Original subtitles

Wall Street is one big turf war.

The basic concept of Wall Street,

which sometimes the regulators lose sight of,

is, it's a for-profit enterprise.

By benefiting one person,

you're disadvantaging another person.

[indistinct conversation]

I had no inkling that

anything was gonna change my life that day.

Okay, guys, let's get ready to go to karate.

Come on. Get your stuff.

Let's go.

Wall Street veteran Bernie Madoff

has been arrested and charged with running

a $50-billion Ponzi scheme.

This is one of the biggest fraud cases ever.

His name is Bernard Madoff.

He is under arrest, charged with running...

The SEC accusing Bernard Madoff

and his investment firm...

You don't get to steal that much money overnight.

I don't know if you can answer this-

But he had 17 billion under management.

How do we get up to that?

And his investment firm...

The SEC doesn't pay attention to it.

Assumed the right things were invested...

We lost everything.

We lost everything.

We are major crime victims.

Bernie Madoff stole every dime we gave to him.

$1.3 million. That's all gone.

The retirement is never.

I guess his addiction was money.

The only sorrow he feels

is that he got caught, and he's behind bars.

The government let us down.

They were supposed to watch him, and they didn't.

What is the purpose of the SEC

other than to investigate fraud?

Where were they?

Shortly after Bernard Madoff confessed,

I got a call from the former chairman of the SEC

asking me to investigate how come the SEC

did not uncover Madoff's Ponzi scheme.

What the heck went on?

We did not bring an enforcement action.

We're using the Madoff scandal as a platform

to set the basis for regulatory reform.

Nothing about this case was ever believable.

It was always the twilight zone.

And that's how you knew it was the Madoff case,

'cause every time you saw something,

it never made sense.

Joined Rampart August 1991.

Started out as a portfolio manager

and worked for the chief investment officer.

Harry's a loveable, affable geek.

He's extremely bright,

magnitudes brighter than me.

And he can make the numbers dance.

I mean, he looks at numbers, and they sing a song to him.

Frank Casey was the horse

that did the work on the money.

He was the moneyman.

My first impression of Harry was, I would say,

maybe the crazy professor.

Neil was my backstop.

He would look at all the math, all the formulas,

prove all the math, all the formulas.

Check all the spreadsheets.

I was trying at the time

to build a new product for Rampart,

and when Harry mentioned to me

that he knew a fellow down in New York

that had hired a manager, a single manager,

instead of a group of 30 or 35 of them,

who was putting out a return stream

similar to what I was trying to do,

this I had to go see.

That's when I went down to New York

to meet the investor that had hired this manager:

Thierry de la Villehuchet.

He said, "Well, I can't tell you anything about him."

And that perked my ears up.

I had been around Wall Street since 1974,

and very seldom do you ever hear of a manager

that no one can talk about.

So I begged him

for the opportunity to compete with this fellow.

He showed me the return stream,

and I brought them back to Harry in Boston.

Late '99, Frank comes back from New York,

and he hands me a marketing document.

Read the strategy description.

Looked at the performance line.

It was straight up, 45-degree angle.

It looked like nothing from finance that I've ever seen,

'cause the markets go up, then they go down.

Harry looked at it for no more than four or five minutes.

He turned to me.

He says, "Frank, you know options.

You know this is a fraud."

[indistinct police radio transmission]

And he said, "Are you sure?

"Is your math good enough to figure this out?

Can you reverse engineer it?"

And so I felt, you know, a little bit offended,

and my pride was wounded.

"What do you mean, something wrong with my math?

"These numbers don't exist.

"Don't you understand?

"You don't get straight lines in finance.

It never happens."

I said, "Oh, but, Harry, I need to believe.

Come on. We got to compete."

So he began building mathematical models

to show what the probability would look like,

what the returns would look like

if this guy was actually doing what he said he was doing.

And after four hours, I knew this was explosive.

This is gonna rock the world.

Everybody's gonna sit up and take notice.

I remember Harry looking at the numbers and saying,

"Frank, if this guy was a professional baseball player,

he would be hitting a .964."

It was pretty clear that it was a fraud.

It took me five minutes to figure it out.

Thierry de la Villehuchet was a sailor,

and I'm a sailor.

We built a bit of a rapport that first day.

I said to Thierry, "How much is this guy running?"

He says, "Oh, I don't know.

I'd say $2 billion or $3 billion."

So that made him automatically

the largest manager on Wall Street at the time,

and no one knew that he was doing it.

He then mentioned that his money manager

was Bernie Madoff.

I said, "Okay, this is a massive fraud.

"It's the biggest fraud ever.

I better have somebody recheck my math."

And so I gave my math to Neil Chelo,

who was my assistant portfolio manager at the time.

My initial thought was, "Too good to be true,

but maybe I'm missing something."

I needed to dig in.

So he checked, and he ran through all the math.

Now, this wasn't gray area.

This was black-and-white.

This was fraud.

When I first saw this portfolio-

seven times bigger

than the number of options in existence.

So if you only have this many options in existence

and you're seven times larger,

that's a problem.

Harry said, "Frank, you're an options guy.

"You know that this can't be true.

It's got to be a fraud."

And then he says, "I probably-

I figure it's even a Ponzi."

And I said, "Whoa.

That's a big word."

You're basically robbing Peter to pay Paul.

It was called a Peter-and-Paul scheme

before Ponzi came about in Boston

in the late '20s, early '30s.

What I do is, I bring the money in,

and I'm always paying everybody else-

the earlier investors-

with the money that I'm bringing in.

You need an ever-increasing flow of new victims

to pay off the old victims.

You can build that Ponzi scheme up

until it becomes so big that its own weight crashes it,

because you cannot raise money fast enough

to pay back all the people you owe a return to.

