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Harry Markopolos Book Review: No One Would Listen

“No One Would Listen” is the story of a great American named Harry Markopolos.  In case any of my readers have been on the moon for the last two years, here is a description of the book in exactly 92 words:  Harry Markopolos is a private citizen who “caught” Bernard Madoff, the most heinous financial criminal in history.  Harry didn’t just catch him; he developed mathematical, incontrovertible proof that Madoff was defrauding investors out of billions of dollars.  Harry then spent close to ten years on a crusade, trying to interest various law enforcement authorities in this crime with the goal of stopping Madoff.  Harry and his message were uniformly ignored.  Eventually, when Madoff’s scheme collapsed—entirely of its own volition—Harry was proven correct, and he became a media sensation virtually overnight.

That is a bare-bones synopsis of the book, and it would make for an interesting read no matter how dry one tries to make it.  But the real value of the book—and the reason why I chose to review it in this blog post—is two-fold.   First, the book provides  brilliant insights into the psychology of a whistleblower.  Second, and most important, the book provides insights into government culture and the culture of Wall Street that no qui tam whistleblower can afford to ignore.

I. The Bernie Madoff Saga

Bernard Madoff was once one of the most powerful and respected “money men” in the world.  At different points in his career he was a stock broker, a securities dealer, and an investment advisor—and in each of those fields, he was one of the most respected guys around.  He was once chair of NASDAQ; indeed, he co-founded NASDAQ.  His personal wealth was estimated to be in the tens of billions.  And, as is expected of any ultra-wealthy person, Madoff was active in many philanthropic endeavors.  In short, he appeared in every way to be not only a model citizen, but a super nice guy.

At some point, for reasons still unknown to the world, Madoff abandoned his legitimate business activities and started running a Ponzi scheme.  In other words, Madoff was not investing any money or engaging in any legitimate business activity at all.  Like every other Ponzi schemer, Madoff became nothing more than a scam artist convincing people to part with their money.  Simply put, he was no different than the criminals that befriend the elderly and scam them out of their life savings.       

His Ponzi scheme ran for at least 12 years, and reached pretty much every corner of the world.  Minimum estimates place his theft somewhere between $40 and $60 billion USD, but the true figure will never be known.     

Harry Markopolos, a Boston financial analyst who considers mathematics a hobby, figured out that Madoff was running a scam.  What’s worse, he figured it out while Madoff’s scheme was probably still in its infancy.  Harry did not engage in conjecture or guess-work.  He developed mathematical proof that Madoff was not engaging in any legitimate investment activities whatsoever.  As a patriotic American, Harry then tried for close to ten years to explain his proof to the S.E.C., the Attorney General of New York, and others.   Had anyone listened to Harry, the largest financial fraudfeasor in history would have been caught, and billions of dollars in investor funds would have been saved.

Instead, Madoff was never caught—he turned himself in once his Ponzi scheme no longer had the momentum to sustain itself.

This book is mandatory reading for every qui tam lawyer, even though Harry’s pursuit of Madoff was not a qui tam case (indeed, as Harry states in his book, Madoff managed purely private funds and thus there was no way to pursue Madoff under either the Federal False Claims Act or a state false claims act).  He had no monetary incentive for this, it was purely out of patriotism.    

Harry is a great American not because of his dogged pursuit of truth and justice, despite all the obstacles against him, or because of his deeply-ingrained love for his country, although he has those things in abundance.  He is a great American because he is not a man of half-measures.  When Harry goes after something, whether it is Madoff or his beloved mathematical equations or anything else, he has only one approach—as another great American once said, “Full speed ahead, and damn the torpedoes.”

II. The Anthrologist’s Eye

As I noted earlier, the book provides valuable insight into the culture and inner workings of two worlds: government and Wall Street.  When I say “culture” I mean that Markopolos’ book is almost anthropological in nature.  At times, Markopolos’ narrative reads like a description of a visit to some remote location and his interactions with the strange tribes of people who live there. 

As with any journey, Harry begins at the beginning; that is, he starts off by describing the formidable lessons he learned early in life. 

This passage from early in the book is illustrative: “Bernie Madoff wasn’t a complete aberration; he was an extension of a cutthroat culture that was prevalent from the day I started … the industry is based on predator-prey relationships.  If you don’t know who the predator is, then you are the prey.”

Indeed, Markopolos is able to separate himself from his surroundings in a way that brings Ray Liotta’s portrayal of Henry Hill in “GoodFellas” to mind.  The brilliance of the movie GoodFellas was Henry Hill’s ability to analyze and describe the Mafia world despite his immersion in it.  Like Henry Hill, despite Markopolos’ immersion in the culture and corruption of the financial world, he never forgets the values that his immigrant parents taught him.  Harry was taught simple lessons early in his life:  “Either you [are] honest or you are not …  [It’s] not possible to be partly honest.”  

