Saturday, March 20, 2010

How could these events happen ?

I still can not quite come around my thoughts after reading "No one would listen" by Harry Markopols. Well, OK, here is a short review. The book was written by the real person and is, as far as I can gather, completely real story of real life events. It describes ten years long hunt conducted by the author after Bernard Madoff and his investment fund. It started, when his bosses at Rampart company wanted him to invent a financial product which could compete with Madoff double digit returns. However, when Markolopos, equipped with excellent mathematical knowledge, started to investigate Madoff strategies, they appeared to him as bogus. He quickly discovered that Madoff could run Ponzi scheme or was involved in an illegal practice of front running:

"This is a fraud, Frank," I told him. "You're an option guy. You know there's no way in hell this guy's getting these returns from this strategy. He's either got to be front running or it's a Ponzi scheme. But whatever it is, it's total bullshit."

The book than describes the series of failed attempts to inform market supervisors, mainly SEC about the fraud. It is incredible history of ignorance and neglect by the regulator.
It is also the story of human naivety, about the incredible ease with which we sometimes trust in people who are just untrustworthy.

As I wrote before - the most horrific conclusion from reading of this book, is not the Madoff evil nature - but the complete lack of true, deep supervision by SEC and other US and international authorities.

The book ends with chapters that look like advice for authorities - how to improve SEC and make it true regulator and true protector. In this spirit, the author's lawyer, Dr. Gaytri Kachroo has offered a speech at World Legal Forum. It's audio version is available here.

We must ask the rethoric question: "Do they listen now" ???

Finally, when writing about Madoff it is hard not to contemplate on his distorted and depraved mind. Not all know, that he embezzled a lot of money from Jewish charitable institutions, Jewish educational institutions (like Yeshiva University) and foundations. See this as one of the most critical examples....


3 comments:

  1. Mirek, thanks for the great review and links. I find this absolutely sickening. It is as if human creativity becomes completely warped and usurped by darkness. There are other equally sickening crimes that we don't need to detail -- but I agree with you that this one is so audacious that we wonder how it ever could have occurred. The SEC has a lot of questions to answer in this case. How do they justify missing this?

    What I would like to know is what Bernie Madoff has so say, or had to say, about this - how does he understand what he has done? How could he possibly do this, live with this?

    I think that more than SEC reform is needed, but at least one group is pushing for evidence that that reform is happening: see http://www.citizensforethics.org/node/43796
    They filed a lawsuit in January against the SEC for not responding to their Freedom of Information Act request for records about their reforms.

    It is a bad sign when law enforcement has to scramble to keep up with criminals and predators in society, a sad but very real necessity...

    Diane

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  2. Diane, the CREW link was great.

    It explains why I love your country so much, and I wish I was there longer and more often ...

    America may err, but it lways have brave citizens to save it. You should read the book - Markopolos is just such citizen....

    Cheers
    Mirek

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  3. Thanks, Mirek - The the video clip that you posted, showing the anger that would not be assuaged, was very good to see. I think that a lot of people have been outraged for years at a system that tolerated way more than it should have. But the particular depravity of Madoff is truly unique. I'll read the book this summer - thanks again!
    Diane

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