Several whistle-blowers filed complaints and suspicions about Bernard Madoff with federal securities regulators years before the disgraced financier's December arrest for allegedly running a massive Ponzi scheme, newly released federal records show.
Filed with the Securities and Exchange Commission from 2003 to 2006, the complaints urged the agency to investigate Madoff's purported trading strategy, his nearly unbroken claims of positive investment returns and other potential red flags.
The complaints appear to show that Massachusetts financial investigator Harry Markopolos, who recently told Congress about his unsuccessful nine-year crusade seeking SEC action against Madoff, wasn't the only one who relayed warning signs.
"I am deeply concerned that Madoff is running a very sophisticated fraudulent pyramid scheme," stated an October 2005 e-mail to the SEC from an anonymous "concerned investor" who claimed the suspicions led him or her to withdraw more than $5 million from Madoff's investment fund.
"Although I cannot point to anything concrete, their returns of 12% to 18% annually for the last 20 years or so tells me something is wrong there," the whistle-blower wrote. "If you can look into their operation, perhaps it will reveal a greater truth."
Similarly, a November 2006 letter from an unidentified complainant urged the SEC to investigate the financial relationship between Madoff and Fairfield Greenwich Group, one of several feeder funds that channeled investors' money to the financier.
"No down months and low volatility all the time just doesn't add up," the letter warned.
Separately, an April 2006 letter to then-SEC chairman Christopher Cox alleged that Madoff's investment fund had commingled "well in excess of $10 billion" invested by a deceased former client.
The letter, referred to SEC investigators by Cox's correspondence staff, termed the alleged action an example of "greed which should be investigated by the proper authorities."
The SEC declined to comment on the complaints, which were among a handful of records released to USA TODAY in response to a Freedom of Information Act appeal application. The agency, the target of public criticism for failing to stop Madoff's alleged scheme, had initially declined to release any records involving the suspect in what may be a $50 billion financial scam with victims worldwide.
However, SEC associate general counsel Richard Humes said the limited release — 12 complaints, including several clearly recognizable Markopolos warnings previously released by Congress — "would not unduly harm the ongoing investigation" of Madoff. That investigation includes an examination of the SEC's handling of complaints involving Madoff, who is under house arrest in New York City on $10 million bail pending criminal prosecution.