Harry Markopolos Testifies Before Congress Regarding Madoff Fraud
On February 4, 2009, he testified before the United States Congress' House Financial Services Committee’s capital markets panel and on March 1, appeared on CBS's 60 Minutes.
“Nothing was done. There was an abject failure by the regulatory agencies we entrust as our watchdog,” he explained in 65 pages of prepared testimony. Describing Madoff as “one of the most powerful men on Wall Street,” Markopolos stated that there was “great danger” in raising questions about him: "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 testified that he feared for his, as well as his family's safety, until after Madoff's arrest, when the SEC finally acknowledged that it had received "credible evidence" of Madoff's Ponzi scheme years before. He explained that Madoff's "math never made sense," that his "return stream never resembled any known financial instrument or strategy," and that Madoff wasn't making the volumes of trades he claimed.
Markopolos goes to great lengths to demonstrate that the investment returns claimed by Madoff were impossible to replicate by any known strategy. But to me that wasn't the biggest of his 29 red flags. The biggest red flag was Why on earth would a prominent brokerage firm chief run a giant, mostly secret money management business on the side and not charge any fees for his services if he wasn't up to something dodgy?