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

That didn’t make sense to me. “No, you can’t sue the government. It has sovereign immunity.” The rule of law, you can’t sue the king, prevents citizens from bringing legal action against the state.

Gaytri disagreed. “That’s what most people believe. But the courts can make law, especially the Supreme Court. There’s nothing to prevent people from suing. I guarantee you, there’s going to be a lawyer out there who is going to file a lawsuit against the government, against the SEC. They know they’re going to lose in federal district court; they’re going to plan on losing in the circuit court on appeal; and then they’re going to hope that the Supreme Court takes their case. The Supreme Court can make law or it can change law. Sovereign immunity may not hold up, because the SEC is clearly so negligent in this case the court could say, ‘We are liable and the victims should get their money back.’

“And this certainly is an international case. Once all the national remedies have been exhausted, it wouldn’t surprise me to see people trying to take it to the International Court of Justice. I’m sure the international community isn’t that happy with the United States after this whole financial crisis. I think that’s what Noelle is afraid of.”

Maybe. It also could have been that, just like me, Kotz’s staff had been working so hard for so long that they were all worn down, and Noelle simply had an emotional outburst—much like mine when Frank told me that Thierry was dead. Sometimes it just gets to be too much. Whatever it was, Noelle’s response showed us how seriously she cared about reforming her agency. Ironically, it had a very positive effect on the rest of the afternoon’s questioning. It removed any doubts that Kotz’s team intended to follow the evidence wherever it led. This wasn’t going to be a whitewash.

We all calmed down and the questioning continued, hour after hour. We were there for six hours. This was as much a military-style debriefing as testimony. Kotz’s questions made it obvious that he was trying to discover whether his agency was simply incompetent or it was also corrupt. He asked a lot of questions about possible interference in the investigation, ranging from asking me if I knew anything about the phone call supposedly made by Senator Schumer—I didn’t—to the possibility that Madoff had bribed team members. Among the questions he asked, for example, was: “If a person with a hedge fund background was on the SEC’s examination team that went into the Madoff operation, should he have been able to miss all the red flags you pointed out?”

That required only a one-word answer. “No.” Actually, months earlier I had accepted the fact that the SEC was not corrupt. If it had been, my name would have come out and I might be dead. “No,” the agency wasn’t corrupt at the team and branch levels. Down at those levels they were incompetent, just incredibly incompetent. This wasn’t a bad apples case; it was a systemic failure.

The meeting continued through the day into the late afternoon. By the time we left, I was exhausted. Whatever excitement I’d felt a day earlier had been thoroughly washed out of me. But we had bonded with Kotz’s team and felt confident they were going to produce the thorough, honest report he had promised. Before we left, I warned the inspector general’s team that this investigation was going to be a trip through the Twilight Zone, and that nothing they were going to see would make any sense whatsoever. In fact, I told them, if it made sense that’s how you knew it wasn’t part of this case, because nothing we had encountered had ever made sense. I told them that what they were going to discover would traumatize them—because they were about to see the worst sort of human behavior. I cautioned them that they were going to have two choices every day while investigating this case: They could either cry themselves into depression or laugh themselves silly. I urged them to laugh, because that was going to be the only way they were going to get to the other side of their investigation. In the months afterward I’d make sure to call with positive messages to boost the team’s morale. I knew the debilitating effect the Madoff case would have on their team because I had seen what this case had done to my team.

David Kotz followed up by interviewing the three other members of my team, each of whom had his own important story to tell about his role in this investigation. Assistant Inspector General David Fielder and Senior Counsel David Witherspoon traveled to Boston to interview employees of the SEC’s New England office, as well as Frank Casey in person and Neil Chelo on the phone. They met with Frank and Gaytri, who was there to provide legal guidance for Frank and Neil, in a conference room at McCarter & English. Frank was ... frank. He took them through the entire story, from the day he discovered Bernie until Thierry’s suicide. He told them how he learned to recognize Bernie’s footprint in documents and then tracked down funds invested with him. He re-created the conversations he’d had with Thierry and others in the industry and his strange encounter with a victim’s son-in-law. He gave them the European background, then brought them inside the financial services industry. He explained to them the accepted methods of conducting due diligence, which obviously the SEC should have known, and what Access International had done. But then he went further, speculating that the SEC’s failure to stop Madoff was more than just incompetence. “The first two years after Harry submitted his initial report, I figured they were just complacent,” he told the investigators. “The next two years I began to believe that they were structurally incompetent. But after that, given Harry’s submission, there