I went to some very sophisticated,

successful friends of mine

who are established on Wall Street,

and they both suggested different ways

in which to invest my money,

one of which was to invest in the Ascot Fund,

which turns out, unbeknownst to me at the time,

to be a 100% feeder fund for Bernie Madoff.

And once the money was put in,

you got these wonderful monthly reports.

Every month, you were richer than the month before.

What could be bad?

And life went on.

And we didn't take money out, and it just grew.

And now, you got to remember that this guy, Madoff,

he became the chairman of NASDAQ.

I mean, this was a very powerful, prominent man

who ran a major trading company.

You didn't make accusations lightly

against an individual like that.

The fact that the market

goes down 300 points or up 300 points,

take my word, but for the most part,

you can ignore all of that stuff,

if you're investing for your retirement or whatever,

you don't have to get involved in all these insane moves

that occur in the marketplace.

It's unfortunate for me

that I have to deal with this every day.

And then Harry took it

to the Boston Securities and Exchange Commission

in May of 2000.

The mission of the SEC is to protect investors;

maintain fair, orderly, and efficient markets;

and to facilitate capital formation.

In the wake of the Great Depression,

Ferdinand Pecora examined high-profile witnesses

and uncovered many abusive practices by the banks.

This led to the formation

of the Securities and Exchange Commission,

the government body that exists today

to regulate U.S. financial markets

and to protect your savings.

I called Ed Manion over at the SEC's Boston office.

And he said to them,

"I've got a fraud here that you need to investigate."

You know, our hope was that the SEC

was gonna quickly do something about it.

I wasn't surprised that Harry decided to push.

He never asked for counsel before he went to the SEC.

He just did it.

He was calling

one of the most successful people on Wall Street

a fraud in a Ponzi scheme,

and had that knowledge become known,

he could have ruined entirely someone's investment career.

Days passed. Weeks passed.

Months passed.

And we never saw anything happen.

Madoff just continued to report good numbers.

What happened here?

We literally receive hundreds of thousands of complaints

every year, hundreds of thousands.

We were surprised, I guess,

at the extent of the lack of appropriate investigation.

You know, when we first went into it,

we thought perhaps that they had done certain things,

but Madoff was able to fool them

and would always provide false documents to them,

and there was almost nothing they could do to uncover it.

But what we found was,

there were steps they could have taken.

They simply didn't take them.

Our economy is in crisis.

We thought the enemy was Mr. Madoff.

I think it's you.

You were the shield.

You were the protector.

How are we supposed to stop Madoff?

He had many billions of dollars to protect.

If he had found out about us, that could have been dangerous.

And here's the reason

we were worried about risk for Harry.

There was this fellow

that had blown the whistle

on a big mutual fund fraud up in Boston,

and they found that poor fellow beat

and left for dead in a parking lot.

I think there was a legitimate threat there.

I mean, Madoff was a very powerful man.

And so Harry was fearful for his life.

And he began finding ways to protect himself.

Harry Markopolos and I have known each other

since shortly after Harry moved into town

and came into my office due to the fact

of wanting to be issued a firearms permit.

We talked about,

"Do you think at any point in time,

"you might want to kick it up a notch

and have it for self-protection?"

You hate to think about those things,

but you better think about them.

I was asking a lot of questions.

I was making a lot of phone calls.

I figured, anybody who was stealing that large

would go to extreme measures to protect the scheme,

protect the organization.

And I was worried about getting taken off the playing field.

You have to be a real evil person to do this,

and no telling where they're gonna stop,

where the line is that they won't cross.

So you just have to assume there is no line,

and you have to take extreme measures to protect yourself.

So I was very frightened,

terrified.

He was a very good child

until he became three,

and then he got into a lot of little mischief.

Questioned the teachers, in fact.

He said that they didn't have the correct question

to his answers.

Well, my school was a very small, Catholic,

all-male preparatory school.

These are our trophies from athletics.

You can see that we won many district championships

and many, many state titles.

I mean, this school has never been afraid

of playing much bigger schools in sports.

We were never afraid of backing down academically.

Whether it was our debate team or our football team,

we would take on all comers.

Basically, what they told us was,

you have to stand for something,

and you have to be able to fight for what you stand for.

I've fought many a time and not won.

You know, most people were bigger than me,

so you just get used to it.

I don't mind losing.

You just have to show up.

The management of Rampart and even myself

were praying that we could come up

with something to compete.

So Neil and I are talking back and forth,

and we're complaining, both of us,

about the pressure we're getting from marketing.

And it's hard to compete with someone

if you're competing with a fraud.

We tried to develop at Rampart

other products that we might be able to get

Thierry de la Villehuchet to market for us.

Thierry was a French nobleman and a noble man.

He formed a company called Access International Advisors.

And the word "access" was the key.

He was getting you access, if you were a foreign investor,

to some of the best money managers

in the United States.

And I wanted access to his people at Access.

Thierry showed me pieces of paper,

and he said, "These are the trade confirmations

I get from Bernie Madoff every day."

And he was giving the papers to clerks.

I said, "What are you doing this for?"

And Thierry said, "Well, I'm trying to make sure

"that these daily confirmations that I get actually match up

with my monthly statements that Bernie mails me."

All Bernie was doing

was coming up with fake trade tickets

that reportedly show that he was generating

those types of returns that everyone wanted.

I said, "He makes up these pieces of paper."

And then that's when Thierry said,

"Frank, you just don't understand.

We have done everything to check this guy out."

You could have shut Madoff down in one half hour

by just following up on one of his allegations

that they were not conducting trades.

As to the specifics of the investigation,

I can't answer.

The most basic step that one takes

in order to figure out whether somebody is trading is,

you have these independent third parties.

So when you conduct a trade,

you have to clear it through some third party.

So they asked Madoff whether he clears through DTC.

