What follows is the Harry Markopolos complaint to the SEC, circa November 2005, identifying 29 red flags that Madoff was a fraud. This highly detailed complaint was filed regarding the apparent Fraud at Madoff Securities.
It was ignored by the Christopher Cox SEC, which was too busy concocting schemes to dismantle the SEC rather than investigate complaints such as this.
http://www.ritholtz.com/blog/2008/12/detailed-and-ignored-sec-madoff-complaint/http://news.muckety.com/2009/01/05/after-years-of-complaints-about-madoff-harry-markopolos-is-vindicated/9441After years of complaints about Madoff, Harry Markopolos is vindicated
By Laurie Bennett
January 5, 2009 at 12:34pm
Harry Markopolos is being called the Deep Throat of the Bernard Madoff scam. He describes himself as “the boy who cried wolf.”
In his case, the wolf was real, and no matter how many times Markopolos cried out, the Securities and Exchange Commission did little.
Not until his sons turned him in was Bernard Madoff arrested on charges of conducting a $50 billion swindle defrauding banks, hedge funds, nonprofits and individual investors worldwide.
In the succeeding weeks, Markopolos, a former investment officer with Rampart Investment, has become known as a financial Cassandra for his repeated warnings about Madoff’s operations.
He began complaining years ago, his insights culminating in May 2005, with what financial writer Michael Lewis and hedge fund manager David Einhorn described in the New York Times Saturday as a “devastatingly persuasive 17-page letter” to the SEC.
Either Madoff was front-running customer orders - essentially taking orders, assigning winners to the Madoff company portfolio and passing losing investmens to the customer.
Or Madoff was conducting what Markopolos labelled “the world’s largest Ponzi scheme.” It appears that scenario two, which Markopolos described as “highly likely” was Madoff’s mode of operation.
Markopolos used mathematics to dissect Madoff’s investment strategy, and concluded that it couldn’t possibly work. He also questioned the secrecy surrounding the Madoff operation.
“Only Madoff family members are privy to the investment strategy,” he noted in his 2005 letter to the SEC. “Name one other prominent multi-billion dollar hedge fund that doesn’t have outside, non-family professionals involved in the investment process. You can’t because there aren’t any.