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Authors: Harry Markopolos
No One Would Listen: A True Financial Thriller (38 page)
BOOK: No One Would Listen: A True Financial Thriller
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She had no idea what I was talking about. It didn’t matter; the restaurant didn’t have a working fax machine. Fortunately, sitting at the bar was the owner of a trucking company whose office was about three miles down the highway. “You’re the whistleblower on that thing?” he asked, indicating the television set.
“Yes sir, the SEC screwed it up totally and these papers prove it. I’ve got to send them to the
Wall Street Journal.”
Wall Street Journal.”
“Count me in,” he said. “I got a fax machine at my place. Let’s go.” He left his beer and pizza on the bar, proving that he was a dedicated American citizen, and we drove to his office in his SUV. It turned out he was pretty angry with the government because of the Wall Street bailouts, so he was thrilled to participate in anything that would embarrass the SEC. I got on my cell phone with Zuckerman as we started sending documents from a fax machine on the first floor of the trucking company office.
Finally,
I thought,
finally.
Finally,
I thought,
finally.
The fax machine stopped. We tried it again. It started, then cut out again. The owner shook his head and sighed. “I got another one upstairs that’s not so modern, but it tends to work better whenever we have a problem.” As we later learned, the problem wasn’t the fax machine; the ice storm was knocking out phone lines all over the state. But the second machine worked as long as we fed it continuously. It took more than an hour to get all the documents faxed successfully. While that was going on Zuckerman asked me, “Do you want to help me write this story?”
I’d been waiting for that opportunity for nine years. “You bet I do,” I said.
When we got back to the restaurant, I put whatever cash I had in my pocket on the bar and told Elaine, “This man eats and drinks as long as this holds out!”
So much was happening so fast. In addition to Gaytri, who was my personal lawyer, I called Phil Michael, an attorney who was representing several of my False Claims Act cases. He was in Mexico. He called me back but we had a poor connection. He told me I could talk about Madoff as much as I wanted to, but I couldn’t mention any of the other cases. Then I thought he said, “Cooperate with the press and milk the publicity.” In fact, that was exactly the opposite of what he’d said.
That night I never slept. I was too busy copying computer files containing Madoff case documents, e-mails, and SEC submissions to CD-ROMs in order to preserve evidence in case the SEC raided my home in a last-ditch attempt to destroy evidence. I also e-mailed files to my legal teams in Boston and New York and also to Taxpayers Against Fraud in Washington. Getting those e-mails out during the ice storm was quite a challenge and took hours longer than it would have if the weather had been cooperating.
The next morning I sent my wife, Faith, into Boston on the commuter rail carrying a set of very incriminating documents burned onto a CD. She carried it on her person all morning; then at lunchtime she surreptitiously made her way through the narrow, crowded streets of Boston’s Chinatown, where she clandestinely passed the CD to one of her trusted girlfriends. They met in a restaurant frequented almost solely by Chinese patrons. Unless the SEC somehow managed to trail her with Chinese Mandarin—speaking agency employees, they’d never be able to track that CD. I now had case documents spread safely up and down the East Coast between Boston, New York, and Washington. If the SEC tried anything illegal, it would only backfire on the agency once those documents started surfacing.
My brother hadn’t heard that Madoff had surrendered. His phone starting ringing at 6 A.M. the next morning with calls from media outlets who wanted to know if he was the Madoff whistleblower featured in the
Wall Street Journal.
After a half dozen calls he realized that the
Journal
was lying on his front porch and figured he’d better get up and find out exactly what I’d done this time.
Wall Street Journal.
After a half dozen calls he realized that the
Journal
was lying on his front porch and figured he’d better get up and find out exactly what I’d done this time.
I was barraged by phone calls, most of which I didn’t answer. But when I saw the phone number of the Boston office of the SEC, I figured I’d better pick it up. The caller was a person in that office other than Ed Manion, a person I knew well from the caller’s former job, and probably the last person I expected to make this particular phone call. This individual was risking their career, which was not something I would have believed was part of the person’s character. Obviously I can’t identify this individual, who warned me, “Harry, Operation Cover-Up has started here. They’re telling us we don’t know you, we never heard of you. I got a call from the senior staff five minutes ago telling me not to have any contact with you. Watch your back, buddy.”
