Harry Markopolos

Harry M. Markopolos (born October 22, 1956) is an American former securities industry executive and a forensic accounting and financial fraud investigator.

From 1999 to 2008, Markopolos uncovered evidence that suggested that Bernie Madoff's wealth management business was a huge Ponzi scheme.

[11] He now works as a forensic accounting analyst for attorneys who sue companies under the False Claims Act and other laws, emphasizing tips that result in continuing investigations into medical billing, Internal Revenue Service, and United States Department of Defense frauds, in which a "whistleblower" would be compensated.

[12][13] During 1999, Markopolos learned that one of Rampart's frequent trading partners, Access International Advisors, was dealing with a hedge fund manager who consistently delivered net returns of 1% to 2% a month.

Frank Casey, one of Rampart's principals, met with Access CEO René-Thierry Magon de La Villehuchet, and learned the manager was Bernie Madoff, who was operating a wealth management business in which his clients essentially gave him carte blanche to invest the money as he saw fit, in a set of securities.

The biggest red flag, he believed, was that the return stream rose steadily with only a few downticks – represented graphically by a nearly perfect 45-degree angle.

Based on this and other factors, Markopolos eventually concluded that Madoff could not mathematically deliver his purported returns using the strategies he claimed to use.

[4] With the help of two of his colleagues at Rampart, Casey and fellow quant Neil Chelo, Markopolos continued to probe the Madoff operation.

Casey surprised Ocrant with information that Madoff, whom Ocrant only knew to be one of the largest market makers on NASDAQ and one of the largest brokers on the New York Stock Exchange, actually ran a secretive multi-billion dollar hedge fund, directly managing investors' money.

He also offered to let the SEC send him to Madoff's headquarters undercover, obtain the trading tickets, and compare them with the Options Price Reporting Authority tape.

Casey and Chelo believed Madoff was already a very wealthy man, and on paper it made no sense for him essentially to steal billions of dollars that he didn't need.

Markopolos was willing to accept that possibility, but thought it was unlikely since front-runners don't need the massive amount of new investor money that Madoff kept bringing in.

Additionally, Markopolos believed that if Madoff was front running, he would have to siphon off money from his broker-dealer arm to pay the investors in his hedge fund.

[4] Soon after his second submission, Markopolos traveled to Europe with Magon de La Villehuchet to help get investors for an alternative product to Madoff that he'd developed for Rampart.

Each manager believed that his fund was the only one from which Madoff was taking new money, a classic "robbing Peter to pay Paul" scenario.

To his mind, this was evidence that the Russian mafia and Latin-American drug cartels were invested with Madoff, and might want to silence anyone who threatened the viability of the hedge funds.

[21][23][24][25][26] Even after leaving Rampart in 2004, frustrated that he was in a business that had to compete with cheats and lawbreakers,[19] Markopolos continued to be driven by the intellectual challenge of solving the problem, and the ongoing encouragement from Boston SEC staffer Ed Manion.

The culmination of Markopolos's analysis was a 21-page memo sent during November 2005 to SEC regulators, entitled "The World's Largest Hedge Fund is a Fraud".

In his book, Markopolos wrote that this was a sign Madoff was running out of cash and needed to increase his intake of new funds to keep the scheme going.

[4] On June 3, 2009, Markopolos told a conference at Boston College, his alma mater, that he believed Madoff personally kept less than 1 percent of the $65 billion reported stolen, and would probably lose what remained of his portion to money launderers.

[29] Thierry Magon de La Villehuchet committed suicide soon after Madoff's scheme collapsed, having lost $1.5 billion of his own and clients' money.

[4][30][31] On February 4, 2009, Markopolos testified before the United States Congress' House Financial Services Committee's capital markets panel and on March 1, appeared on CBS's 60 Minutes.

"[37] He also added that during 2005 it was Meaghan Cheung, the branch chief of the SEC's New York office, to whom he gave his 21-page report alleging that Madoff was paying old investors with money from fresh recruits.

[37] He testified he gave details about the case during 2005 to John Wilke, an investigative reporter for The Wall Street Journal, but that it was never pursued.

[41][42] He disclosed information regarding a dozen as-yet-unknown foreign Madoff feeder funds, "hiding in the weeds" in Europe, the victims of which likely included Russian mafia and drug cartels, "dirty money" investors.

[44][46] In his interview with Steve Kroft of 60 Minutes, Markopolos said the biggest warning he noticed during his initial 1999 analysis of Madoff was that he reported losing months only four percent of the time.

Markopolos noted that during his tenure at Rampart, he traded with some of the biggest derivatives companies in the world, and none of them dealt with Madoff, because they didn't think his numbers were real.

He assailed the SEC once again for ignoring his warnings, saying that the only reason Madoff was caught was that he ultimately collapsed under the weight of his own lies.

He also believed that the SEC's enforcement staff didn't take his complaints seriously, because they were expecting legal proof Madoff was a fraud, not the mathematical evidence he provided.

[4] Harry served in the United States Army Reserve and obtained the rank of Major and held the branch of Civil Affairs.