MELISSA BLOCK, host:
This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.
ROBERT SIEGEL, host:
And I'm Robert Siegel. Harry Markopolos had his I-told-you-so moment on Capitol Hill today. He's the one you may have heard of, the guy who looked at Bernard Madoff's numbers a decade ago and figured they didn't add up. Markopolos made repeated attempts to get the Securities and Exchange Commission to investigate what he called Madoff's giant Ponzi scheme - all for naught. Today, Markopolos had no trouble getting people to listen. He told a House subcommittee that the SEC is a failed regulator, unable to protect investors. NPR's Jim Zarroli reports.
JIM ZARROLI: Harry Markopolos said it took him just five minutes to figure out that Bernie Madoff was running a scam. He only had to look at a chart of his fund's performance.
Mr. HARRY MARKOPOLOS (Financial Fraud Investigator): It was a 45-degree angle without any variation. It went in only one direction: up. It never had variation like the market does, like this. And that was the key tip-off.
ZARROLI: (unintelligible) his investors. He says as the investigation went on he feared for his safety and that of his family. So he presented his findings anonymously to the Securities and Exchange Commission, with only a few officials there knowing his real name. He said he kept returning to the SEC to urge it to take up the case, and was repeatedly ignored.
Mr. MARKOPOLOS: Unfortunately, as they didn't respond to my written submissions in 2000, 2001, 2005, 2007 and 2008, here we are today.
ZARROLI: Meanwhile, he said, Madoff's operations grew bigger and bigger, and he attracted more and more investors. Markopolos made clear he thinks the SEC fell down on the job.
Mr. MARKOPOLOS: 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. If a $50 billion Ponzi scheme doesn't make the SEC's priority list, then I want to know who sets their priorities.
ZARROLI: Why had the commission been so lax? Markopolos said the agency has too many lawyers and not enough people who really understand how Wall Street works in the 21st century. 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, Markopolos says, the commission was simply scared.
Mr. MARKOPOLOS: Mr. Madoff was one of the most powerful men on Wall Street. He owned a prestigious brokerage firm. He and his brother held numerous top-level positions on the most influential industry association boards. Clearly, the SEC was afraid of Mr. Madoff.
ZARROLI: Markopolos was followed by several SEC officials whose unhappy task it was to defend the agency. Each insisted they couldn't comment on Madoff's case because the investigation is ongoing. Each also spoke at length about the SEC's mission and operations. The committee chairman, Congressman Paul Kanjorski of Pennsylvania, accused them of impeding his committee's investigation and said their testimony amounted to mush.
Representative PAUL KANJORSKI (Democrat, Pennsylvania): You know, I like oatmeal, and that's about how I classify the testimony I heard today.
ZARROLI: Kanjorski asked SEC inspections director Lori Richards how the agency could have overlooked what Madoff was doing when Markopolos had all but spelled things out for it. Richards said that missing a big case was a nightmare for her staff.
Ms. LORI RICHARDS (SEC Inspections Director): There is nothing that makes a member of my staff happier than bringing a case. 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.
ZARROLI: But in this case, regulators failed to catch one of the biggest cases of all. And how that happened is something a lot people are trying to understand.
Jim Zarroli, NPR News.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.