Book Excerpt: Investigating Bernie Madoff

In 1999, local financial analyst Harry Markopolos was asked to figure out how Wall Street titan Bernard Madoff managed to achieve his spectacular investment returns. After concluding it was impossible — that Madoff was a fraud — Markopolos reported his findings to the SEC. Over the next nine years, Markopolos would warn the SEC four more times, to no avail. As this exclusive excerpt from Markopolos’s new book details, the audacity of Madoff’s scheme was matched only by the SEC’s unwillingness to investigate it.

I had long since taken to looking over my shoulder when I walked down the street and checking underneath my car before I turned the key. But that no longer seemed like enough protection. I started carrying an airweight Model 642 Smith & Wesson gun everywhere I went. I also decided it was time to get some outside help.

When my wife, Faith, and I had moved to Whitman, I went to the local police precinct to apply for a firearms permit. There I had met Sergeant Harry Bates, and since then, I had often seen him around town. In those encounters, I was always pleasant and calm, so when I came barging into his office one afternoon pale as a ghost, he knew whatever was bothering me was serious. “I need to talk to you,” I told him.

Bates settled comfortably into his chair. “What’s going on?”
 
I laid out the broad strokes for him. Basically, I told him I had uncovered one of the biggest frauds in history and I was afraid people might try to kill me to shut me up.
 
“What do you want us to do?” he asked.

“You have to keep this very quiet,” I explained. “If you put this in the precinct log and the newspapers pick it up, my life is going to be in jeopardy. If you talk about it and the word gets out, my life is going to be in jeopardy.”

It took a little while for Bates to understand I was deadly serious about this, but he began working to set up the safest possible situation. He knew if I called for help he had to come running with the cavalry. He knew if my home alarm went off it wasn’t going to be a false alarm. Then he asked, “You carrying?” I told him yes. Then he asked if I wanted to wear body armor. I had thought about it. But if Madoff wanted to kill me he would use professionals, and that meant two bullets to the back of my head. A bulletproof vest wasn’t going to help.

In addition to meeting with Sergeant Bates, I upgraded my home alarm system. I began altering the routes I traveled to get home at night. But I also made a decision.

There was no way of knowing if, or when, Madoff would figure me out. And I’d decided that if Madoff threatened me, I was going to drive down to New York and take him out. At that point it would come down to him or me; it was as simple as that. By failing to do its job and protect me, the government would have forced me into it. In that situation I felt I had no other options. I was going to kill him.                                         

  • lynda

    Thank God for Markapolos–and for Mike Garrity. Is it completely impossible for someone (like those whom Madoff defrauded) to initiate a suit against the NY SEC and perhaps Ms. Cheung personally? If a watchdog institution and the person directly in charge of the relevant branch fails to keep watch over precisely what it is charged with watching— and this occurs not because of mere oversight but because of repeated acts of willful negligence–and that negligence ends up costing possibly millions of investors a collective billions of dollars—why should Ms. Cheung and the higher ups in the SEC who knew about this and should have acted, walk away scot-free? I assume that Cheung and the others who were directly in the know continue today to work at the SEC and likewise continue to make a whole bunch of bucks for their supposed proficiency as watchdogs. I say they should be rudely shoved out of the kennel and fined so heavily that they will find themselves sharing the mean financial

  • arthur

    I wonder if Meaghan Cheung of the SEC was a product of Affirmative Action ?