Now my precautions of the previous night preparing my shotgun seemed vindicated. I was holed up in my office preparing documents all morning. Vans and cars were showing up in front of the house. Reporters were getting out and ringing the front doorbell (at least we hoped they were journalists and not SEC employees). I left my mother-in-law to answer the door and shoo reporters away. It was frightening each time she opened that front door. If they came in a TV news van and had TV cameras, that was actually a relief since we knew the SEC couldn’t carry out that elaborate a ruse. From our vantage point we could plainly see strange folks walking up and down the neighborhood knocking on my neighbors’ doors and asking questions. We live in the town center, so these folks were also canvassing the local merchants, no doubt asking questions about me. We hoped they were journalists and nothing more. It was a scary time for us, particularly when the school bus dropped the boys off that afternoon.
I also got several calls from a reporter at the
Washington
Post telling me that the SEC was denying the existence of a whistleblower. “They’re saying they get hundreds of thousands of whistleblower tips every year and they can’t investigate all of them and they don’t know anything about you.”
Washington
Post telling me that the SEC was denying the existence of a whistleblower. “They’re saying they get hundreds of thousands of whistleblower tips every year and they can’t investigate all of them and they don’t know anything about you.”
“Thank you,” I said, but I was thinking,
Wait, just wait.
My informer inside the SEC had been absolutely correct: The agency was trying to cover up its malfeasance. I had to wonder how far the SEC would go to protect itself.
Wait, just wait.
My informer inside the SEC had been absolutely correct: The agency was trying to cover up its malfeasance. I had to wonder how far the SEC would go to protect itself.
Within a day of Madoff’s surrender, my house was under media siege. Cameras were set up on my front lawn and it seemed like every TV producer in the business had my phone numbers on speed dial. My phone never stopped ringing. I had to come up with a plan, so I decided I’d speak to the
Journal
for print, make one big TV appearance, and do one radio show.
Journal
for print, make one big TV appearance, and do one radio show.
Meanwhile, Zuckerman and I were working 16 to 20 hours a day, desperately trying to get the story published as quickly as possible. I was living on adrenaline; I couldn’t sleep. I knew I wasn’t going to be vindicated until the story was published. I’d sleep then. I kept feeding him more and more documents, whatever he said he needed. Finally, he asked me, “Are you for real? I mean, are you making this stuff up?” Later I found out that he actually called Frank and Neil to confirm my story.
“You’re kidding me, right, Greg?” I said. “How could anybody write all this stuff on short notice and in such great detail?”
“I know that,” he admitted. “No one could. But this stuff you’re sending me—it’s too good to be true. It’s amazing. You knew all of this was going on?”
“Yes, I did.”
“Jeez,” he said, impressed. I could hear the astonishment in his voice as the full impact of this information hit him. This was proof that the SEC had been warned about Madoff eight years earlier and had done nothing to stop him. They were $50 billion too late. “Jeez,” he said again.
Later that evening John Wilke finally called me. I knew he was excited about the story, but from the sound of his voice it was obvious that the chemo was draining all his energy. There was an overwhelming sadness in this conversation; this should have been another scoop for Front Page Wilke, but physically he couldn’t write it. He did call Zuckerman, though, and gave me great reviews. “He’s totally legit,” he told Zuckerman, and then admitted, “We’ve had all this information for a couple of years.”
What continued to astonish me was the SEC’s denial that I existed. It was obvious they were desperately trying to contain the damage and were hoping that somehow I wouldn’t surface. I was the smoking gun that could destroy that agency. And as long as they were able to maintain the fiction that there was no whistleblower and they knew nothing about Madoff, I believed I was still in jeopardy.
Finally, five days after Madoff’s surrender, Zuckerman called the SEC’s Washington office and asked specifically, “On April 2, 2008, did your director of risk management, Jonathan Sokobin, get the following e-mail with the subject line, ‘$30 Billion Equity Derivative Hedge Fund Fraud in New York’?”
That was the first time the SEC knew that the
Wall Street Journal
had copies of my submissions. They were finished. That night SEC Chairman Christopher Cox issued a long statement in which he reviewed the progress the agency was making in closing the biggest barn door in Wall Street history. Basically, he began with several excuses, claiming that Madoff took “complicated steps . . . to deceive investors, the public and
regulators,”
and that he “kept several sets of books and false documents, and provided false information.”
