2009-01-09 20:39:35
Is the SEC Corrupt, Inept or Both?
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I just finished up reading the 19-page document that Harry Markopolos submitted to the SEC in November of 2005 titled "The World's Largest Hedge Fund is a Fraud".
Now obviously I had heard about this document over the past couple of weeks, but today was my first chance to actually read it. I have included a link to the document at the end of this article.
I'm sure that you know who Bernard Madoff is by now. In case you don't, he apparently orchestrated the biggest Ponzi scheme in the history of the world. Estimates say that Madoff swindled as much as $50 billion dollars from other funds, high net-worth investors, unions, celebrities, banks, etc. In a "Ponzi scheme", the perpetrator of the fraud lies about the returns in the fund, and pays out old investors with new capital that is flowing into the fund.
Anyways, Harry Markopolos smelled a rat and started warning the SEC about Madoff in 1999. Markopolis is a very smart guy, as you can see from his resume. CFA, CFE, securities industry executive, specialist in forensic accounting - certainly a guy that you would want to listen to if you were the SEC.
As I said, Markopolos warned the SEC about Madoff in 1999. He then met with an SEC official in 2001. Markopolos refused to back down from his stance that Madoff was a fraud, sending a damning document to the SEC in 2005. Acting in part on information supplied by Markopolos, the SEC once again investigated Madoff in 2007 and didn't find any evidence that he was operating a "Ponzi scheme".
You really have to wonder what happened at the SEC. How could they not have realized that this was a "Ponzi scheme"? I mean - it WAS a Ponzi scheme! Surely the SEC would have realized this after turning over a few stones at Madoff's operation. Was this negligence at the SEC, or something more sinister?
After reading the document sent to the SEC by Markopolos, you REALLY have to wonder just what is going on. Markopolos laid out the case against Madoff perfectly, and was proven right over and over again. Considering that the SEC supposedly investigated Madoff and his firm after talking to Markopolos, you have to wonder (again) what was going on.
Markopolos points out no less than 29 red flags in his statement to the SEC. 29! Markopolos (correctly) points out that situations like REFCO and Wood River had far less red flags.
When you read this document titled "The World's Largest Hedge Fund is a Fraud", you'll really start to wonder about the SEC. If they aren't corrupt, then they are shockingly inept.
Source: WSJ - The World's Largest Hedge Fund is a Fraud
Filed under: Hedge Fund News | Stock Market Scandals
5 COMMENTS - What Say You?
Comment by Arthur_Charap@msn.com on January 10, 2009 @ 10:46 pm
I am an eye surgeon.This is the first time i have ever written to some one "out of the blue" on the internet.This Madoff "thing" has triggered something in my head and I am just plain obsessed with it.I have read every blog and comment I can access .I dont have lexus-nexus so I am probably misssing some interesting material.Someone should start a site dedicated to Madoff/Markopolous.Did you see a newspaper article about the woman from the SEC that did one of the Madoff investigations.She apparently was well educated and trained.She was arguing that she didnt have enough time or funds in her budget to do any more work on a given investigation than she did on madoff.It was a short article and their was no mention of Markopolous.I wonder if she even read his accusations.!I have read some comments that investors who recently took profits from Madoff may have to refund them.I would appreciate it if you could send me any good related links.The first person to write a good book on the scam and Markopolous[I wonder if he is in hiding] will clean up.
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Comment by Bob Butcher on January 11, 2009 @ 1:43 am
It should say "...had far fewer red flags." , not "...less red flags."
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Comment by Howard Johnson alias on February 04, 2009 @ 3:24 pm
From my experience as a stockholder victim of a stock that became a penny stock, key people at the SEC got bribed through NY SEC attorneys. I suggest to research cases of complaints, partularly out of court settlements, find patterns, and surround the attorney prviledge cover up.
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Comment by ToNYC on February 04, 2009 @ 11:42 pm
Harry Markopolos is a gift and we should reward him (and be grateful if he accepts) and the US Financial system with all the incentive and more he needs to interview every regulator that could have stood up, fire the deadwood, and hire a brand-new staff. No one else has his chops..and to ignore this gift while leaving over 95% of the miscreants still in place, including Potus 44's shameless and without honor Treasury Secretary, is suicidal.
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Comment by JT on February 09, 2009 @ 1:20 am
The Madoff fraud is just the tip of the iceberg. If you want to learn more about the tremendous manipulation and fraud occurring on Wall Street, I would recommend 4 web sites. The first would be financialsense.com, and go to the radio archives featuring Bud Burrell and the series "the Crime of the Century." Go to bloomberg.com and look up the archive on "naked short selling" and watch the video. The third would be www.thesanitycheck,com, and the fourth would be www.deepcapture.com. Prepare to have your mind blown!
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