He said, "Yes."

So he though-he said to us that, you know,

he remembers that night,

that he knew, the next day, the whole thing would come out.

But the SEC never called DTC.

They never requested the information.

People were seeing the SEC go in.

Nothing was found, and they said,

"Green light for investing with Bernie."

And they did.

They invested more money with him.

The Security and Exchange Commission gave a green light.

They said, you know, "It's safe.

Put your money there."

So we put our money there, trusting him

and mostly trusting our government.

If our bosses knew

that we were pursuing a case against Madoff,

they would have told us to shut down the investigation.

So it would have been a career risk for us

if we hadn't complied.

And, of course, we had no intention of complying.

You can always find another job,

but you always have to live with yourself

if you don't do the right thing.

Been out of the army, at that point, five years.

You know, but I took an oath.

I took an oath to support and defend the Constitution

and this nation against all enemies,

foreign and domestic.

So I looked at Madoff as a domestic enemy.

And Frank Casey, he was in the army too

as an officer just like I was.

He took the same oath.

We began building an intelligence network.

We were trying to find people who were invested with Madoff

since no one would declare that they were invested with Madoff.

We knew pretty much every broker that traded options.

We went out, and we spoke to all these brokers.

They would try to give up information

without disclosing too much about their clients.

I would give up information without disclosing

that I was actually hunting Madoff.

And I would say simply to some analysts,

"What do you know about Bernie?"

You never even had to use the last name.

And they would always come back with,

"What do you know about Bernie?"

And everyone we talked to said,

"I don't do business with Madoff,

"but I heard he's a huge player in the options market.

Can you get me an introduction?"

You didn't want a secret getting out like this

because that could only result in harm.

My wife knew.

We didn't have children at that time,

and so, you know, if the worst they're gonna do

is shoot my wife or me, that's bad for us.

But at least Neil and Frank

can go forward to the authorities,

and it makes the case pretty compelling.

"Hey, Harry died of acute lead poisoning

of the high-speed multiple-entry-wound variety."

She's petite, well-spoken, well-mannered,

well-educated, a good conversationalist.

It was a very strange wedding.

They had a band in this Chinese restaurant

with a big dragon across the wall,

but they had a Greek band.

That's Harry for you.

I was way too young when I got married.

I was only 42.

I really didn't know what I was doing.

And I started the Madoff case

probably six to seven months later.

We figured that since we hadn't heard anything

from the SEC submission in May of 2000,

we would try to blow the cover off of this deal

and push the SEC into action

by making it public.

You know, I was trying to get the media to pay attention.

And the world doesn't know this, but I went to Forbes.

I sent them 12 pages.

And we have a conversation, and for some reason,

their publisher killed the story,

didn't want to do it.

I have a fear.

I have a fear of being mundane.

I enjoy the challenge.

And consequently, when I came across Madoff,

it wasn't a big reach for us.

It was to level the playing field.

It was the right thing to do.

Maybe you don't get to become

the richest person on Wall Street,

but you can surely sleep at night.

It hurts to think that I worked my whole life

to retire and do things that I want to do,

and these are the things that were taken away from us,

just culled out, just taken away from us.

As a young adult, I always thought that,

you know, going out and working and doing the right thing

and saving my money

and sharing my life with the woman that I love

was the American thing to do.

And when...

When Madoff happened, it just took it away,

stripped everything.

Think on reflecting what the American public feels.

How are they supposed to have confidence

that if somebody goes to you with a complaint,

gives it to you on a silver platter

with all of the investigation, with all of the numbers,

with all of the data, telling you exactly what he did,

how he did it, and why he did it and how he knows that,

you don't know anything.

You're supposed to find it out before it happens.

I was overseeing a conference in Barcelona,

which we had started as we saw the European market expanding.

And Frank was attending that conference.

So we took a taxi together to the hotel.

Mike starts the conversation

riding from the airport to Barcelona with,

"I'm an investigative reporter,

"and I know most everyone on Wall Street

"that's to be known-

"surely every hedge fund guy

because I write stories on them."

He said to me, "And I'll bet you a steak dinner in Barcelona

"that you don't know every hedge fund.

In fact, I bet you..."

"That I can give you a name

that's running $3 billion or more."

Sure, I'll take that bet.

And I said, "It's Bernie Madoff."

Well, his head whipped around so hard,

I thought it was gonna come off.

If that was true, it was a story in and of itself.

Nobody had ever heard the name Madoff

mentioned in the same breath as a money manager.

So he bought me dinner in Barcelona.

Frank began to tell me

not only is Madoff managing a lot of money,

but he was adamant that it has to be a fraud.

Then he says, "Frank, I'm going to write

"an investigative article on it.

I'm going to uncover this guy."

And then Mike became, at that point in that cab ride,

the fourth group member to try to hunt Madoff.

Here we had a respected senior investigative reporter

from a major hedge fund publication.

In fact, it was the number one

hedge fund publication out there.

Managed Account Reports, that was it.

Yeah, hi. This is Mike Ocrant.

He's on this case, and he's on our team.

And he writes an article

that exposes this fraud for what it is.

That should bring the whole thing toppling down.

Right. Oh, okay.

Mm-hmm. Mm-hmm. Mm-hmm.

Well, we're gonna figure that out.

He's talking to the derivatives professionals

on Wall Street, and they all said the same thing,

"Madoff's not for real."

Mmhmm. Mm-hmm.

And so he's ready to go to print,

and then in April, he gets that phone call

from Madoff himself.

We really don't know who Bernard Madoff is.

I think he was so powerful,

became so powerful,

people were afraid to challenge him.

White-collar fraudsters always seduce you.

They have the best resumes, went to the best schools,

sit on all the right boards,

have all the right country club ties.

They're political donors, philanthropists.

