I caught the Congressional testimony of self-designated Madoff investigator and portfolio manager Harry Markopolos this past Wednesday. It was quite a show. In effect, Harry got his 15 minutes of Warholian fame, and, boy, did he make the most of it.
It's hard to decide which was more stomach-churning; the sight of Markopolos puffed up with self-importance, pontificating on all sorts of matters about which he has little knowledge, or; various Congressional members hanging on his every word, as if he receives Truth directly from God.
Perhaps the most chilling moment was when Markopolos, in response to a question, solemnly recommended that SEC personnel be compensated by bounties from pursuing investigations. Imagine the world which that would create. Numerous Inspector Javerts accusing many investment managers, rightly or wrongly, since they would pay no penalty for an erroneous accusation.
If SEC personnel made money by successful prosecutions, it logically follows that they would simply charge as many managers as possible, figuring that some would either pay or confess to a lesser crime, just to be rid of the investigation.
With sensibility like this, do you really want Congress listening to Markopolos?
Among other comments the manager made, he personally gave himself credit for several unnamed, large funds not having invested with Madoff. We don't know, of course, if any of that is true. Much of Markopolos' energy and verve seems to stem from being ignored by many people, including SEC regulators, for several years.
Having happened to turn his anger against Madoff into a lucky strike, Markopolos isn't about to go quietly into the night, say, like Sully Sullenberger, the skilled US Air pilot who made the safe landing of his commercial passenger jet into the Hudson River a few weeks ago, without loss of life.
No, Markopolos is going to make this Congressional appearance pay, and pay big. He served notice that he would be filing a formal accusation of another 'mini-Madoff' the next day with the SEC, in order to claim the bounty on the case.
The thrust of Markopolos' testimony, and that of the questions of the mock-shocked members of Congress in front of whom he appeared, was that every one of Madoff's 'victims' should have been better-protected by the SEC. As if the SEC can, and should, prevent every single investor from hurting themselves by throwing caution to the wind, ignoring obvious signs of deceit, and violating prudent investment principles.
We'll never have enough money or people at the SEC to personally hold the hand of every retail, or institutional investor.
The truth is, as I've written several times, here, here and here, for example, the so-called victims in the Madoff case were greedy, blind, and chose to ignore obvious signs of trouble, such as custody reports from an independent, reputable custodian. Neither the SEC, nor the government, will ever successfully protect investors from their own stupidity.
Let's hope Congress doesn't listen to carefully to this self-obsessed and self-congratulatory investment manager.
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3 comments:
It's easy to decide which was more stomach-churning; the sight of Markopolos testifying before Congress or; your superfluous rant.
You like to talk about common sense but do you ever think things through? A system of incentives to investigate fraud in our financial is sound. The method of application that needs refinement.
You appear to be educated but make thoughtless comments like; ""If SEC personnel made money by SUCESSFUL prosecutions, it logically follows that they would simply charge as many managers as possible."" You said, "sucessful prosecutions".
Evidence collected and presented before a court of law is a successful prosecution. What you should have said, is, "If the SEC personnel made money by SUCCESSFUL PROSECUTIONS , it logically follows that they would simply charge as many CORRUPT managers as possible. It would then logically follow that the number of illegal schemes would corrospondingly drop.
Of course, any charges resulting from an investigation must utimately be resolved by the court. You don't bring a case to court without solid evidence and these type of cases are pretty much cut and dry. It a matter of record.
Do we really want Congress listening to Markopolos? Had the government heeded his warnings and brought him into the fold, Madoff and others would have been shut down and this whole mess avoided.
Do we want a highly trained, intelligent financial investigator, former Army Major, and a true American hero, giving honest albiet emotional, advice on how to improve the system.
YES. YES. YES.
Do we want someone like Markopolos assisting our government? Absolutely! He could help develop investigator training programs and assist programmers to develop computerized screening of financial databases to help red flag ferret out fraud. You of all people should appreciate the value of computerized screening.
Let's hope Congress listens to him and other whistleblowers. Most are basically decent people reporting dishonest deeds. Should he be rewarded? I hope so. Had the government listened to other whistle-blowers (reporters), the attack on the World Trade Center could have been avoided. I know this for a fact.
You called investors "GREEDY" "BLIND" and "STUPID".
You said,
"Leading me, once more, to state that everyone who lost money with Madoff deserved to, because they were motivated by sheer greed."
