This is starting to sound very much like the description of events and parties on the deepcapture.com website. What I find amusing is that this is being cited as authority by some who laughed at the issues of abuse of power and front running by MM's and manipulation through failed settlement of trades of hedge funds.
====================================================
Lawmakers Criticize Role of SEC in Madoff Scheme
FEBRUARY 4, 2009, 2:19 P.M. ET
By PATRICK YOEST and MICHAEL R. CRITTENDEN
online.wsj.com
WASHINGTON -- The Securities and Exchange Commission was sharply criticized by both U.S. lawmakers and the fraud investigator who blew the whistle on Bernard Madoff's alleged Ponzi scheme Wednesday, describing the regulator as scared to pursue cases against top securities firms and investors.
"You are both a captive regulator and a failed regulator," Harry Markopolos said of the SEC in highly anticipated testimony to a U.S. House subcommittee.
Mr. Markopolos detailed his nine-year effort to alert federal regulators about Madoff, who is accused of engineering one of the largest swindles in U.S. history. The SEC was "unable to understand" the complex financial instruments involved in the alleged fraud, Mr. Markopolos said, and regulators weren't interested in pursuing investigations against influential firms and investors.
Mr. Markopolos also said Wednesday that he also tried to tell former New York Gov. Eliot Spitzer of Mr. Madoff's actions.
"The SEC was never capable of catching Mr. Madoff," Mr. Markopolos told a House Financial Services subcommittee.
Mr. Markopolos described his efforts in the terms of a Tom Clancy novel, sprinkling his testimony with talk of intelligence networks, the Russian mob, drug cartels and collecting information from "field operatives." He claimed he feared for his life as he sought to expose Mr. Madoff's actions, even making sure to remove his fingerprints from an envelope with Madoff information he handed to former New York Gov. Eliot Spitzer during an appearance in Boston.
"When you are zeroing out mobsters, you have a lot to fear," he said. "If [Madoff] would have known my name, and he had a team tracking it, I wouldn't have been long for this world."
Lawmakers agreed that Mr. Markopolos was right to take precautions. "When you deal with the kind of characters that you were trying to bring to the bar of justice, you have to be concerned, not only for yourself, but to family members that are near and dear to you." Rep. Al Green (D., Texas) said.
Mr. Markopolos said that in December 2005, he contacted a reporter at The Wall Street Journal, resulting in a number of phone calls and emails. Mr. Markopolos said he thinks that senior editors prevented the reporter from the newspaper's Washington bureau from flying to Boston to meet and discuss the Madoff issue. A spokesman for Dow Jones & Co., publisher of The Wall Street Journal, declined to comment on Mr. Markopolos's statements.
Also during testimony, Mr. Markopolos said he gave Mr. Spitzer a package with information about Mr. Madoff when Mr. Spitzer appeared at the John F. Kennedy Presidential Library in Boston.
"I figured the odds were high that he was a Madoff investor," said Mr. Markopolos, an independent fraud investigator.
Mr. Spitzer's family real estate firm had in fact invested with Mr. Madoff. According to Mr. Markopolos, he took care to remove his fingerprints from the package he gave to Mr. Spitzer.
Mr. Markopolos didn't say when he attempted to inform Mr. Spitzer of Mr. Madoff's activities. Mr. Spitzer served as New York state attorney general before his tenure as governor, a position he resigned in March after revelations of his use of a high-priced New York escort service.
Reached at his office Wednesday, Mr. Spitzer said he had "absolutely no recollection" of ever meeting Mr. Markopolos.
"Obviously, I wish people had listened to him," Mr. Spitzer added.
Mr. Markopolos said that Mr. Madoff is not alone. He plans to turn in a "mini-Madoff" to the SEC's inspector general Thursday and urged lawmakers and regulators to pursue Mr. Madoff's alleged accomplices, including the feeder funds that brought in additional funds.
"My team was out there in the field talking to the Madoff feeder funds and identifying who they were," Mr. Markopolos said. "There are 12 more out there lying low in the weeds in Europe that you have not heard of yet."
Lawmakers on the panel lavished praise on Mr. Markopolos, while focusing their criticism on the SEC for missing warnings about Mr. Madoff for years.
"Unfortunately, our regulators failed to follow his road map and heed his warnings," Rep. Paul Kanjorski (D., Pa.) said. "As a result, thousands of investors were hurt."
Rep. Scott Garrett (R., N.J.) the subcommittee's ranking Republican, said the alleged Madoff fraud wasn't a result of a lack of regulation, but instead a lack of coordination and information sharing among regulatory bodies such the SEC and the Financial Industry Regulatory Authority, or Finra.
The entities, Mr. Garrett said, didn't pay enough attention to Mr. Madoff's broker-dealer operations.
"At least some of the things, had they been implemented earlier, at least in this case, it appears that the improprieties would have been discovered much earlier," Mr. Garrett said.
The Madoff case, along with similar alleged frauds that have been uncovered in the last two months, have focused criticism on the SEC as federal policy makers consider a wholesale overhaul of the U.S. regulatory system.
"We have to re-engineer the SEC going forward," Rep. Ed Royce (R., Calif.) said.
Write to Michael R. Crittenden at michael.crittenden@dowjones.com
online.wsj.com |