They live in the best neighborhoods

in the nicest homes.

You never suspect them.

It's only afterwards, in retrospect,

that you see the evil that they are

and the damage that they cause.

It's not the little guys.

It's not the small firms on Wall Street

that cause the big problems.

It's the big firms.

It's the big predators

and big predators like Madoff.

I wasn't surprised

that he necessarily agreed to an interview

because I had known Madoff on and off throughout the years.

This has nothing to do with the institution, I believe.

They spend too much time thinking.

He was always known as one of these rare people

at that level on Wall Street

who would take calls from journalists.

They would deliver an order.

They now will own 1,100 shares of IBM,

and you would see them...

I didn't go in, necessarily, with suspicions.

I went in really with, you know,

here is a number of very serious questions

people who are very knowledgeable in the industry

have about what you're doing

and seeking a response to those.

Well, in layman's terms, he was essentially buying stock,

buying options,

betting that they would go up on certain stocks,

and buying options on certain stocks

betting that they would go down.

The basic concept of Wall Street is,

a person that is buying a share of stock

is convinced he knows something

that the other person who's selling it to him

does not know.

The problem with it,

you'd have to be very, very, very accurate

in picking the winners.

It's jus- it's humanly impossible, really.

Essentially he was saying, "We've watched and helped,

literally, develop the markets in NASDAQ."

Our firm, for example, alone,

we trade in excess of $1 trillion a year.

"We've got this incredible reputation

and knowledge for using technology."

What we did was totally automate the process.

I think at one point, he said, you know, "Give us some credit.

We've been in business for 40 years."

Today's regulatory environment,

it's virtually impossible to violate rules.

My immediate impression was just,

you know, "Here's a genuinely nice man."

It's, "According to Madoff, according to Madoff,

according to Madoff."

He's had perfect market timing.

Bullshit.

Hello.

How are you?

[man speaking indistinctly over telephone]

He sounded like a whipped puppy dog.

Yeah.

He called me up, and he said, "Frank..."

So I got to tell you,

this guy was just so comfortable in his skin

and so unconcerned and so responsive.

Clearly, if you're examining somebody

where there is the possibility of fraud,

you can't take that person's word for it.

I said, "Mike, go back to square one."

And Mike says, "You're absolutely right.

I'm gonna write the piece."

He came out with his investigative piece,

Madoff Tops Charts.

And it came out on May 1st of 2001.

Mike wrote a great article.

It was scathing, scathing.

When we saw it published, we gave each other high fives.

It was like, "Hey, Frank, hey, Neil, it's over.

It's over."

You know, "This thing is going down.

Markets are going to sell off."

We said, "We got him.

This guy's going down."

Six days later, Barron's goes to print

with Erin Arvedlund's expose.

This could finally be it, you know:

Madoff exposed in a Main Street publication.

The SEC's gonna come riding in.

The posse's in town.

You'd think that the fund of funds reading this

would have pulled out,

that they would ask some serious questions of Madoff.

You know, you'd think they'd have teams in there

the very next day after these articles appear,

and they don't do anything.

They just don't care.

We waited a week, two weeks, three weeks, four weeks,

and we started getting nervous.

You go to the movies.

You see the suspense- drama thriller,

and you say, "Why don't they go to the press?

"Why don't they go to the press?

"Why don't they get it on a newspaper?

That will end this nightmare."

Well, that's what we did.

And then you're saying, "How powerful is he

that the press can't bring him down?"

And so it was back to the drawing board.

So we, basically, were going out

and finding other investors,

trying to figure out where the money was coming from.

It was the only safe way for us to proceed.

It was clear that the scheme was getting much, much larger,

and instead of $3 billion to $7 billion

like we figured it was the prior year,

now it's $12 billion to $20 billion.

We, in our view, had almost, like, a handbook

that we had written

on how the SEC should have looked at the situation.

I find it hard to believe

that if anyone at the SEC looked at the evidence,

how they could have just dismissed it.

Maybe someone at the SEC was paid to look the other way.

I'm not participating in the current examinations

or investigations due to the fact

that a former employee

who was under my chain of command

married a member of the Madoff family,

and I attended the wedding.

When you first go into the investigation, you think,

"Wow, they missed all these red flags that were obvious.

Somebody may have been paid off," you know,

or, "Somebody was offered a job and kept quiet."

What percentage of your employees

in those two branches- Enforcement and Compliance-

leave the SEC and go to work for a SEC-regulated entity?

I think fewer people leave the SEC than they used to,

but when they do go,

they often go to a regulated entity in the Compliance area.

Mr. Swanson was the lead attorney on this case.

He leaves the SEC, marries Mr. Madoff's niece.

Did you, for one minute,

think that maybe you should go back

and look at how he handled that case?

I probably would have dropped it.

You know, I did my duty as a good citizen once,

but Ed Manion said,

"Harry, my agency is thicker than a brick.

You just need to keep trying."

And so I resubmitted in March 1, 2001.

So we're talking what, ten months later?

And the returns were not outsized.

I mean, there was no flag there.

Anywhere between, like, 6% and 10% in a good year.

But I just thought, "Well, that's, you know,

"not gonna make me rich,

but it's gonna keep my money safe."

And that's kind of how he always said:

"You know, we're not gonna make you rich,

but your money will be safe here."

I left Rampart in the end of '01.

Harry was still struggling

to meet the desires of the owners of Rampart

and develop a product

that Thierry would actually invest in.

Well, my firm had requested

that I come out with a strategy that could compete with Madoff.

So I did. I developed one.

And it was a product that had better returns than Madoff,

but it was real.

That was the big difference.

But it was highly risky.

Well, sure enough, he got Thierry de la Villehuchet

to look at it, and he said,

"Oh, I think the clients might like that."

