Too Good to Check
One interesting fact of the Madoff story is that while the fact that his so-called hedge fund was a fraud wasn’t exactly common knowledge, it wasn’t much of a secret either:
Harry Markopolos, an independent fraud investigator and derivatives expert, made it his hobby for nine years to uncover Madoff’s fraud. “Madoff was our fantasy sport,” he tells the Journal. “We wanted him nailed.” [...] It features no fewer than 29 “red flags.” Those ranged from his inability to replicate Madoff’s returns to statements like “I have also spoken to the heads of various Wall Street equity derivative trading desks and every single one of the senior managers I spoke with told me that Bernie Madoff was a fraud.”
It seems that he wasn’t alone. A few other individuals or groups who looked into what was happening decided that Madoff’s operation was super-fishy.
This reminds me of Nora Ephron and Deep Throat in some ways:
For many years, I have lived with the secret of Deep Throat’s identity. It has been hell, and I have dealt with the situation by telling pretty much anyone who asked me, including total strangers, who Deep Throat was. Not for nothing is indiscretion my middle name.
I knew that Deep Throat was Mark Felt because I figured it out. Carl Bernstein, to whom I was married for a brief time, certainly would never have told me; he was far too intelligent to tell me a secret like that. He refused to tell his children too, who are also my children, so I told them, and they told others [I was in high school with one of the children in question], and even so, years passed and no one really listened to any of us. Years passed while unbelievably idiotic ideas of who Deep Throat was were floated by otherwise intelligent people. There were theories about John Dean, and David Gergen, and Alexander Haig, and L. Patrick Gray and Diane Sawyer and Ron Ziegler (Ron Ziegler!), and I’m pretty sure even Henry Kissinger’s name came up. I mean, really. Why these people with these ludicrous theories didn’t call me I cannot imagine. I am listed.
Sometimes people want to believe. As long as Madoff’s scam was working, nobody was really interested in the truth.
34 Responses to “Too Good to Check”
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December 19th, 2008 at 9:12 am
Well, this was a faith-based administration. The substance of things hoped for, the evidence of things not seen, etc.
December 19th, 2008 at 9:20 am
So where was President Bush and the Republican Congress’s SEC?
Who appointed the political heads of our agencies of government?
Why are the Democrats –including Obama — refusing to point out to the people of this country how badly they’ve been fucked by Republican corruption?
Why is the Democratic leadership passing up a MAJOR Opportunity to consign the Republicans to the political wilderness for a DECADE?
If the Democratic leadership were really RIVALS to the Republicans, they would be doing that.
On the other hand, if the Democrats were PARTNERS with the Republicans –working for the same plutocrats as it were –and are merely the current standins intended to dispel voter anger by a faux display of “Change”, then they would be acting pretty much the way they are acting now.
December 19th, 2008 at 9:20 am
The Ephron example seems simply strange in proof of anything. After all, famous as she is, even her children can’t constitute a groundswell for people to ignore. Or maybe the rest of the world just ignores her on principle.
December 19th, 2008 at 9:23 am
Its nice that you choose the deep throat analogy on the day that he dies. Real touching and classy to compare him to Bernie.
December 19th, 2008 at 9:30 am
SB “follow the link“
December 19th, 2008 at 9:30 am
For those who may not follow the length, Markoplos did more than investigate that Madoff was defrauding clients; he repeatedly tried (along with others) to warn the SEC as far back as 1999:
This seems to me part of a multi-administration, bi-partisan admiration for the New Economy which was going to move us beyond all our old fashioned concerns about banks and the financial system etc. etc.
December 19th, 2008 at 10:08 am
In a case of interesting timing, the news just came out that Deep Throat, a/k/a Mark Felt, has swallowed for the last time.
December 19th, 2008 at 10:09 am
“As long as Madoff’s scam was working, nobody was really interested in the truth.”
Finally, someone says it out loud!
It’s important to remember that the investment banks that had money with Madoff generated huge fees. One company took down $164 million in fees alone last year on their client-related activity with Madoff, according to CNBC this morning.
