Markopolos, Harry - No One Would Listen by No One Would Listen

Author:No One Would Listen
Language: eng
Format: epub

Gaytri Kachroo became my lawyer. She began negotiating with...

Be­cause I had told Gaytri ab­so­lute­ly noth­ing about Mad­off, she prob­ably thought I was over­re­act­ing. But as she lis­tened to me yelling about the SEC’s in­com­pe­tence, about their stu­pid­ity, about their re­fusal to do their job, as she lis­tened to me let­ting all my anger and frus­tra­tion come out, she fi­nal­ly re­al­ized that I’d had pre­vi­ous en­coun­ters with that agen­cy. And she be­gan won­der­ing about that.

Chap­ter 7

More Red Flags Than the So­vi­et Union

In Au­gust 2007 Frank Casey sent me an e-​mail about a new fi­nan­cial prod­uct he’d found on the In­ter­net site Naked­Shorts: “In­vest­ment deal­ers are ex­cit­ed to an­nounce the newest struc­tured fi­nance prod­uct—Con­stant Obli­ga­tion Lever­aged Orig­inat­ed Struc­tured Os­cil­lat­ing Mon­ey Bridged As­set Guar­an­tees, or Colosto­my Bags. De­signed to ac­com­mo­date the most so­phis­ti­cat­ed in­vest­ment strate­gies, Colosto­my Bags con­tain the eq­ui­ty tranch­es of Struc­tured High In­ter­est Tax­able deriva­tives, or Shit, and are lever­aged an in­fi­nite amount of times through the in­no­va­tive use of deriva­tives.”

I prob­ably smiled sad­ly as I read it, know­ing that it was no less re­al than Mad­off, and that if it ac­tu­al­ly ex­ist­ed and some­body could make mon­ey from it, they would sell it. I wrote back, “That’s an awe­some-​sound­ing prod­uct! Who do I call to get an al­lo­ca­tion? I want to take down a small piece first, say $100 mil­lion, then pitch them to the French HFOF’s as a high­er re­turn, slight­ly high­er vol­ume prod­uct than Mad­off.”

When Neil was sit­ting across the desk from me at Ram­part and things got a lit­tle hairy, he would re­mind me that his moth­er, who nev­er in­vest­ed in any­thing more risky than a cer­tifi­cate of de­posit, had tried to talk him out of go­ing in­to the fi­nan­cial in­dus­try. “My Dad was in fa­vor of it, telling me Wall Street peo­ple are smart. They make a lot of mon­ey. Get in the trench­es and do a good job. But my Mom thought in­vest­ment peo­ple were scam artists, and want­ed me to be­come some­thing re­spectable: ‘Be a doc­tor or a lawyer.”’

Then he would add, “And we aren’t even Jew­ish!” We’d laugh and man­age to some­how get through the cur­rent cri­sis. But as the years went by, it oc­curred to me that maybe she knew what she was talk­ing about. Af­ter spend­ing so many years try­ing to con­vince gov­ern­ment of­fi­cials, re­porters, and fund man­agers that Mad­off was a fraud and be­ing re­ject­ed or ig­nored by ev­ery one of them, it’s hu­man na­ture to at least won­der if maybe ev­ery­body else was right and I was wrong. But the truth is that I nev­er doubt­ed my­self. There is a sin­gle ir­refutable fact that I re­lied on: Num­bers can’t lie. That’s the ba­sis of my ca­reer. First ex­am­ine the num­bers, then in­ves­ti­gate how those num­bers were gen­er­at­ed.

The ques­tion I’ve strug­gled with, which all of us on the team have strug­gled with, is why did so many peo­ple per­mit this fraud to con­tin­ue for so long? The in­dus­try knew, there’s no ques­tion about that. Af­ter Mad­off col­lapsed, I was told so many sto­ries about peo­ple who knew he was a fraud and warned oth­ers.

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