And then he took Harry in 2002

to meet with probably 20 different firms.

Each conversation would start with Thierry de la Villehuchet

saying, "Harry is just like Madoff,

only higher risk, higher return."

The first bank said, "Well, Harry,

"you know we have money with Madoff,

"and he never loses us money.

You could lose money."

And every time they said that, I was pissed.

I was pissed off that they would tell people that.

"I'm nothing at all like Madoff," I wanted to say,

"You fools. Madoff's a crook.

I'm legit. I'm real."

And they'd all tell me the same story.

They'd say...

"Madoff's closed, you know?

"He's not accepting any more money.

"But we have a special deal with him,

and he accepts our money and only our money."

When you hear it the first time,

you sort of believe it.

But when you hear it time and time again,

you know it's a Ponzi scheme,

because what do we know about Ponzi schemes?

You need new money coming in to replace the money going out.

They were just basically tentacles of an octopus.

Their job was to raise money for Bernie Madoff

and yet keep the body of the octopus hidden.

He turns away customers.

He doesn't take all comers.

You have to be graced by God and graced by Bernie

before he'll take you into his scheme.

And little did I know, till the next day

when Thierry de la Villehuchet told me,

that they had gone to the polo fields,

and I'm sure that they were there

to make a marketing pitch to Prince Charles

to get assets for Bernie.

And Thierry de la Villehuchet made a pointed comment.

He said, "Harry, we would have invited you,

but we didn't think you knew how to curtsy."

And I said, "Thierry, I can do that.

"It's pretty easy. It looks pretty lame.

"But I'm not gonna do that.

"I'm an American.

We don't bow to royalty."

And it's pretty clear to me that Madoff is bigger in Europe

than he is in North America.

As we moved to Paris

and were going through the Arc de Triomphe,

and Thierry says, "Look up there.

See underneath Napoleon's name?"

I'm looking at the names, and I realize,

"Hey, that's who I'm meeting with in Europe."

And I realized then,

it was royals marketing to royals.

And I thought that was pretty astounding

that these people were gonna be drawn into the Madoff scheme.

We realized that this is global in scope.

It's massive.

And somehow when you count dollars-

and we were counting the dollars-

but when you see all the people behind the curtain,

that's when you get fearful.

He had a lot of powerful people helping him, behind him,

that were standing to gain a lot of money

by keeping the Madoff scheme going.

And then you realize

the truly epic proportions of the scheme.

When you look at who Madoff was running money for,

it was all offshore banks.

And we know that those monies are-

there's a percentage of I- who knows how much-

3%, 5% of the money may be criminal money.

That was dark money.

That was offshore, untaxed, dirty money.

The other people that love to use offshore accounts

are drug cartels, terrorists.

So if Madoff is taking money from organized crime,

and he gets caught, he's gonna be killed.

So if he thinks I'm gonna catch him

and turn him in to the authorities,

he has a lot of fear.

Obviously, first of all,

this conversation never took place, okay?

When they did an examination for us,

they asked all those questions,

which are standard questions.

And the answers that I gave them,

which are the case, are exactly what I'm giving you

and basically what you should respond to them.

Obviously, not that- we didn't have a conversation

and all of this stuff,

The best thing to do is not get involved with-

that you send written instructions, if possible,

'cause any time you say you have something in writing,

they ask for it.

So the best thing to do is to say

that it's a phone call.

At this point, Harry got nervous,

because Harry was the guy out front with the SEC.

So they knew his identity.

[indistinct police radio transmission]

We were on our own.

We had no idea we were on our own.

We had no idea that the four of us

were the last line of defense between Madoff and his victims.

Hell, we weren't even the last line of defense.

We were the only line.

During the time that we were developing strategies,

one of the meetings, I was down in Thierry's office,

and I said, "Thierry,

what happens if we're right and you're wrong?"

And he looked right at me, and he said,

"Frank, I have all of my money in this manager."

"I have most of my family money in this manager.

"I have half the royalty of Europe in this manager.

"I have every private banker in Switzerland and France

"that I have cultivated over my complete career

"in this manager.

"I cannot be wrong.

If I am wrong, I am a dead man."

What's happening here is a travesty

that I don't think anybody can explain to somebody

who hasn't lived through it.

We lost our life savings.

I worked. I kept a beautiful home.

I sold it. I made a nice profit.

I put it into Madoff. It's gone.

I could have just given

the woman that bought my house the key and said,

"Here's a gift for you."

And that's basically, in effect, what happened to me.

On December 17, 2002,

Eliot Spitzer was appearing at the JFK Library.

Now New York State Attorney General Eliot Spitzer.

He was pretty much a big-time fraud fighter.

He was doing cases against Wall Street

that the SEC was too afraid to do.

Really, this is a debate about the role

government should play in defining the boundaries

of appropriate business ethics.

Defining what it means...

I wanted to meet him and pass off my documents.

I didn't want anything to prevent me

from getting into that library and seeing him.

My wife was gonna deliver twin- twin boys in about three months,

a little over three months,

and I had enough risk on the table already

with the SEC,

and so I didn't approach him openly.

As the event's ending,

I put my gloves on, and I pulled out the 9x12,

and I went over to the woman, the JFK Library staffer.

I said, "Eliot Spitzer,

"the New York attorney general, just spoke.

Could you hand this envelope to him?"

And she made her way over to him,

and I made a beeline for the door.

I hotfooted it out of there in the dead of night.

And I always pack light or heavy,

depending on the situation,

and that night was a heavy night.

When the twins were born in 2003...

I became more concerned

because the case was dragging on,

and the government wasn't taking action.

Seems there's no way for me to stop Madoff with my team.

And so I'm very, very worried,

and I'm getting extremely agitated and very nervous.

And it's a risky position to be in.

