The Back Alley Archives

Feb. 4 (Bloomberg) -- Harry Markopolos, a former money manager who sought to convince regulators for nine years that Bernard Madoff was a fraud, said the U.S. Securities and Exchange Commission suffers from “investigative ineptitude.”

Markopolos told Congress today that he contacted the SEC in 2000 after examining Madoff’s investment strategy and determining in four hours that returns exceeding 10 percent weren’t possible. Markopolos, in almost a decade of communication, said only one SEC staff member understood Madoff’s scheme and “the threat it posed to the public.”

“My experiences with other SEC officials proved to be a systemic disappointment and lead me to conclude that the SEC securities lawyers, if only through their investigative ineptitude and financial illiteracy, colluded to maintain large frauds such as the one to which Madoff later confessed,” Markopolos said. Madoff “had a lot of help,” Markopolos said.

U.S. lawmakers, who began investigating Madoff’s case last month, are hearing from Markopolos for the first time as they try to determine how regulators missed his alleged $50 billion Ponzi scheme, the biggest in history. The proceeding may shape the SEC’s fate as Congress debates whether to bolster the regulator or turn its responsibilities over to another agency.

Investors “expected regulators to perform their roles effectively,” Representative Paul Kanjorski, the Pennsylvania Democrat and chairman of the House Financial Services Committee’s capital markets panel, said as he began the hearing. “We need to pursue long-scale reforms.”

Democratic Representatives Bradley Sherman of California and Michael Capuano of Massachusetts, members of the subcommittee, suggested Markopolos consider joining the SEC. He declined, citing family issues.

SEC Officials

Markopolos, 52, testified along with SEC directors Linda Thomsen, enforcement; Andrew Donohue, investment management; Erik Sirri, trading and markets; Lori Richards, compliance and inspections; and Acting General Counsel Andy Vollmer.

The officials, in joint testimony, said the regulator may stiffen audit requirements for money managers and inspect firms more frequently. The SEC is also examining how it evaluates risk and may require investment advisers to provide more information than it currently requires, according to the testimony.

Claims filed against Madoff by the SEC and prosecutors may result in billions of dollars in liability and “decades of incarceration,” the officials said.

SEC Inspector General David Kotz told lawmakers Jan. 5 that he was investigating whether Madoff’s clout and relationships with regulators helped the money manager avoid detection. Madoff sat on an SEC advisory committee and was chairman of the Nasdaq Stock Market.

point is, limiting compensation will de-incentivize and we'll only lose our top talent...who knows? maybe we lose our resources to foreign competitors...this bit of irony is going to change the face of business and not for the better.

^^^Interesting...and I just thought of something...right now I have two friends that are moving their families overseas for better jobs. One is going to Germany and the other to China. Just a random thought.

point is, limiting compensation will de-incentivize and we'll only lose our top talent...who knows? maybe we lose our resources to foreign competitors...this bit of irony is going to change the face of business and not for the better.

Aw, we'll lose out on the services of guys who lost billions upon billions of dollars this past year. Poor us. Whatever shall we do without that kind of talent?

well, I don't think we should be giving any of these cocksuckers money, but if we're going to do it in the hopes that they're sustainable, then they need to be able to attract the top talent (presuming this talent was not involved in the fuck up in the first place). To do that, we shouldn't be capping any pay.

^ let's see who takes help post BHOs mandate josh...let's see....my guess - nobody...not banks, not auto, not pencil companies...nada...even if they need it, they won't...why? because if you do, your company will be BHOs and CEOs would rather retire and live off a fixed income before having to relinquish control to gov't...then what happens?


here's to hoping BHOs got a viable exit strategy.............i mean, secondary strategy...cause when these companies start falling off the wayside, BHO will at least have the chance to say he indeed made 'chaaaaaaange'

(no BHO bashin or name calling in my post btw)

^ let's see who takes help post BHOs mandate josh...let's see....my guess - nobody...not banks, not auto, not pencil companies...nada...even if they need it, they won't...why? because if you do, your company will be BHOs and CEOs would rather retire and live off a fixed income before having to relinquish control to gov't...then what happens?


here's to hoping BHOs got a viable exit strategy.............i mean, secondary strategy...cause when these companies start falling off the wayside, BHO will at least have the chance to say he indeed made 'chaaaaaaange'

(no BHO bashin or name calling in my post btw)

If they don't take the money with strings attached and they fail as companies, that's called capitalism. Why do you hate capitalism? It's just the market at work.

^ let's see who takes help post BHOs mandate josh...let's see....my guess - nobody...not banks, not auto, not pencil companies...nada...even if they need it, they won't...why? because if you do, your company will be BHOs and CEOs would rather retire and live off a fixed income before having to relinquish control to gov't...then what happens?


here's to hoping BHOs got a viable exit strategy.............i mean, secondary strategy...cause when these companies start falling off the wayside, BHO will at least have the chance to say he indeed made 'chaaaaaaange'

(no BHO bashin or name calling in my post btw)

If they don't take the money with strings attached and they fail as companies, that's called capitalism. Why do you hate capitalism? It's just the market at work.

so is not capping pay.

^ let's see who takes help post BHOs mandate josh...let's see....my guess - nobody...not banks, not auto, not pencil companies...nada...even if they need it, they won't...why? because if you do, your company will be BHOs and CEOs would rather retire and live off a fixed income before having to relinquish control to gov't...then what happens?


here's to hoping BHOs got a viable exit strategy.............i mean, secondary strategy...cause when these companies start falling off the wayside, BHO will at least have the chance to say he indeed made 'chaaaaaaange'

(no BHO bashin or name calling in my post btw)

If they don't take the money with strings attached and they fail as companies, that's called capitalism. Why do you hate capitalism? It's just the market at work.

We agree on this: Don't give them the money, period. Let them fail.

Again, Manny, why do you hate capitalism? Let these companies and their oh so smart "talent" face the market.

you're a fucking lawyer jimmy...why are YOU explaining THIS to a guy who's worked for a brokerage company and made a very good living and career off of it? who are you to tell him?

"That is pretty draconian - $500,000 is not a lot of money, particularly if there is no bonus," said James Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. "And you know these companies that are in trouble are not going to pay much of an annual dividend."

I'm with a1 on this and I don't think rad's argument holds water at all. If a company needs these funds, it probably means that:

a) they are in a sector that is reeling from the downturn in the economy

and

b) the company was in a bad financial position to begin with.

Rad, I personally believe that exec pay has grown too much versus the pay of the average employee. Too many CEO's are getting paid much more than their worth versus the worth of the company. They are basically stealing money from shareholders.