Something sure is rotten... in the state of the SEC.
Madoff whistleblower blasts SEC
A fraud investigator told Congress that he'd warned the agency about Madoff's Ponzi scheme years ago. But his efforts went nowhere.
By Allan Chernoff, Sr. Correspondent, CNN
NEW YORK (CNN) -- A whistleblower who repeatedly warned the Securities and Exchange Commission that Bernard Madoff was perpetrating a massive investment fraud testified Wednesday that the regulatory agency that oversees financial markets is inept, "financially illiterate" and far too cozy with the financial titans it is supposed to be regulating.
"The SEC is also captive to the industry it regulates and it is afraid of bringing big cases against the largest most powerful firms," said Harry Markopolos, an independent financial fraud investigator. "Cleary the SEC was afraid of Mr. Madoff."
Markopolos began contacting the SEC at the beginning of the decade to warn that Madoff was a fraud. He sent detailed memos, listing dozens of red flags, laying out a road map of instructions for SEC investigators to follow, even listing contacts and phone numbers of Wall Street experts whom he said would confirm his findings. But, Markopolos' whistle-blowing effort got nowhere.
"I gift wrapped and delivered the largest Ponzi scheme in history to them and some how they couldn't be bothered to conduct a thorough and proper investigation because they were too busy on matters of higher priority," Markopolos told the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.
After at first receiving an encouraging reception from the SEC's Boston Bureau Chief, Edward Manion, Markopolos said the New York SEC office, which supervised Boston, blocked a further investigation.
"In 2000 Mr. Manion warned me that relations between the New York and Boston regional offices was about as warm and friendly as the Yankees-Red Sox rivalry and that New York does not like to receive tips from Boston," Markopolos testified.
Markopolos said it took him five minutes to conclude that Madoff was a fraud after looking at his reported investment performance, and four hours of actual number-crunching analysis to confirm his suspicions....more...