And I didn't appreciate that the government put me there.

I think Harry changed.

First of all, he was no longer happy

being a portfolio manager

because now he's found so many people in the industry

that are fraudulent on this Madoff situation

that he just says,

"Hey, why am I playing in finance?

I mean, these are all crooks."

I found so much corruption just in 2003,

in the finance industry.

I said, "You know, Wall Street's so corrupt.

"I want to be on the other side of this industry.

I want to go against these guys."

So he just basically got out of the industry.

He virtually left the industry.

I met Gaytri at a Cambridge Chamber of Commerce meeting

in Massachusetts.

She introduced herself.

She said, "Hello. I'm Gaytri..."

"The Hindu goddess of wisdom and knowledge."

I thought, "Wow, that's a weird introduction."

I think that had an impact on him.

And I think it drew a smile as well.

Turns out she was

an international transaction lawyer,

had been a Wall Street deal attorney.

He explained to me that he had been

to a bunch of law firms to figure out

how to do this business of fraud investigation

and to make money doing it.

I was doing cases on a contingency,

but I wasn't getting paid any kind of an hourly rate.

We batted around a few ideas,

and he basically, in five minutes, said,

"You're my lawyer."

She would take a look at my cases

and help me negotiate the deals with the attorneys

that I was placing these cases with.

And they were typically large cases,

several hundred million and up.

Some were a few billion.

He had already figured out the fraud element.

This is something that he seems to instinctively gravitate to.

I had left the firm in October of '01.

About a year and a half later, I helped draft Neil Chelo,

Harry's assistant, away from Rampart.

I was traveling nonstop, meeting hedge fund managers.

It was very good as far as me being able

to get further intelligence

and pass that on to Harry,

who wanted to hear anything related to Madoff.

We would get an opportunity to speak to risk managers

who controlled risk at big banks and brokerage firms.

And I would occasionally have conversations

with these people and raise some of the red flags.

Some people took the hint,

and others shunned what we had to suggest and said,

"Well, maybe, wink, wink, nod, nod,

"he's doing something a little wrong,

but he's our crook, and he's paying us."

Madoff was very clever.

The feeder funds were making millions and millions

and millions of dollars.

They were taking probably over 90% of the fee pie,

and Madoff was keeping the smallest piece for himself.

And that's where Bernie was a genius,

in allowing everybody else to participate in the fraud

and not trying to garner it all for himself.

The feeder funds had no economic incentive

to turn Madoff in.

They were making too much money.

Click!

And the commission has no idea

what the hell is going on.

Now, the reality of it is, the stupidity of-

and we answer those questions all the time.

Every time we get an exam.

And the issue that is- our market making desk,

the information that we get from our orders is meaningless.

The relationship that we have

has been an established relationship for a long time.

The commission knows how we operate.

And even if they act stupid on a phone call with you,

like, they're just trying to find out

all this information,

they're full of shit.

There were probably many people on Wall Street

that believed that Madoff was a fraud

but just walked away and did nothing about it.

I talked to people at the big firms,

people that I trusted,

and they'd say, "Harry, you're right.

"Bernie Madoff has got to be a fraud.

"But I can't, without my firm's permission,

"join you at the SEC.

If I do that, I'll be fired."

But they did say,

"Look, you can have the SEC contact me.

"If they contact me, my firm will cooperate

"because we're under SEC jurisdiction.

So they have to call me."

And do you know what?

The SEC, they never made those calls.

I was speaking with a fellow maybe in his mid-40s

at a financial institution in Boston area,

and as I stood up to leave, he says,

"What do you know about Bernie Madoff?"

I said, "Who are you, and why are you asking?"

He said, "I married a woman

who's the sole heir to a fortune."

"At the wedding, Madoff came up to me afterwards

"and said, 'Now that you're family,

I'm gonna let you in to my deal."

And he says, "And I'm a financial guy.

"So I looked at the numbers he was showing me,

"and I said, 'I don't understand

where he's getting this return."

He says, "For going on two years now,

"my father-in-law's been calling me,

'This is a great deal for you and our daughter."

So he says, "I need some ammunition.

You got to help me beat my father-in-law."

So I went home that night,

and I started writing.

And I email it to "Abe," I'll call him.

And I didn't hear anything from Abe.

We saved. We saved for this future.

We never wanted to be a burden to our children.

And now I wish I'd spent it.

I wish I'd lived it up,

because all our life savings, in a blink of an eye,

just poof, gone.

The average person should be aware

that when you get a brokerage statement,

it's only a piece of paper

representing what that person thinks they own.

October 29, 1929, Black Tuesday.

The New York Stock Exchange is in a panic.

Frantic investors have scrambled

to unload their stocks at any price.

Everyone wants to sell.

No one wants to buy.

When you see something that big in your industry,

if you don't do something about it-

clean up your industry-

your industry is gonna suffer, and we saw that.

And that's why our financial system came near to collapse.

It was because no one said anything.

They saw the frauds going on,

and everybody remained silent.

Well, that's just not my way.

I don't remain silent.

If I see a fraud, I'm gonna stop it.

[distorted, indistinct conversation]

It was clear that the scheme was getting much, much larger.

So now we had 29 separate red flags.

And we'd expanded each of the red flags dramatically.

I mean, you could have hired an English major

who knew nothing about finance,

given them the 29 flags, and said,

"Pick three randomly, go into Madoff's office,

and get the answers to these three things,"

and they will uncover the fraud.

We felt this was the big last push.

And a few days later, I'm meeting with Mike Garrity

and a few other people from the SEC,

and it's clear that Mike Garrity gets it.

He doesn't understand the math,

so he has me diagram every relationship.

And at the end of it, he says,

"Harry, this is very serious,

"and it certainly merits me forwarding it to New York

as quickly as possible with the utmost seriousness."

