in on it with him, aiding and abetting, and they had to know. He named four individuals that he felt had to know.

Conveniently, three of those four are dead and one is 99 years old. That’s about the only thing he said that really struck me as being true. The rest? Pure fantasy.

Tavis: Finally, finally, finally, could this ever happen again?

Markopolis: Yes, it can. We learned nothing from the lessons of 2008. We didn’t make our financial system that much stronger. The regulators are still starved for resources, they’re inadequately staffed and there’s a lack of aggression on the part of the Department of Justice to bring the people responsible for the financial crisis of 2008 to justice. Not one bank CEO or CFO has gone to prison, and that’s a crime.

Tavis: He was for 10 years, a full decade, the Madoff whistleblower. Finally, 10 years later, somebody started listening to him blowing his whistle. His name is Harry Markopolis. The book is called “No One Would Listen,” now a documentary – a film, in fact, coming to you soon in select cities and broader, I’m sure, in the weeks to come. Harry, thanks for the work again, and good to have you on this program.

Markopolis: Thank you. Thank you, Tavis.

Tavis: My pleasure.

[Walmart - Save money. Live better.]

“Announcer:” Nationwide Insurance supports Tavis Smiley. With every question and every answer, Nationwide Insurance is proud to join Tavis in working to improve financial literacy and remove obstacles to economic empowerment one conversation at a time. Nationwide is on your side.

At Toyota, we celebrate differences and the people who make them. Toyota – proud supporter of the Washington, D.C. Martin Luther King, Jr. National Memorial Project Foundation.

And by contributions to your PBS station from viewers like you. Thank you.

Last modified: August 24, 2011 at 5:40 pm