In our warped financial markets, the overriding culture glorifies wealthy arrogant criminal assholes, while ignoring or ridiculing honest, hard working, highly intelligent truth tellers.
By Jim Quinn of Burning Platform
“Certainly one of the most important things I learned is that numbers can be deceiving. There is a logic to mathematics, but there is also the underlying human element that must be considered. Numbers can’t lie, but the people who create those numbers can and do. As so many people have learned, forgetting to include human nature in an equation can be devastating.” ― Harry Markopolos, No One Would Listen
The quote I used from Harry Markopolos’ No One Would Listen book about the Bernie Madoff ponzi scheme in my last article triggered a bittersweet recollection. For me, the experience captured the true nature of our warped financial markets, a culture glorifying wealthy arrogant criminal assholes, while ignoring or ridiculing honest, hard working, highly intelligent truth tellers.
The picture of Markopolos above shows an average looking middle aged guy, with a five o’clock shadow, bad haircut, and wearing a modestly priced suit and tie. Since reading about his fruitless effort to expose Madoff’s Ponzi Scheme and his fifteen minutes of fame in 2009, I have felt an affinity towards him. We both have a brother and sister. We were both brought up in Catholic households and went to Catholic schools. We both have degrees in finance. We have both had financial careers. We are both married with three sons. And we both believe facts and an accurate assessment of the numbers always reveals the truth.
Through his job as a portfolio manager with a small investment firm Bernie Madoff’s investing record was brought to his attention. As a numbers guy, he immediately began assessing the returns. Markopolos said he knew within five minutes Madoff’s numbers didn’t add up. It took him another four hours to mathematically prove that they could have only been obtained by fraud.
In 2000, 2001, and 2005, Markopolos alerted the SEC of the fraud, supplying supporting documents, but each time, the SEC ignored him or only gave his evidence a cursory investigation. The incompetence or willful ignorance of factual proof by these government drones ultimately resulted in the financial ruin of thousands to the tune of $18 billion and the suicides of a number of people, including Madoff’s son.
The culmination of Markopolos’ analysis was a twenty one page memorandum sent during November 2005 to SEC regulators, entitled “The World’s Largest Hedge Fund is a Fraud”. It outlined his unequivocal mathematical findings in more detail and invited officials to check his theories. He outlined 30 red flags proving Madoff’s returns could not possibly be legitimate.
His analysis was based on more than 14 years of Madoff return numbers. During that time, Madoff reported only four losing months – a statistically impossible scenario Markopolos said could only be achieved by fraud. He was ignored because he was a nobody in the view of SEC Wall Street wannabes…