On my submission, I didn't want to be identified,

because if they know and any of them turn out

to be corrupt and take money from Madoff,

I'm a dead man.

We keep waiting and waiting.

The commission knows how we operate...

It was a road map for the fraud,

and I'm just telling you, "Go get it."

It's the case.

I already solved it for you.

All you have to do: call my witnesses.

I gave you their contact information.

And I'm also saying,

"How about if I offer to go undercover

"and just go inside the Madoff operation?

"If I do that, I can ask a few questions

"and bust this thing wide open in the space of an hour.

"Look at the math. Check with a third party.

"All you have to do is show up and ask a question,

and you'll get the answer that solves the fraud."

They never showed up.

What the hell's going on?

I was like the boy that cried wolf,

but there was a wolf.

It was never a false alarm. I was always telling the truth.

There's the wolf. It's Bernie Madoff.

Now, in this case, you know,

Harry Markopolos provided the complaint.

So he's the guy who did have the experience.

But, unfortunately,

they didn't utilize him the way they could.

What the heck went on?

Your mission, you said, was to-was to...

Protect investors and detect fraud quickly.

How did that work out?

What went wrong?

One guy with a few friends and helpers

discovered this thing nearly a decade ago,

led you to this pile of dung that is Bernie Madoff,

and stuck your nose in it, and you couldn't figure it out.

You have single-handedly diffused the American public

of any sense of confidence in our financial markets

if you are the watchdogs.

You have totally and thoroughly failed in your mission.

Don't you get it?

I'm in New York now.

I'm in Madoff's turf.

He gets wind of this, and I'm doomed.

Me, personally,

I didn't feel the safety issue.

We never felt that threat.

But I had been, personally, on the receiving end

of such a threat once in my business career...

When I inadvertently was referred in

by a lawyer to the mob.

I want to tell you,

it's a horrible thing to have to live under.

I rotted out 12 shirts over a period of two months.

When you're dealing with professionals,

you don't get the warning.

The first warning you get is the flash of light.

And that's the first bullet

that's gonna go through your brain.

And it's usually gonna be followed

by a second within an inch.

It's called double-tapping.

I was very familiar with double-tapping.

I had a military background,

and I knew what a double-tap was.

It's two bullets to the head, either the front or the back.

There's no warning.

It's just a flash of light.

Your brain barely registers this,

and you're already dead.

I could tell something had spooked him.

He was very spooked, scared, white as a ghost.

So he started mentioning this thing about Ponzi.

I said to him, I goes, "Are you that scared

where you feel you might need a bulletproof vest?"

I says, "I have one right here."

We started talking about carrying weapons.

I mean, this thing started to mushroom to the point of,

you need self-protection.

What can a small little department offer you, you know?

If nobody else is believing you,

I mean, what's going on?

There are three things you have to do

to survive on the battlefield:

shoot, move, and communicate.

The thing I was worried about was the moving.

This thing was gonna prevent me from moving.

I didn't want him to leave here

without any protection, but it was his choice.

When he left that day-

and this kind of sticks out in my mind-

he said, "When somebody finally believes me,

"when I get the right agencies to believe me,

"this isn't gonna be just the biggest thing

"in the state or the country;

"this will be the biggest thing in the world

that anybody will ever see."

They did not live a normal childhood.

They grew up very, very protected.

There's the security system over there.

And I had a newborn about to come

in April of that year.

Rah!

Everything was different.

Carrying a gun with you is different.

And most people don't do that.

That's not a normal dad thing to do.

[speaking indistinctly]

We lived a different life.

There were places we didn't go.

I liked to stay in state

because my pistol license was only good for Massachusetts.

I needed to be armed.

And you didn't know where the ambush was gonna come from.

You just knew it was gonna be

a time and place of their choosing.

My kids probably think my minivan

must leak a lot of fluids

because I'm always underneath the body carriage

checking it out for bombs.

Okay, guys.

Let's roll.

Harry first.

Have the window?

I didn't have a normal lifestyle.

Fear is an amazing thing.

It gives you a shot of adrenaline.

It gives you the fight-or-flight response.

[echoing] Flash of light, flash of light...

You're already dead... Already dead...

You've reached the point of no return

where you can't stop.

The easiest way out is forward.

You can't go back

because you left too much risk on the table.

If your security wasn't good enough,

and if Madoff found out about us,

I would have had a decision to make,

and my decision was pretty clear.

I'd go down and take out Madoff before he took me out.

I mean, I'd made the conscious decision-

I was gonna go down there and kill him.

I went to a whistleblower organization:

Taxpayers Against Fraud in Washington.

And they put me in touch with John Wilke,

a senior investigative reporter

for The Wall Street Journal's Washington bureau,

which was perfect for me.

Madoff would be focusing to the south,

toward Philly or Washington,

thinking the whistleblower is down there,

where I'm safe and sound, hopefully, up in Boston.

There's this fellow by the name of John Wilke,

and they call him Mr. Front Page.

He was probably the best investigative reporter

The Journal had.

I mean, he was that good.

A lot of stories he broke, the people went to jail.

They were congressmen. They were senators.

And Wilke is excited.

And he said, "This is very interesting."

I said, "I have a lot of documents."

The best thing to do is not get involved...

He said, "Can you prepare me some contact information

of other people I can contact to verify the story?"

Harry says, "This guy's going to do it.

"He's coming up,

"and he's going to write the article,

"and it's going to go on the front page

of The Wall Street Journal,"

I know that my only hope for salvation

is The Wall Street Journal.

If they go to print, I'm safe,

'cause Madoff is gonna blow up.

If they don't go to print, my life's forfeit.

Oh, I was in way too deep.

I couldn't give up at this point.

My name's in New York.

The investigation's off course.

The Journal has my story.

