NPR logo

Whistle-Blower Tried To Expose Madoff, He Testifies

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Whistle-Blower Tried To Expose Madoff, He Testifies

Whistle-Blower Tried To Expose Madoff, He Testifies

Whistle-Blower Tried To Expose Madoff, He Testifies

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

Securities executive Harry Markopolos says it took him only about five minutes to spot a giant investment fraud that he says federal regulators couldn't detect. Markopolos testified before Congress Wednesday on an alleged pyramid scam operated by Bernard Madoff that cost investors more than $50 billion.


The collapse of Bernard Madoff's investment operations in December left a long string of victims. For these investors, one of the most painful parts of that case is that it might've been avoided if regulators had heeded the warnings of the likes of Harry Markopolos. He's a private fraud investigator who was an executive in the securities industry when he said years ago that Madoff was operating a house of cards. Yesterday, he told a Congressional committee how he tried to tell the Securities and Exchange Commission about Madoff and was repeatedly rebuffed.

NPR's Jim Zarroli reports.

JIM ZARROLI: Markopolos was the chief investment officer of a Boston firm called Rampart Investment Management. He says he was asked by his boss in the late 1990s to try to match Bernie Madoff's returns. His funds seemed to earn steady returns, regardless of market conditions.

Markopolos says he very quickly concluded that Madoff's returns were impossible. He set about proving it, and he took the evidence to the Securities and Exchange Commission.

Mr. HARRY MARKOPOLOS (Private Fraud Investigator): I told the SEC exactly where to look, providing them with a long series of clear warnings that any trained investment professional would've immediately understood. Inexplicably, the SEC never acted upon those repeated multiple warnings over a nine-year time span.

ZARROLI: Markopolos told the House Financial Services Subcommittee that a couple of SEC officials in the Boston office backed his efforts to stop Madoff, but by and large, the agency shut him out, never responding to his warnings.

Mr. MARKOPOLOS: My team and I kept collecting additional information, and I kept sending it to the SEC, and they kept ignoring it.

ZARROLI: Markopolos believes he was thwarted in part by a turf war between the SEC's Boston and New York offices. He also said he believes that SEC officials simply lacked the expertise to understand what was happening.

Mr. MARKOPOLOS: The SEC is over-lawyered and has too few staff with relevant industry experience and professional credentials to find fraud, even when a multi-billion-dollar case is handed to them on a silver platter.

ZARROLI: And there was something else, he said. Markopolos believes that SEC officials were simply afraid of Madoff.

Mr. MARKOPOLOS: Mr. Madoff was certainly one of the most powerful individuals on Wall Street. He had a respected broker-dealer arm. He traded a substantial percentage of the over-the-counter and New York Stock Exchange listed stock volume every day. And they just looked at his size and said he's a big firm, and we don't attack big firms.

ZARROLI: Markopolos was followed in the witness stand by several SEC officials who were called to explain what had gone wrong with the Madoff case. Each one refused to comment on the case itself, saying the investigation was still going on. Instead, they limited themselves to broad remarks about the SEC's mission and its commitment to stopping fraud.

Subcommittee Chairman Paul Kanjorski accused the officials of trying to impede his committee's work.

Representative PAUL KANJORSKI (Republican, Pennsylvania; Subchairman, Financial Services Subcommittee): The lack of cooperation shown in the last several weeks, and I think the abuse of authority or the attempt to bring a protective shield over an executive agency or independent agency of this government, is not acceptable.

ZARROLI: After that, the exchanges grew even more tense. Democrat Gary Ackerman of New York said he was frustrated beyond belief by the testimony from SEC officials. Here, he questioned the SEC's director of enforcement, Linda Chatman Thomsen.

Ms. LINDA CHATMAN THOMSEN (Director of Enforcement, SEC): As I said, we did an investigation in - we began an investigation in 2006, and it was closed without action.

Rep. KANJORSKI: Why was it closed without action? What did you investigation? What methodology did you use?