As a result, during all his time in the world of “rip your face off financing,” he never forgets that he is a stranger in a strange land.                   

When he turns his keen anthropological eye toward the government the result is no less interesting.  No qui tam lawyer will, however, share his surprise at the lack of enthusiasm shown by the federal agency to whom he first reported the fraud (in this case, the S.E.C.)  The fact of the matter is that cooperation from the federal or state agency is, in every in qui tam case, absolutely crucial to a successful outcome. 

Markopolos’ journey is also one with which any whistleblower will be familiar, at least up to a certain point.  The feelings of helplessness that Markopolos experienced only increased over time, because he was not successful in his quest to blow the whistle on Madoff.  At that point, thank goodness, his journey parts company with that of many qui tam relators. 

His journey is different largely because qui tam relators in federal cases have the U.S. Department of Justice on our side.  The book should renew the appreciation qui tam lawyers have for the U.S. Department of Justice’s Civil Fraud Division.  We are truly fortunate in federal cases to have the involvement of the United States Department of Justice.  The civil enforcement folks at DOJ are top-notch litigators who take their obligations to investigate every case filed under the statute very seriously. 

They may not always agree with those of us representing qui tam whistleblowers, and we may not always agree with them, but I have never felt like the folks at DOJ’s civil frauds division didn’t listen carefully to what my qui tam relator clients have to say.  More important, if there is a disagreement, it is normally about something that reasonable people can disagree about.   

As a result, DOJ can, and often does, help the agency to change its mind and arrive at the right conclusion about a case.  At a minimum, DOJ makes sure the agency does not actively discourage an investigation.  As Harry learned, unlike the lawyers at DOJ, lawyers at a specific agency often do not have what I like to call “a law enforcement mindset.”

Now, that is not to say that Harry did everything exactly as he should.  In fact, he made some serious missteps in the way he went about trying to alert authorities.  For example, he submitted an anonymous report to New York Attorney General Elliot Spitzer.  Anonymous letters, no matter how detailed, are rarely taken seriously by government officials, who receive thousands and thousands of such letters each year. 

Moreover, by titling his first S.E.C. submission “The World’s Largest Hedgefund is a Fraud” Harry basically guaranteed that his submission would be viewed as a crank letter right out of the gate.  Even worse, if any government reader made it past the title, the first sentence he or she read was probably his or her last.  In that lead sentence, Harry seemingly reduced himself to a second-rate huckster by writing:  “In 20 seconds or less I will show you that the world’s largest hedgefund is a fraud.”

III. The Anthropologist’s View of the S.E.C.

The fact that Markopolos inadvertently did his best to discredit himself does not excuse the S.E.C., however.  First,  because of his reputation for integrity and honesty, those S.E.C. people who actually knew him personally (particularly the people in the Boston office) knew that Harry Markopolos was a man to be taken seriously, and that is exactly what they did.  From the beginning to the end, people in the Boston office of the S.E.C. were convinced of Harry’s cause.  So it would not be accurate to say that every single person at the S.E.C. wrote Harry off as a nutcase.  He had regional officials of the agency (like Boston Section Chief Mike Garrity) doing their level best to push his case up the ladder. 

Second, and more incriminating for the S.E.C., a number relatively high-ranking officials had numeorus interactions with Harry, including multiple interviews, emails, letters, etc.  Eventually, he got to be on a first-name basis with some of them.  They thus had plenty of time to size Harry up and to investigate carefully his allegations.   It is at this point in Harry’s story that S.E.C. layer and Branch Chief Meaghan Cheung enters the picture.

Almost from the very instant she is introduced to the reader, Meaghan Cheung’s dangerous combination of ignorance and arrogance is on full display.  The fact that she did not take the time to seriously study Harry’s information or to even read it thoroughly is not the scariest thing about Ms. Cheung.  Indeed, one can even be forgiven for that, as I mentioned earlier.  No, the scariest thing is the sense of superiority shown by Cheung. 

She literally thought she knew everything there is to know about everything; she considered herself a Master of the Universe.  She knew, for example, that Bernard Madoff was a very respected man on Wall Street.  She probably thought him a wonferful person.  And there is no question that she considered herself a Master of the Universe.  And she knew that Harry was this little Greek guy.  In her view, he was a nobody, and he was trying to assail the character of her fellow Master of the Universe.   

