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The Madoff whistle-blower talks about what the S.E.C. doesn't understand about money
What was it like to spend nine years trying to persuade the Securities and Exchange Commission that Bernard Madoff was a fraud, only to learn that the agency thought he was perfectly reputable?
For nine years I was the S.E.C.’s doormat.
Now you’re triumphant, a hero in investment circles who exposes the S.E.C. as the most futile of agencies in your new book, “No One Would Listen.”
It was a trip through the twilight zone.
Why do you think the S.E.C. failed to wake up to Madoff’s $65 billion Ponzi scheme until he turned himself in?
They weren’t even asleep at the switch; they were comatose. They didn’t respond to heat and light, much less evidence of wrongdoing. They were not engaged in the fight.
This was when William Donaldson was head of the S.E.C.?
Donaldson was too tough on Wall Street, so he got the ax. Then you had Christopher Cox, because he wasn’t going to do his job. That’s why he got the job.
You met last year with Mary Schapiro, the current head of the S.E.C. How did that go?
I would say she was coldly polite. Her general counsel, David Becker, did most of the talking. He and I did not get along at all. He was getting ready to come across the coffee table and strangle me.
In the year since you testified before Congress about the S.E.C.’s failures, many of the agency’s employees have been replaced.
They’ve redisorganized. They redisorganized the enforcement unit. I actually approve of that. I think Robert Khuzami, the new head of the enforcement division, has got fire in his belly.
Are you saying the S.E.C. under Schapiro is about to catch fraud on Wall Street?
She has the wrong staff. They’re a bunch of idiots there.
What do you mean?
The five commissioners of the S.E.C. are securities lawyers. Securities lawyers never understand finance. They don’t have the math background. If you can’t do math and if you can’t take apart the investment products of the 21st century backward and forward and put them together in your sleep, you’ll never find the frauds on Wall Street.
So why doesn’t the S.E.C. hire finance people? Why don’t they hire you?
They’re overlawyered. They’re poisoned by lawyers.
You actually began your career as a money manager in Boston who first noticed Madoff’s monkey business when your boss told you to try and duplicate his investment returns. You realized they were mathematically impossible.
Madoff was a competitor of mine, and I couldn’t compete against him because he was making up his investment returns, and I had to manage according to the market. It wasn’t a level playing field.
Where did you learn about finance?
You don’t learn much in grad school. Half the formulas they teach you are false. It’s a lot of self-study. I read a lot of finance books, and I usually read them with a calculator because I go through the math to make sure I master the formulas.
Were you always a math whiz?
I needed a tutor in 7th and 8th grade. Whatever it was, I was having big problems with algebra.
In a recent interview with a government investigator conducted in prison, Madoff called you “a joke in the industry.” Have you ever met him?
No. I was asked if I wanted to. I don’t want to sit there and hear his lies.
http://www.nytimes.com/2010/02/28/ma...l?ref=magazine
What was it like to spend nine years trying to persuade the Securities and Exchange Commission that Bernard Madoff was a fraud, only to learn that the agency thought he was perfectly reputable?
For nine years I was the S.E.C.’s doormat.
Now you’re triumphant, a hero in investment circles who exposes the S.E.C. as the most futile of agencies in your new book, “No One Would Listen.”
It was a trip through the twilight zone.
Why do you think the S.E.C. failed to wake up to Madoff’s $65 billion Ponzi scheme until he turned himself in?
They weren’t even asleep at the switch; they were comatose. They didn’t respond to heat and light, much less evidence of wrongdoing. They were not engaged in the fight.
This was when William Donaldson was head of the S.E.C.?
Donaldson was too tough on Wall Street, so he got the ax. Then you had Christopher Cox, because he wasn’t going to do his job. That’s why he got the job.
You met last year with Mary Schapiro, the current head of the S.E.C. How did that go?
I would say she was coldly polite. Her general counsel, David Becker, did most of the talking. He and I did not get along at all. He was getting ready to come across the coffee table and strangle me.
In the year since you testified before Congress about the S.E.C.’s failures, many of the agency’s employees have been replaced.
They’ve redisorganized. They redisorganized the enforcement unit. I actually approve of that. I think Robert Khuzami, the new head of the enforcement division, has got fire in his belly.
Are you saying the S.E.C. under Schapiro is about to catch fraud on Wall Street?
She has the wrong staff. They’re a bunch of idiots there.
What do you mean?
The five commissioners of the S.E.C. are securities lawyers. Securities lawyers never understand finance. They don’t have the math background. If you can’t do math and if you can’t take apart the investment products of the 21st century backward and forward and put them together in your sleep, you’ll never find the frauds on Wall Street.
So why doesn’t the S.E.C. hire finance people? Why don’t they hire you?
They’re overlawyered. They’re poisoned by lawyers.
You actually began your career as a money manager in Boston who first noticed Madoff’s monkey business when your boss told you to try and duplicate his investment returns. You realized they were mathematically impossible.
Madoff was a competitor of mine, and I couldn’t compete against him because he was making up his investment returns, and I had to manage according to the market. It wasn’t a level playing field.
Where did you learn about finance?
You don’t learn much in grad school. Half the formulas they teach you are false. It’s a lot of self-study. I read a lot of finance books, and I usually read them with a calculator because I go through the math to make sure I master the formulas.
Were you always a math whiz?
I needed a tutor in 7th and 8th grade. Whatever it was, I was having big problems with algebra.
In a recent interview with a government investigator conducted in prison, Madoff called you “a joke in the industry.” Have you ever met him?
No. I was asked if I wanted to. I don’t want to sit there and hear his lies.
http://www.nytimes.com/2010/02/28/ma...l?ref=magazine
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