Ms. CHATMAN THOMSEN: And if you - in the interest of…

Rep. KANJORSKI: Were you suspicious a guy had a one-man accounting firm investigating a $50 billion empire?

ZARROLI: It was Markopolos who emerged as the hero of the hearing. He was hardly the only person who saw through Madoff over the years, but he was the most persistent about turning him in, and committee members hung on his word. And for them, Markopolos had a disturbing piece of news.

He said he's uncovered evidence of at least a dozen more feeder funds that invested with Madoff. He says he's been talking to European regulators about them. And if the information pans out, it means the potential losses from the Madoff case could be even bigger than they now appear.

Jim Zarroli, NPR News.

Copyright © 2009 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Madoff Whistle-Blower Testifies, Blasts SEC

Madoff Whistle-Blower Testifies, Blasts SEC

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

When Bernard Madoff was arrested and charged with running a giant Ponzi scheme many people were shocked — but not Harry Markopolos.

He's the man who looked at Madoff's investment returns a decade ago and figured they didn't add up. Markopolos made several attempts to persuade the Securities and Exchange Commission to investigate, all for naught. He had no trouble Wednesday getting people to listen. He told a congressional panel in Washington that the SEC is a failed regulator that was unable to protect investors.

'The Key Tip-Off'

Markopolos said it took him just five minutes to figure out that Madoff was running a scam. He only had to look at a performance chart for Bernard L. Madoff Investment Securities.

"It was a 45-degree angle without any variation," he said. "It went in only one direction: up. It never had variation like the market does, like this. And that was the key tip-off."

Markopolos and his staff did some more digging and came to the conclusion that Madoff was cheating his investors. As that investigation went on, Markopolos says he feared for his safety and that of his family. So he presented his findings anonymously to the SEC; only a few officials knew his real name. He said he kept returning to the SEC to urge it to take up the case and was repeatedly ignored.

"Unfortunately, as they didn't respond to my written submissions in 2000, 2001, 2005, 2007 and 2008, here we are today," Markopolos said.

Warnings Ignored

Meanwhile, Madoff's operations grew bigger and he attracted more investors, Markopolos said. He made it clear to the congressional panel that he thinks the SEC fell down on the job.

"I gift-wrapped and delivered the largest Ponzi scheme in history to them and somehow they couldn't be bothered to conduct a thorough and proper investigation because they were too busy on matters of higher priority," he said. "If a $50 billion Ponzi scheme doesn't make the SEC's priority list, then I want to know who sets their priorities."

Markopolos said the agency has too many lawyers and not enough people who really understand how Wall Street works. He also said the SEC officials he was dealing with in Boston were thwarted by a turf war with the agency's New York office. And, he said, the commission was simply scared.

"Mr. Madoff was one of the most powerful men on Wall Street. He owned a prestigious brokerage firm," Markopolos said. "He and his brother held numerous top-level positions on the most influential industry association boards. Clearly, the SEC was afraid of Mr. Madoff."

SEC Officials Weigh In

Markopolos' testimony was followed by that of several SEC officials whose unhappy task it was to defend the agency. They insisted they couldn't comment on Madoff's case because the investigation was ongoing, but each official spoke at length about the SEC's mission and operations. The chairman of the House Financial Services subcommittee, Rep. Paul Kanjorski (D-PA), accused the officials of impeding his panel's investigation.

"I like oatmeal, and that's about how I classify the testimony I heard today," Kanjorski said.

Kanjorski asked SEC Enforcement Division Director Linda Chatman Thomsen how the agency could have overlooked what Madoff was doing when Markopolos had all but spelled things out for it. Thomsen said that missing a big case was a nightmare for her staff.

"There is nothing that makes a member of my staff happier than bringing a case," Thomsen said. "The only thing that makes them happier is a big case, and if it's against someone of some notoriety or fame, that makes them happier still."

In this case, however, regulators failed to catch one of the biggest cases of all. And how that happened is something many people are determined to understand.