Wall Street Whistle Blower Vindicated

Harry Markopolos is not a household name, but he soon could be. For nearly ten years the investor and former securities industry executive and fraud investigator carried on a fruitless campaign to get federal regulators to thoroughly examine the dealings of now-disgraced pyramid scammer Bernie Madoff. Now that Madoff's $50 billion Ponzi scheme has been revealed, Markoplos is seen as something of a prophet. He testified before the House Financial Services subcommittee this week. You can read the Los Angeles Times story about it here.

"The SEC was never capable of catching Mr. Madoff. He could have gone to $100 billion," Markopolos told the subcommittee. "It took me about five minutes to figure out he was a fraud." Markopolos came to that conclusion in 2000, based on comparing the strategy Madoff touted with the results he claimed he was getting. It just didn't add up.

Markopolos and his team of four investigators found 29 separate "red flags" about the Madoff operation. Over the years he delivered his findings and evidence to the Securities and Exchange Commission, former New York Attorney General Eliot Spitzer and the Wall Street Journal. Markopolos was not reticent about the reasons he feels no investigations were launched. He cited the incestuous pattern of former Wall Street figures regulating their own industry before cycling back into the business.

Markopolos testified, "The SEC is captive to the industry it regulates and is afraid." As a one-time chairman of the NASDAQ stock market and a member of the SEC Advisory Committee, Madoff was, "one of the most powerful men on Wall Street and in a position to easily end our careers or worse." For this reason, he said, "the agency is busy protecting the big financial predators from investors," and, "roars like a lion and bites like a flea."

SEC Division leaders Linda Thomsen and Lori Richards and industry self-regulator Stephen Luparello were heard by the committee last week, in performances that left the congressmen, "scarcely satisfied," according to the Times, and legislators of both parties are calling for a major shakeup. Markopolis pointed to the Financial Industry Regulatory Authority as, "very corrupt." It was headed by Mary Schapiro until December. She is now the Head of the SEC.