No One Would Listen
While the title of the book makes you think “teen angst” and the book’s choice of cover image that makes you think “Jack the Ripper”, you’d be surprised to learn that this is a book about the Securities Exchange Commission (yes, that’s right – the not-so-dreaded SEC). The book follows the mildly eccentric tale of the mildly eccentric Harry Markopolos, briefly and intermittently describing his journey through life, but getting quickly into the meat of how he set his sights on Bernie Madoff, first to try to replicate his gains and then, when the case flummoxed him, to prove that he was a fraud, and finally to prove that he was running a Ponzi scheme. Thinking that he needed help from some bigger guns, ie figures of authority with the power to do something to right the situation, Markopolos eventually went to the SEC to see if they could be interested in bringing a fraud to justice, but encountered resistance every time. And so, somewhere around the mid-way mark, Markopolos’ book becomes less a book about the evils of Bernie Madoff, and becomes a book about the evils of the SEC.
The book is interesting, funny, upbeat, and at times emotional, as Markoplos talks about friends and colleagues who didn’t make it – struck down by cancer, or who took their lives with their own hands – and those that nearly didn’t make it, like the colleague who had a disastrous yachting expedition with an inexperienced Russian first mate. He talks very little about the investors in the fraud, but explains carefully how he analysed the fund and could come to no other conclusion than it was a fraud. Then he explains it again. Then he explains how someone else had a theory that backed up his. Then he explains again how he checked his numbers. And then he tells about how he found supporting evidence. And then some more supporting evidence. Eventually you see see that it’s elementary, Dear Watson.
The book does get a bit weird at times, like when he explains how he feared for his life (is he imagining things? or is he underplaying the threat of some desperate people? He also mentions how he’s a germophobe who wiped down his keyboard with rubbing alcohol the day he left his job at an investment fund. Well, that was just a bit too much information.
Markopolos peppers his book with jokes, including the very apt one about life in investment banking which talks about the hunters who encounter a bear: one of them starts to run, knowing that he doesn’t need to outrun the bear – he just needs to outrun his companion. But some of his jokes begin to get tired after a while, and one page after he tells the bear joke he’s already telling the one about the guy (in this case a SEC investigator) who can only count to 21 if he takes his pants off. Jokes at the SEC’s expense fly fast and furious, and after a while we get a torrent of them “they couldn’t even catch a cold in the winter”, “they couldn’t spot the ocean from the shore”, “they couldn’t find the haystack that surrounds the needle that’s in the haystack”, etc.
One of the stranger anecdotes happens in a meeting with an SEC examiner, who broke down sobbing when she realised that heeding Markopolos’ earliest reports to the SEC could have stopped Madoff when his fund was only at $3 billion.
Markopolos ends his book with an epilogue that goes through fifteen wicked steps needed in order to turn the SEC into an effective regulator, the eleventh of which is to encourage whistleblowers, which he calculates to be 13 times more effective than regular SEC examiners. Of course, there’s some self interest here, as Markopolos is now a committed full-time professional whistleblower himself.
Markopolos takes apart the dysfunctional regulatory system in the US, which includes five separate units, each with their own politics, priorities, databases and information silos, where underpaid staff are easily hoodwinked by well-paid individuals who have been trained in diversion tactics and are usually much smarter than them who work at institutions that have been branded as too big to fail. Markopolos illustrates this with the point that “if the SEC can’t coordinate two examinations within its own agency, there is little reason to believe that five separate agencies can successfully coordinate their examinations.”
By the end he is scathing in his criticism of the SEC, and by now the book is barely about Madoff at all. That was all just a ruse, the book has graduated to bring about a much bigger message, which is about bringing to justice the people who shelter the bad people and allow them to steal the money from innocent people like you and me. And now we do see the SEC trying to do something, by taking on one of the biggest names of them all – Goldman Sachs. Of course, it may be too little too late, but it does show a regulator finally beginning to take its job seriously, now that it has a president behind it. But how long will that atmosphere last?
Click here to see a video report on Harry Markopolos.
