Whistleblower says SEC 'roars like a lion, bites like a flea'
Financial guru Bernard Madoff was arrested in December, accused of bilking clients out of $50 billion in the greatest Ponzi scheme on record.
Ever since, watchdog groups have wondered: where was the Security and Exchange Commission?
Today, a whistle blower in the case -- a fraud investigator from Massachusetts named Harry Markopolos, who testified that he repeatedly tried to warn the SEC about Madoff -- said he knew in five minutes that the financier was a fraud because his earnings statement went in a straight 45-degree angle upward -- never encountering a single down day.
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The SEC missed it, he said, because the agency is over-lawyered, a captive of the industry and rife with regional turf wars.
“A fraud that should have been stopped at $7 billion in 2000 has now grown to $50 billion," he told a House Financial Services subcommittee. "The SEC roars like a mouse and bites like a flea.”
Repeatedly, including in one 29-page report, Markopolos said he warned the SEC about Madoff, but said he got no response. "I was told that the relationship between the SEC's Boston and New York offices is about as warm and cordial as the Yankees-Red Sox rivalry," he said.
Asked who should police the agency, Markopolos recommended that the lawyers be separated from the investigators. As for investigators, he said they should be elder statesmen of the profession, gray hairs who speak the language of finance but who aren't looking to use a stint at the SEC as a stepping stone to join the very Wall Street companies they are supposed to monitor.
"You need old foxes to come in and police the hen houses," he said.
-- Johanna Neuman
Photo: Getty Images