No One Would Listen: A True Financial Thriller by Harry Markopolos (i wanna iguana read aloud .txt) 📕

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.

In late 2005 a reporter from the hedge fund magazine Absolute Return, another publication owned by the company that would later acquire the parent company of MARHedge, got hold of a copy of my 2005 Securities and Exchange Commission (SEC) submission. Ironically, Mike had gone to work at the company, Institutional Investor, after leaving MARHedge. Mike hadn’t given it to him, and he was reluctant to ask this reporter about his source. We had all agreed that we would keep the identities of everyone—except mine—secret. There is no reason to believe that reporter knew that Mike and I were working together, and Mike didn’t even want to hint at it.

The reporter had come to Mike because he had written the original Madoff piece and was wondering if there was a new way to approach it. “He’s looking for a new angle,” Mike told me. “He wants to do another piece, but he needs something to make it newsworthy. He says that a lot of the stuff in the submission has already been reported, and what’s new isn’t a game changer. Is there anything else we should give them?” It was not news that Madoff was managing a lot of money, the reporter had told Mike, and the new red flags in the submission were certainly more detailed than Ocrant had written almost five years earlier, but mostly these things had already been reported.

Sometimes I wondered what world these people were living in. Didn’t anyone want to win a Pulitzer Prize?

The team batted around some ideas that might convince them to do the story. We had heard a rumor, literally nothing more than a rumor and I don’t remember the source, that based on my submission the SEC had opened an informal inquiry. That was considerably less than a formal investigation, but it was more than twiddling their thumbs and singing “Home on the Range.” Mike finally told the reporter, “I’ve been told, but I can’t tell you my source, that the SEC has opened up an informal inquiry. If you can get somebody to confirm that, that’s probably a pretty good angle.”

Apparently the SEC refused to confirm that information. Without this new peg, the reporter went to look for a story that would be more pertinent for the magazine’s hedge fund readership.

By this time I don’t think I was capable of being surprised or disappointed by anything that happened in this investigation. Ocrant and Barron’s reporter Erin Arvedlund had done their job in 2001-they’d exposed Madoff. So I understood the way journalists were thinking now; if nobody had been outraged by those stories, they needed much stronger ammunition before going after Madoff. What was so obvious to me and my team was obviously confusing to the media.

It was Pat Burns who convinced me not to give up on the media. “Go public and finish this guy,” he said. “If investors read the story, he’s going to collapse and he’s going to end up behind bars. Once he’s behind bars you’re safe.”

Pat is an arranger; he has tremendous contacts throughout the entire financial industry and enjoys bringing people together for their common benefit. So not only did he urge me to go public, but he also introduced me to John Wilke, an investigative reporter at the Wall Street Journal whom he greatly respected. “This is the guy,” he told me. “This is the guy.”

Pat Burns made the initial contact with Wilke. In preparation for that I sent him a one-page memo suggesting a three-part package for the Journal, which that paper could promote as “the largest hedge fund blowup since that of Long-Term Capital Management in August-October 1998. And, in reality, since it will likely involve hundreds of billions in selling pressure, the losses to investors will be akin to the largest company in the S&P 500, General Electric (with a market capitalization of $373 billion) suddenly collapsing.” I sat in my office late into the night, and as I wrote this I could almost feel the hope igniting inside me again. I included everything I could think of to make this reporter understand how important this story would be. “Therefore,” I wrote, believing completely that this was true, “this is a much bigger story than the falls of Enron and WorldCom, and truly is the biggest finance story since LTCM’s demise that almost led to a systemic collapse of the world’s financial system.”

What reporter could resist that pitch?

There were actually three stories in this package, I pointed out to Pat. The first one would require “calling the senior equity derivatives folks on Wall Street for their opinion on BM’s strategy.... An earthquake will soon follow.”

The second story would be tracking the complete destruction of Madoff’s empire that would inevitably follow the first story. And the third story would highlight the complete ineptitude of the SEC, which would include “the fact that the SEC’s Section 21A(e) bounty program has paid bounties to whistleblowers only twice in its 71-year history and that the bounty only pays rewards for information related to insider-trading cases. General securities fraud is not rewarded.... The lack of a meaningful bounty program allows and encourages small frauds into becoming large frauds.”

Pat e-mailed me the day he met with Wilke: “This reporter is a repeat player and he understands we are elephant hunting. If he can get a clear shot at the target he will bag this trophy story... [but] the Wall Street Journal is always cautious....”

Wilke was interested, Pat reported after their meeting. He’d like to talk to me.

“I’m a senior investigative reporter,” John Wilke explained when we spoke for the first time. His tone was courteous and professional, and maybe a little bit dubious. “I don’t pump out stories on a daily basis like a lot of guys.