Huge fees equals–huge bonus checks for everyone involved, and no real work was required!
It’s not that “people wanted to believe”. It’s that people wanted to make a boatload of money for as long as they could, and damn the consequences to others. And that’s the part no one is talking about.
December 19th, 2008 at 10:11 am
The Madoff thing is really amazing. I mean, those “Fund of Funds” take a 1% cut (plus 10% of gains) for performing one task: due diligence. Presumably that means when vetting a potential investment, they canvas peers like Mr. Markopoulos. Of course Mr. Markopoulos has an interest in generating clients for himself, so you take his testimony with a grain of salt, but when EVERYONE tells you the same thing, it’s negligent to invest with Madoff.
The Fund of Funds phenomenon should simply cease with this scandal.
(By the way, whatever information was brought to the SEC’s attention, is it really the SEC’s job to follow up? The SEC regulates the securities industry; hedge funds are essentially unregulated.)
December 19th, 2008 at 11:20 am
Ephron “figured it out,” unless, of course, she had been wrong. It’s pretty easy to reveal in retrospect that you were right.
December 19th, 2008 at 11:22 am
From the PDF you linked to
Hooray self regulating market!
December 19th, 2008 at 11:23 am
Ephron went to high school with one of her own children?
December 19th, 2008 at 11:45 am
Certain things can blind people into seeing only what they want to see. Greed, ideology, and religion are tops on the list.
December 19th, 2008 at 11:58 am
dog, that’s a square bracket, hence an MY editorial insertion.
December 19th, 2008 at 12:29 pm
“Ephron “figured it out,” unless, of course, she had been wrong. It’s pretty easy to reveal in retrospect that you were right.”
I guess, but it’s pretty hard to see what Nora Ephron, someone with no particular reputation for political insight, has to gain by lying here, especially since she says she told (among many others) her kids, long before the truth came out. So, if she’s lying, they’ll no it. “Hey mom, why are you lying in the Huffington Post?” I have no particular brief for Ephron, and don’t really like her movies, but it wouldn’t make a lot of sense for her to just randomly lie about this.
December 19th, 2008 at 4:18 pm
RE #15: Nora Ephron undoubtedly thought that Mark Felt was “Deep Throat” and said so to other people. But as Ephron notes, there were all sorts of theories about who “Deep Throat” was floating around, so it’s hardly surprising that someone came up with the correct answer. But if you want to know who “Deep Throat” was, knowing that one of the mutitudinous theories out there is correct isn’t much help. What you want to know is which one of the theories is correct.
December 19th, 2008 at 8:49 pm
Yes, people were suspicious of Madoff – but not because they thought he was running a Ponzi scheme. They thought he was doing insider trading!
December 20th, 2008 at 10:58 pm
Oy Vey!!!!!!!!!!!! Ithis story keeps getting better…… this epic Ponzi scheme of Madoff (Made-Off) continues to fascinate the world. ….A true financial holocaust… He managed to lose or steal 50 billion dollars, which can’t be easy to do no matter how hard you try….. with a busy looking stock-trading operation occupying the 19th floor, of his building…. and the computers and paperwork of Bernard L. Madoff Investment Securities (his name is on the door remember!) filled the 18th floor and on the 17th floor was Bernie Madoff’s fraud center, occupied by another two dozen staff members but who must have been blinded by some sort of quantitative trading wizardry in order produce that mind-numbing 10-12%… lol ….It was called the “hedge fund” floor, where the scam was conceived…….. and nobody else knew?????????????? .not the other 2 dozen employees who worked there?????? I smell rotten lox..I actually feel bad for Charles Ponzi ..Ponzi scammers will have to change their name to “Madoff schemers”.and Mr.Ponzi will disappear into the federal prison files……. in researching more about hedge funds I came across a few books that were also fascinating… Hedge Fund Trading Secrets Revealed by Robert Dorfman… and Confessions of a Street Addict by Jim Cramer….both these books take you on a great ride about hedge funds how they make and lose millions…… and expose many other scam practices in this game. Dorfman actually teaches his strategies.
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