As a result, in her mind, she didn’t need to waste her precious time with someone like Markopolos.  The sort of lawyer who thinks that there is nothing that they can be taught is obviously someone that hasn’t litigated very many cases, or even worse, who has done one case of significance.  Indeed, that is exactly the case with Ms. Cheung.  In Chapter 5, when she proudly explains to Harry that he doesent’ matter to her, she includes a statement of her bona fides:  “I did the Adelphia case.”   

One important case is enough to make a lawyer feel like they are on top of the world.  Lawyers with multiple significant cases know that no matter how well one important case turns out, the next one might make you feel like you got punched in the stomach.    Lawyers with experience know that this is called a “learned profession” because no matter how much experience one has, there is always something that can be learned.   A true learned professional is motivated, at least in part, out of a fear of learning something new the way Meghan Cheung did.

Cheung didn’t respond to Harry’s complaints or emails about Madoff, except to provide acidic commentary to Markopolos’ claims.  We can be absolutely certain that after each phone call or email from Harry, Meaghan Cheung went to her other smart buddies at the S.E.C. enforcement division and made fun of Markopolos and the absurd, preposterous story he was telling. 

I would bet that Meghan Cheung and at the other Masters of the Universe at the New York S.E.C. office probably developed Harry Markopolos impersonations that they enjoyed very much.  They might have even made up a joke or two about him. 

I hope Markpolos gets some satisfaction out of thinking of Cheung and all of her oh-so-smart-friends at the S.E.C. making fun of him around the office water-cooler, because we can be 100% certain that Meaghan Cheung isn’t laughing now.          

In case I have not made the point clearly, I want to clearly say that I admire Harry Markopolos.  I believe he is a great American; I am proud to share a nationality with him.  In his journey as a whistleblower, he identified many weaknesses in government and in our financial markets, and in our society as a whole. 

I point this out because as a patriotic, red-blooded American, Harry is not satisfied pointing out weaknesses and flaws in our country.  He is way too American to content himself with pointing out flaws in our social structure.  No, Harry feels a deep seated need to fix it the problems he found.  This need is what makes our country the best in the world.   

Nevertheless, Harry and I part ways in the last section of the book, when he tries to formulate solutions to the problems he describes so well. 

IV. The True Story of No One Would Listen

I believe the behavior of the S.E.C. and Meaghan Cheung is a form of corruption.  I believe also that the story of this unique brand of corruption is the true genius of No One Would Listen.  It is also the reason it should be read by everyone interested in the future of our country. 

It is not Latin-American or Russian-style corruption, however.  At least that sort of corruption has a rational basis—i.e., in many parts of the world, government people get money for ignoring or prosecuting various behaviors.  No, this is certainly irrational and a-typical corruption, but it is rampant and it is deadly.  

Harry recognizes this as well, I think, and the final chapters of his book are dedicated to describing solutions that he believes workable. 

Harry is very skilled at pointing and describing weaknesses in our government.  He is less skilled at finding answers to those problems—which is no shortcoming on his part.  Harry just doesn’t realize that if these things could be easily solved, they would have been solved long ago. 

It is not that surprising that Harry attempts to come up with solutions—lots of people think there are simple solutions to complex problems.  What I find amazing about the closing chapters of the book, however, is that Harry’s solution to the problems he encountered with government is—brace yourselves—more government.  Whiskey…Tango…Foxtrot….

With an almost child-like innocence, he calls for the creation of a single “super agency” to regulate banking.  One of the key elements of his plan is—and I am quoting here—a “super-duper call center” to log and track all complaints and/or investigations launched by the super agency.  

He also fails to recognize one of the simple truths of life in a civilized society:  and that is that no set of written rules will ever be capable of regulating even the simplest human activities, let along activities as complex as those of Wall Street or the federal government.  So Harry’s call for “a simple, easy-to-follow set of rules and regulations” is simply naïve.  From there, his demands only get worse.              

What Harry fails to realize is that Madoff was able to pull this off because he was in the right place at the right time. (Or maybe he was in the wrong place at the wrong time…)  As Madoff himself crows in the book, “These people [the S.E.C.] are light years behind…they don’t really understand this stuff….” 

Indeed. 

The world of financial products has changed and grown at a mind-boggling rate in recent years, just like every other highly-specialized field.  Information technology, financial products, biotechnological engineering, you name it, and it is more complicated now than it was five years ago.  What’s worse, the change has not been incremental—in other words, the world does not become 5% more complicated each year.  Rather, it grows by irregular leaps and bounds, and the rest of society—never mind government—finds it quite difficult to keep pace.

That is at least one of the reasons why stock bubbles form so readily during periods of technological innovation. 

We can hardly fault Harry for his attempt at solutions to the problems he found in government—he is, after all, a great American.

More than that, he has written a great book that should be read by everyone.