Madoff Whistleblower Slams SEC

Feb. 4, 2009— -- A former rival of alleged Ponzi-schemer Bernard Madoff launched a scathing attack today on the Securities and Exchange Commission for its "disastrous" handling of the Madoff investigation.

Harry Markopolos, a money manager who says he spent nine years investigating Madoff, told lawmakers on the House Financial Services subcommittee that the SEC was not competent enough to know that Madoff's business was built on fraud and that the agency was unlikely to investigate someone so prominent in the financial world.

Saying that the SEC "continues to roar like a mouse and bite like a flea," Markopolos accused the agency of having "a combination of incompetence and an unwillingness to take on a major player like Mr. Madoff."

"I gift-wrapped and delivered the largest Ponzi scheme in history to them, and somehow they couldn't be bothered to conduct a thorough and proper investigation because they were too busy on matters of higher priority," Markopolos said. "If a $50 billion Ponzi scheme doesn't make the SEC's priority list then I want to know who sets their priorities."

Madoff, a prominent Wall Street figure and former chairman of the Nasdaq stock market, was arrested in December after allegedly confessing to bilking investors of $50 billion by his own estimates, in what the authorities say was possibly the largest Ponzi scheme ever. Bankruptcy trustee Irving Picard said today in U.S. Bankruptcy Court that nearly a billion dollars has been recovered for bilked investors.

Markopolos said that at times he feared for his life during the years of his voluntary investigation of Madoff because Madoff had nothing to lose.

"Mr. Madoff was already facing life in prison if he were caught, so faced little to no downside to removing whatever threat he felt we posed," Markopolos said.

"At various points in time throughout these past nine years, each of us feared for our lives," he continued, referring to a group of people he said was working with him. "Each time any of us collected information we took risks and fortunately for us we were not discovered."