No One Would Listen: A True Financial Thriller (27 page)

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Authors: Harry Markopolos

BOOK: No One Would Listen: A True Financial Thriller
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Harry Bates settled comfortably into his chair. “What’s going on, Harry?”
 
I laid out the broad strokes for him. Basically, I told him I had uncovered a multibillion-dollar Ponzi scheme that was global and the biggest fraud in history and I was afraid people might try to kill me to shut me up. While he didn’t know what a Ponzi scheme was, he certainly understood billions of dollars.
 
“What do you want us to do?” he asked. “Where do you want me to take this?”
 
“You have to keep this very quiet,” I explained. “If you put this in the precinct log and the newspapers pick it up, my life is going to be in jeopardy. If you talk about it and the word gets out, my life is going to be in jeopardy.” It took a little while for Sergeant Bates to understand I was deadly serious about this, but to his credit he began working with me to set up the safest possible situation. We agreed on a simple plan. He knew if I called for help he had to come running with the whole cavalry. He knew if my home alarm went off it wasn’t a going to be a false alarm.
 
Then he asked me, “You carrying?” We talked about guns for a while. Obviously he knew I had a license; he’d filled out the forms. I told him that I was now carrying a weapon with me wherever I went. I’d opted for a lightweight gun, I said. I felt it was better to have a weapon I could fire rapidly than something with massive stopping power. He reviewed the state gun control laws, particularly what was permitted in public. Massachusetts has tough regulations and he didn’t want me to have any problems.
 
Then he asked me if I wanted to wear body armor. I had thought about it. The army had taught me there were three things you had to be able to do to protect yourself: shoot, move, and communicate. I certainly was trying to communicate; I had been trained pretty well to handle the shooting part; that left mobility—which was why I decided not to wear a bullet-proof vest. I actually tried on several different types, but all of them restricted my movement. If Madoff wanted to kill me he was going to use professionals, and that meant a double-tap with two bullets to the back of my head. In that situation a bullet-proof vest wasn’t going to be any help. I knew that my only hope in that situation was to survive the initial attempt, fire as many shots as quickly as I could, and either get out of there or get help. There were no good options.
 
By the time I walked out of Sergeant Bates’s office I had calmed down. His confidence had been somewhat reassuring. I knew that if anything happened to me, my family would be protected.
 
But in addition to meeting with him, I took several additional precautions to make sure I was never put in that situation. I upgraded the alarm system in and around my home, including pick-proof locks. I began altering the routes I traveled to get home at night. I never drove more than a couple of blocks without checking continually in my rearview mirror. In addition, Faith got her handgun license and took lessons in properly handling a weapon—and firing it to hit the target. Eventually she became an excellent shot. We kept guns safely locked up in the house, but always within quick and easy reach.
 
By nature I’m a cautious person. I am actually one of those strange people who will stand on a street corner waiting for the walk sign, even if I don’t see a car coming. In this situation I was taking every possible precaution to stay alive. There was no way of knowing if, or when, Madoff would figure me out. And finally I made a decision. If he contacted me and threatened me, I was going to drive down to New York and take him out. At that point it would have come down to him or me; it was as simple as that. The government would have forced me into it by failing to do its job, and failing to protect me. In that situation I felt I had no other options. I was going to kill him.
 
Chapter 6
 
Didn’t Anyone Want a Pulitzer?
 
My father was a tough man. For a while he owned two diners and two bar-lounges in Erie, Pennsylvania. He also owned the storefront next to the New York Lunch, as one of the diners was named. He had rented that space to a motorcycle repair shop, which, naturally, became the hangout for the local chapter of the Hell’s Angels. I was in that restaurant one afternoon when my father threw a biker out of the place for causing some kind of problem. A few minutes later the biker came back, tearing through the front door on his Harley, and started doing circles in the middle of the restaurant.
 
I remember people scrambling to get out of the way, but my father didn’t hesitate. He came running out from behind the counter and knocked him off his bike, then started fighting him. He didn’t care that this guy had a gang backing him up. He was just protecting his livelihood, protecting his family. The fight ended when the short-order cook, Rusty, called the police, ran into the back room and came out pointing a double-barreled shotgun at the biker. A 12-gauge ends a lot of arguments.
 
I never saw my father back down. I saw him challenge customers who tried to walk out of his place with silverware. I remember him coming home from one of the bars some nights with his face swollen and his knuckles bloody because he’d had to throw a drunk out. I had learned right and wrong from him and that whatever the cost I was supposed to fight the bad guys. So for as long as possible I would continue to fight Madoff with documents, but now I was aware it could get much more dangerous.
 
In my head, I had worked out my plan to go to New York and kill him if he threatened me. I didn’t tell anyone about it; I certainly didn’t tell Faith or Frank or Neil. I didn’t want to make any of them an accessory to murder. I knew how they would respond if I told them. At first they wouldn’t believe me: Harry? Kill someone? Forget it, it isn’t going to happen. But when they realized I was serious, they would try desperately to talk me out of it.
 
I wasn’t interested in those conversations. I knew how crazy my plan sounded, but I also knew it was my life and my family’s lives that were in jeopardy.
 
