Madoff whistleblower assails SEC’s ‘ineptitude’
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The Securities and Exchange Commission‘s image is taking a pounding today, as former money manager Harry Markopolos tells Congress how he tried to blow the whistle on Bernie Madoff‘s alleged Ponzi scheme for more than nine years -- but couldn’t get the SEC interested.
From Bloomberg News:
Markopolos told Congress that he contacted the SEC in 2000 after examining Madoff’s investment strategy and determining in four hours that returns exceeding 10% weren’t possible. Markopolos, in almost a decade of communication, said only one SEC staff member understood Madoff’s scheme and ‘the threat it posed to the public.’ ‘My experiences with other SEC officials proved to be a systemic disappointment and lead me to conclude that the SEC securities lawyers, if only through their investigative ineptitude and financial illiteracy, colluded to maintain large frauds such as the one to which Madoff later confessed,’ Markopolos said. Madoff ‘had a lot of help,’ he said. U.S. lawmakers, who began investigating Madoff’s case last month, are hearing from Markopolos for the first time as they try to determine how regulators missed his alleged $50 billion Ponzi scheme, the biggest in history. The proceeding may shape the SEC’s fate as Congress debates whether to bolster the regulator or turn its responsibilities over to another agency.
Markopolos’ full testimony is here. He spends part of it on recommendations for rebuilding the SEC into a competent regulator.
The SEC ‘has blamed everything on a lack of staff and resources while refusing to admit to its underlying problems,’ Markopolos said. ‘I know that I am tired of their lame excuses and I suspect that Congress and the American public also are tired of the SEC’s shameless attempts to deflect blame.’
And as long as he had Congress’ ear, he also lobbed a grenade at the Federal Reserve:
Unfortunately, as bad a regulator as the SEC currently is ... it’s the best of a very sorry lot. Compared to the Fed, which has led this nation to the abyss of national bankruptcy by its refusal and inability to regulate the banks, the SEC actually looks halfway competent.
-- Tom Petruno