By Scott Calzolaio
Harry M. Markopolos, a former securities industry executive and independent forensic accounting and :nancial fraud investigator, visited FSU on Wednesday to discuss a fraud case he described as his “worst nightmare” – the Bernie Madoff case.
The event took place in the McCarthy Forum, and was the last of three in the President’s Distinguished Lecture Series, following the theme “Live to the Truth,” in honor of the school’s 175th anniversary.
“The truth may be hidden from plain view,” said Interim President Robert Martin in his introduction to the event, “and sometimes the truth may be subverted or just ignored by power. ... Each of our speakers showed perseverance and tenacity and a willingness to follow where their convictions and beliefs led them.”
MadoF was an executive chair member of the NASDAQ stock exchange, and he was a major
stockbroker. Over a 20-year period, Madoff was able to organize the biggest Ponzi scheme the world has ever seen. A Ponzi scheme is a form of investment fraud where old investors are paid using the money of new investors instead of from pro:ts. This means Madoff was basically re-using the same money over and over, never turning a true profit, but faking it instead.
To Markopolos, a financial fraud analyst, truth is the most important aspect of the average workday. When his team saw the patterns in Madoff’s gain charts, they knew something didn’t add up. Markopolos is what the financial industry calls a “whistleblower” – someone who exposes illegal activity in an organization. Though it may sound like a good deed, being a whistleblower in the financial industry can sometimes end one’s financial career.
“If you are an industry participant and you turn your firm in,” said Markopolos, “What do you think your career prospects are in finance in the future? Zero.”
Markopolos talked about the corrupt and backwards nature of being the whistleblower.
“The industry knows that they can never trust you because you are honest ... you would almost think that they were corrupt.
“He’s up for the year, everyone else is down,” said Markopolos. “Everyone went to Bernie Madoff because he pretended to have insurance contracts protecting his portfolios from loss.” Madoff’s gains were mathematically impossible in such a short period of time, and to Markopolos this was obvious.
Markopolos and his team of four attorneys recognized what Madoff was doing, but nothing could have prepared them for the 10-year struggle with the Securities and Exchange Commission (SEC), and the big banks of the world. This accusation against Madoff was so huge and affected so many people from all over the world that there was a battle from the start, he said.
“Who’s the government going to believe?” said Markopolos.
He reached out to the media regarding Madoff’s Ponzi scheme, but was also largely ignored.
“I gave the story to Forbes magazine and they said ‘no way. It can’t be true,’” he said, “’we know Bernie.’”
Markopolos held off on the whistleblowing for some time before presenting his case to the SEC.
“I was so angry. I couldn’t say that Bernie was a crook because if I did, I was dead,” he said.
Eventually, he built up the courage and evidence to come forward, but his safety wasn’t guaranteed. Madoff knew Markopolos was onto him, and Markopolos was scared for his family.
“Think about six-and-a-half years where you’re convinced you’re going to be killed, and you’re worried about your family being killed,” he said, “so you arm your wife, and you keep armed weapons in the house with a family with young kids.”
Markopolos saw Madoff as the dangerous leader for the financial NASDAQ mafia.
“He was pretty much a mob boss, and people were afraid of him. ... Everyone was afraid of Bernie,” he said.
The case was truly a nightmare for Markopolos, “If I could go back in time, I wouldn’t have done the case.”
On March 12, 2009, Madoff was found guilty of 11 federal felonies, including securities fraud, wire fraud, mail fraud, money laundering, making false statements, perjury, theft from an employee benefit plan, and making false :lings with the SEC. From 1989 to 2009, Madoff had defrauded almost $65 billion from his clients, making it the biggest Ponzi scheme in history.
Markopolos’ sarcastic, funny demeanor mixed with his honesty made for an informative and
entertaining lecture, delving into the dark recesses of the financial underworld.