I disagree, most people did not have the financial savy to analyze a scheme created by a Former NASDAQ Chairman, philanthropist who sat on boards of nonprofit medical research institutions. Running a business since 1960 (48 years) with a total of 147 nonprofit institutional investors such as MIT, Children's Health Fund. Madoff Securities' reputation was one of the top traders of securities in the nation. Who had reason not to trust him? Most just going about their lives and trusting the advice of their friends.
You said,
I doubt anyone would have been in a position early on to learn what was really going on with Madoff, if they were outside the scheme.
I disagree,
Mr. Markopolos knew and so did others.
Let's hope Congress keeps listening. As far as listening to your rant, that's a different story...
I take it with a grain of salt when I read an article from a man that can't spell SUCCESSFUL.
It's easy to decide which was more stomach-churning; the sight of Markopolos testifying before Congress or; your superfluous rant.
You like to talk about common sense but do you ever think things through? A system of incentives to investigate fraud in our financial is sound. The method of application that needs refinement.
You appear to be educated but make thoughtless comments like; ""If SEC personnel made money by SUCESSFUL prosecutions, it logically follows that they would simply charge as many managers as possible."" You said, "sucessful prosecutions".
Evidence collected and presented before a court of law is a successful prosecution. What you should have said, is, "If the SEC personnel made money by SUCCESSFUL PROSECUTIONS , it logically follows that they would simply charge as many CORRUPT managers as possible. It would then logically follow that the number of illegal schemes would corrospondingly drop.
Of course, any charges resulting from an investigation must utimately be resolved by the court. You don't bring a case to court without solid evidence and these type of cases are pretty much cut and dry. It a matter of record.
Do we really want Congress listening to Markopolos? Had the government heeded his warnings and brought him into the fold, Madoff and others would have been shut down and this whole mess avoided.
Do we want a highly trained, intelligent financial investigator, former Army Major, and a true American hero, giving honest albiet emotional, advice on how to improve the system.
YES. YES. YES.
Do we want someone like Markopolos assisting our government? Absolutely! He could help develop investigator training programs and assist programmers to develop computerized screening of financial databases to help red flag ferret out fraud. You of all people should appreciate the value of computerized screening.
Let's hope Congress listens to him and other whistleblowers. Most are basically decent people reporting dishonest deeds. Should he be rewarded? I hope so. Had the government listened to other whistle-blowers (reporters), the attack on the World Trade Center could have been avoided. I know this for a fact.
You called investors "GREEDY" "BLIND" and "STUPID".
You said,
"Leading me, once more, to state that everyone who lost money with Madoff deserved to, because they were motivated by sheer greed."
I disagree, most people did not have the financial savy to analyze a scheme created by a Former NASDAQ Chairman, philanthropist who sat on boards of nonprofit medical research institutions. Running a business since 1960 (48 years) with a total of 147 nonprofit institutional investors such as MIT, Children's Health Fund. Madoff Securities' reputation was one of the top traders of securities in the nation. Who had reason not to trust him? Most just going about their lives and trusting the advice of their friends.
You said,
I doubt anyone would have been in a position early on to learn what was really going on with Madoff, if they were outside the scheme.
I disagree,
Mr. Markopolos knew and so did others.
Let's hope Congress keeps listening. As far as listening to your rant, that's a different story...
I take it with a grain of salt when I read an article from a man that can't spell SUCCESSFUL.
Randy-
It's evident from your comments- well, the same one twice, whatever that implies- that you don't really understand much about investment management regulation and enforcement. I don't have time to reply to your ill-informed comments point by point.
In brief, incenting SEC personnel in the manner that Markopolos desires is to effectively loose hundreds, or more, DA-like bounty hunters with no process of control or accountability.
My point regarding their activity is that, like the IRS, these agents would bring charges against many innocent managers, simply to wring some sort of consent decree and monetary penalty, on pain of having to spend even more proving themselves not guilty.
Btw, I spelled 'successful' correctly, so I don't know what you are whining about. I even ran spell check twice to confirm that.
So it appears you are the "man that can't spell successful."
Thus, by your own logic, everyone should totally discount your comments.
I do, anyway, of course, but not because of your reading problems. Rather, because of your lack of intelligent discourse and logic.
My points in the original post stand, as written. I still believe them all to be true.
-CN
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