We had been pursuing Bernie Madoff for almost five years, and the cost of this fight was continuing to rise. Five years earlier I had been in comfortable control of my life. I was earning a reasonable salary working on the equity derivatives desk of a respectable firm, and if it wasn’t particularly exciting most of the time, at least it was interesting. Then Frank Casey dropped Bernie Madoff into my life. I’d ended up leaving that company, in fact leaving the entire industry, because of that, and here I was working in an attic office, never leaving my house without being armed, and always being careful to avoid shady areas. I hadn’t earned a paycheck in more than a year, and I was forced to watch helplessly as Madoff continued to steal billions more dollars and the people who could stop him instead treated me as their enemy.
 
Only the fact that I was part of a team made it tolerable. Frank Casey, Neil Chelo, and Mike Ocrant continued to gather information and feed it to me, and whenever we heard something new or got hold of a Madoff document, a flurry of angry, funny, sarcastic, ironic, and occasionally bitter e-mails would circulate among us. Early in 2006, for example, Neil finally found a former employee of Madoff who was willing to talk. This man had worked for Madoff for three years in the mid-1990s and was currently at a hedge fund. Neil certainly gave him no indication he was investigating; it was normal business chitchat. This man was pretty open with Neil about Bernie. He had no reason not to be—he believed Bernie’s operation was honest. But he had worked on the 19th floor as a proprietary trader in the brokerage, and had little knowledge about the hedge fund. He’d left on very good terms, convinced that Bernie was “the real deal,” although he admitted that having knowledge of the order book was a big moneymaker. He never saw any of the options transactions, he told Neil, but that didn’t bother him. Bernie and his sons were “brilliant and hardworking,” he told Neil. As Neil concluded his e-mail to me, “He believes in Bernie.”
 
This type of communication between us was very common and because of that, I never felt like I was in it alone. In addition to the three of them, I also had come to rely on a man named Pat Burns for advice. Pat Burns was the director of communications for Taxpayers Against Fraud, a whistleblower organization in Washington, D.C., and had seen this kind of insanity up close several times before.
 
Being a whistleblower is extraordinarily lonely, and eventually I had begun searching for other people in a similar circumstance, people who understood what I was going through and who shared my fears. I had found Pat Burns’s organization through an Internet search. I called him and introduced myself, explaining that I had several good cases and I was interested in learning more about the bounty programs.
 
I was exploring a new world, a world in which people took great risks to expose corruption, and Pat Burns became my guide. We spoke on the phone often and traded e-mails, but it was actually more than a year before we met in person. Pat is tall and balding and, like me, has a broad sense of humor and a visceral dislike for bad guys. He hates to see them win as much as I do. And in the sometimes chaotic world of whistleblowers he was the steady hand. I think it’s accurate to say that he knows more about white-collar fraud in the United States than any man in history. He knows how lawyers and lobbyists work to protect their clients and what can happen to whistleblowers, both the bad and the good. He told me right from the beginning that there was considerably more bad than good, that few whistleblowers ever win and go on to live happily ever after. He’s seen lives destroyed. But beyond answering my questions and helping me navigate through these unfamiliar waters, his presence served as a constant reminder that I wasn’t hanging out there alone.
 
Eventually I had told Pat everything about our Madoff investigation. I sent him the 2005 submission with the instructions, “If anything should happen to me you’ve got a green light to go to the media immediately. Give the story to anybody who’ll print it.”
 
He told me that there was an annual conference of whistleblower attorneys and fraud investigators—like me—who met to exchange information and receive updates on new case law. Eventually I went to my first conference and I began learning about the False Claims Act, the law that hopefully would allow me to eventually earn a living. The False Claims Act is the statute that allows anyone to bring legal action against contractors who are cheating the federal government. If the government agrees to prosecute, under the
qui tam
provision the person filing the case is entitled to a reward that is usually between 15 and 25 percent.
Qui tam
is a Latin phrase meaning that person “who brings forth a case on behalf of our lord the King, and for himself.” There are “relators,” as the person who finds the case and brings it to the government is known, who have earned many millions of dollars.
 
The False Claims Act was originally passed by Congress in 1863 to reward people for warning the Union government about dishonest suppliers who were selling them sick horses and mules, spoiled food, and faulty weapons. It became known as the False Claims Act because it was intended to stop people from submitting false claims for government payment, but it also covered several other areas of fraud against the government. It has been strengthened several times since its original passage and is the primary tool used by whistleblowers. The federal government has recovered more than $25 billion in the past two decades. The government accepts only between 15 and 20 percent of the best cases submitted for intervention and, hopefully, a reward. Through Pat Burns I was to become very familiar with all the provisions of this act. I had to; my future depended on it.
 
Obviously Madoff didn’t fit under this provision (he was cheating everybody
except
the government), but Pat Burns certainly took an interest in the case. He understood immediately the risks that I was taking. I had seen enough movies in which people are in jeopardy because they have some information that someone wants to keep private, and I would sit there in the audience wondering why the person in jeopardy didn’t simply tell a reporter and get the story published. Once it was published, theoretically at least his life would be saved because the secret would be out and the spotlight would be on the bad guy. That strategy had always made sense to me, but in May 2001 two stories had been published by respected magazines within the span of six days, and it hadn’t done any good at all. For some reason I just couldn’t figure out, journalists didn’t seem to understand the magnitude of this story. Through the years Mike Ocrant had been approached several times by journalists from various publications who were interested in pursuing the story. But mostly they wanted him to hand it to them. Mike, who had left journalism in 2003, had continued to urge other reporters to pursue the story. Any diligent financial reporter should have been able to use the information already made public as a foundation for their own investigation. But finding a news peg, something new that would excite editors, remained elusive.

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