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

guess is that he’s running low on new investors’ cash inflows and needs to feed the Ponzi scheme or face ruin. Any insight on your part on what you might be hearing? Is Madoff running short of new cash?

“We all know how Ponzi schemes turn out.”

While I don’t remember his response, he certainly said nothing to change my opinion.

We found out after Madoff’s collapse that we were right; he was desperate for cash. He was running out of big fish, so he had started casting a much wider net. Banks in Europe and Asia had begun offering certificates that allowed small investors to buy into Bernie for as little as $150. To promote sales, some of these banks actually offered a 3:1 leverage; for example, the Fairfield Sigma 3X Leveraged Certificates sold by Japan’s largest brokerage for 10,000 included a loan that boosted the investment to 30,000, contributing to that bank’s $300 million loss.

In late June I made my final submission to the SEC. The fact that I did that is probably a reasonably good definition of optimism. Actually, I wasn’t naive enough to believe the SEC would do anything, but I wanted to make sure they had a complete record. Hope dies hard. “Hello Meaghan,” I began an e-mail to Meaghan Cheung. I went on to say: “1. Attached are some very troubling documents that show the Madoff scheme is getting even more brazen. 2. Wickford is showing a monthly estimated pro forma set of returns of an investment in Madoff that is leveraged by a factor of 3.0 to 3.25 times and earns annual returns ranging between a low of 11.75 percent (2005) to a high of 33.42 percent (1997). 3. Madoff couldn’t possibly be managing billions in this strategy unlevered, much less levered. I thought you would want to see these Wickford documents. And 4. When Madoff finally does blow up, it’s going to be spectacular and lead to massive selling by hedge funds and funds of funds as they face investor redemptions. Regards. . . .”

The SEC’s inspector general found out that as far as Cheung was concerned, by the time she received this e-mail she considered the Madoff case “for all intents and purposes closed without the formalities.” She did claim that she forwarded it to Suh, the attorney, but Suh has no memory of ever receiving it.

The possibility that Madoff was in trouble was obviously very good news for me. I didn’t care how he collapsed as long as he was no longer a threat to me. The day he was arrested or went out of business or died would be the first day I could take a deep and very safe breath.

Maybe other people might have wondered what was going on in Bernie’s mind at this time. Was he panicking? Was he looking for an escape route? I knew that once he was exposed there would be no place in this world that was safe for him; if the legal system didn’t put him away, then his offshore investors who had lost millions certainly would. But throughout this entire investigation I never took the time to put myself in his position. I never wondered what he was thinking or when he started this Ponzi scheme or why he did it or whether his family was involved. All I had to know was that Bernie Madoff was the enemy of everything in which I believed and his continued existence was an insult to all the people in this industry who tried to do it right.

Besides, I didn’t have time to think about Bernie. I was much too busy investigating other crooks. By the summer of 2007 I had been working full-time on my fraud investigations for almost three years—without settling a single case. I was working with 20, 30, 40 whistleblowers on more than a dozen cases. What depressed me was how easy it was to find my cases. Fraud in the United States was a growth industry. Maybe I should figure out a good fraud and franchise it, I thought. There really wasn’t much risk of getting caught. I’d discovered that among government regulatory agencies the SEC wasn’t unusually inept. It was simply as bad as all the rest of them. It required an unusual level of stupidity or tremendous bad luck to get caught by any government agencies other than the IRS, the FBI, and the Department of Justice, which are highly competent but vastly underresourced.

Bernie wasn’t a genius, but he certainly wasn’t stupid—and his luck had held for decades. For my team, pursuing Madoff had probably become more of a hobby than a live investigation, something that came into our lives on occasion like an old friend showing up unexpectedly. He remained the link that held my team together, and whenever anything happened in the industry, we immediately related it back to him. For example, CNN reported in February that “The SEC confirmed that it was investigating whether the major brokerage houses were tipping off hedge funds to the trades the brokers handle for big clients like mutual funds.... The SEC is also likely to scour trading records to see if the brokers are using info about clients’ moves to invest their own capital.” Frank wrote to ask if that meant “Bernie is tipping himself off.”

As always, we tried to find the humor in everything Bernie. In April an article in Absolute Return entitled “To Catch a Thief” featured Fairfield Greenwich managing director Douglas Reid—but not the way any of us anticipated. “In the 1955 Alfred Hitchcock movie To Catch a Thief it takes reformed cat burglar Cary Grant to capture the thief responsible for a series of jewelry heists across the French Riviera. Douglas Reid, managing director and investment committee member for $12 billion alternative management firm Fairfield Greenwich Group, believes the same approach holds true in creating and operating hedge funds.

“‘Who better than a hedge fund manager to understand the business of another hedge fund manager?’ asks Reid.... FGG,