Wall Street Journal
had copies of my submissions. They were finished. That night SEC Chairman Christopher Cox issued a long statement in which he reviewed the progress the agency was making in closing the biggest barn door in Wall Street history. Basically, he began with several excuses, claiming that Madoff took “complicated steps . . . to deceive investors, the public and
regulators,”
and that he “kept several sets of books and false documents, and provided false information.”
It was only in the third paragraph that he finally admitted, “The Commission has learned that credible and specific allegations regarding Mr. Madoff’s financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of the SEC staff, but were never recommended to the Commission for action. I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations....
“In response . . . I have directed a full and immediate review of the past allegations regarding Mr. Madoff and his firm and the reasons they were not found credible, to be led by the SEC’s Inspector General. The review will also cover the internal policies at the SEC . . . and whether improvements to those policies are necessary.”
Basically, he threw his staff under the bus. I’d won.
Once the SEC issued its mea culpa acknowledging my existence, the editors at the
Wall Street Journal
told Greg Zuckerman that his story was not going to be published as scheduled. They had decided to double the size of the article, add pictures, and move it to the top slot as the page one cover story for the following day’s edition. Greg called me excitedly and asked me if I minded the delay in order to appear on the front cover. I said, “No, but only if you agree to post my 2005 SEC submission on your web site so that the world knows exactly what information the SEC had and failed to act on.” He readily agreed, and we started working overtime to get the story written.
Wall Street Journal
told Greg Zuckerman that his story was not going to be published as scheduled. They had decided to double the size of the article, add pictures, and move it to the top slot as the page one cover story for the following day’s edition. Greg called me excitedly and asked me if I minded the delay in order to appear on the front cover. I said, “No, but only if you agree to post my 2005 SEC submission on your web site so that the world knows exactly what information the SEC had and failed to act on.” He readily agreed, and we started working overtime to get the story written.
I think we were both too excited to sleep well that night. I knew that this story was going to rock the SEC’s world with earthquake-like force. Once that story was out and my SEC submissions, along with a few e-mails, were posted online, my family and I would have nothing to fear from the SEC ever again.
Greg and I worked feverishly through the next day. Late the following afternoon the
Journal
posted the one-star edition onto its online edition, which we both read. He kept writing, adding more and more detail until finally late that evening the five-star late edition made its way onto the web site and out to printing presses. My wife came up to my office and accused me of being Greg Zuckerman’s unpaid love slave, to which I replied, “Well, I am Greek and I bet he’s probably very cute in person.” She laughed and went to bed.
Journal
posted the one-star edition onto its online edition, which we both read. He kept writing, adding more and more detail until finally late that evening the five-star late edition made its way onto the web site and out to printing presses. My wife came up to my office and accused me of being Greg Zuckerman’s unpaid love slave, to which I replied, “Well, I am Greek and I bet he’s probably very cute in person.” She laughed and went to bed.
On Thursday, December 18, the
Journal
published Greg Zuckerman’s story, “Madoff Misled SEC in ‘06, Got Off.” The second paragraph began, “Harry Markopolos—who once worked for a Madoff rival—sparked the probe with his nearly decade-long campaign to persuade the SEC that Mr. Madoff’s returns were too good to be true. In recent days, the
Wall Street Journal
reviewed e-mails, letters, and other documents that Mr. Markopolos shared with the SEC over the years.
Journal
published Greg Zuckerman’s story, “Madoff Misled SEC in ‘06, Got Off.” The second paragraph began, “Harry Markopolos—who once worked for a Madoff rival—sparked the probe with his nearly decade-long campaign to persuade the SEC that Mr. Madoff’s returns were too good to be true. In recent days, the
Wall Street Journal
reviewed e-mails, letters, and other documents that Mr. Markopolos shared with the SEC over the years.
“When he first began studying Mr. Madoff’s investment performance a decade ago, Mr. Markopolos told a colleague at the time, ‘It doesn’t make any damn sense,’ he and the colleague recall. ‘This has to be a Ponzi scheme.”’
BOOK: No One Would Listen: A True Financial Thriller
10.23Mb size Format: txt, pdf, ePub
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