Wilke apparently was reassigned

every time he wanted to come up to Boston

to do the interviews and work on the Madoff case.

And he made numerous plans to come up and see me,

but someone higher up at The Journal

killed the story.

It's a Pulitzer.

All a reporter had to say is,

"I want to cover it, and I want to break Madoff."

Every time we've tried to uncover this Madoff fellow,

the investigations are stymied.

I mean, we went to the biggest and the best.

And that was it.

There was no luck.

They didn't care.

"Too unbelievable. Too big.

"We don't do stories that big.

We don't believe it's for real."

And we don't know,

is there someone high up in the government

that is actually stopping this?

When the agency in charge of the capital markets

doesn't do their job

and when the press doesn't do their job,

then where else do you go?

So we became jaded, if you will, disgusted.

By, I'm going to say, somewhere around 2007,

we were almost giving up.

At that point, I was, you know,

willing to drop it, in my mind.

Harry was just obsessed.

Here I am, armed to the teeth and checking for bombs.

And I need something to happen.

I need Madoff to go down, so I can live my life.

I want to return to normal.

I'm the point person.

My name's out there, no one else's.

So I'm living in fear.

I'm afraid.

Harry, you okay?

Wake up. Wake up.

[whispering] Okay, we got to be quiet.

We want to hear them before they hear us, okay?

Okay, here.

You see all these sticks here?

All these dead sticks?

If we step on those dead sticks,

we'll scare the animals

because the stick will crack, all right?

It will snap, so we have to avoid that.

So you have to really make sure you put your foot

where the sticks are not, okay?

That's it.

Here, now, what do we have here?

Let me show you.

These are deer droppings.

Poop?

That's deer poop. That's right.

Now here- Don't step on it.

All right, now, there's two types

of animals in the woods here.

There's predators, and there's prey.

A deer is known as a prey animal.

And there's predators like bear, bobcat, and mountain lion

that would hunt these and eat these.

To catch a predator,

you have to think like a predator,

and you have to go where they're going.

They're always looking over their shoulder,

so you have to be very careful when you sneak up on them,

'cause if they find out, they could hurt you.

You understand that?

Yes.

- Good. - Yep.

In retrospect, you know, once my twins were born in 2003,

I should have stopped the investigation.

I was a fool to keep going forward.

If the government didn't care, why should I?

But if you have that attitude,

if citizens don't step forward and contribute to society,

then society falls apart.

In 2008, the world financial markets

really started coming apart.

Investors around the world were losing money on everything.

There was no haven.

People were withdrawing their money from fund of funds,

from the feeder funds.

So I need money from somewhere.

I've got to get the money.

Old Bernie, Bernie never loses money.

We'll use Bernie as our ATM.

He literally couldn't continue the Ponzi scheme.

He ran out of money.

But it was nothing that we did.

It wasn't the foxhounds.

It wasn't the team.

It was the marketplace.

So when Bernie couldn't deliver,

he picked the time of his own choosing

to say good-bye.

So how many documents were destroyed?

How many cover-up stories were built

before he decided to call it quits?

I had no inkling that anything

was gonna change my life that day.

Okay, guys, let's get ready to go to karate.

Come on. Get your stuff.

Let's go.

Go.

Both: Yah!

Come on.

Oh, nice.

I'm listening to the voice mail,

and it says, "Harry, Bernie Madoff's been arrested.

"He's in federal custody,

"$50-billion Ponzi scheme.

"You're not gonna believe it.

Congratulations. You got him."

And so I knew that I needed to get home as soon as I could

because I had one enemy left to fight,

and that was the Securities and Exchange Commission.

And I knew, back home,

I had unprotected back there lots and lots of documents

that would incriminate the SEC to no end.

I knew that if the SEC would try

to seize my computers and documents that night,

there was gonna be shooting.

And we had rehearsed what I call a battle drill,

where if somebody did pierce the premises,

I'd go down to the first floor and confront the suspects.

My wife would remain posted at the top of the stairs.

Anybody coming up the stairs that wasn't me,

she'd just keep shooting until she ran out of ammo.

I was gonna protect those documents.

I knew they had a lot to hide.

I just rushed into the house, run upstairs to my office,

and I start collecting documents.

So Harry is on the phone very excited, very animated.

"What do I do?

"I have all this stuff. I'm emailing it to you.

Can you safeguard it?"

And my immediate reaction was that I was scared.

"Yes. What do we do?"

She goes, "I don't know.

"I have to think about this. This is big.

No one's ever done this."

And I said, "Yeah."

And so I was emailing documents all through the night.

I didn't sleep because I knew my risk factor was high.

I thought eventually the SEC would know

that they needed to move on my house

and get those documents out of there

and seize my computers.

And I get a phone call,

"Are you Harry Markopolos?"

And I said, "Yes, I am. Who is this?"

And he said, "It's Greg Zuckerman

"of The Wall Street Journal calling.

Are you the Madoff whistleblower?"

I said, "You damn well know I am.

"You've had my stuff for three years.

"You've been sitting on it. You didn't do anything with it.

Of course I am."

"I just wanted to confirm this

"because CNBC is reporting the existence

of a Madoff whistleblower."

[announcer speaking indistinctly]

And then the fear went through me.

I said, "Oh, sheesh."

And he said, "Calm down. Calm down."

"I'll work with you on the story.

"Once your story is out, you're safe.

Do you have any documents you can send me?"

When Harry came in that night,

he was completely just out of his mind.

He was all disheveled, very white,

frazzled, and he started- he called me over.

He's like, "I need to talk to you.

"I need to talk to you.

I need to borrow a fax machine."

And I'm like, "For what?"

And he's like, "I have to get these papers off.

"I have to get them to The Wall Street Journal,

"It's a matter of life and death.

"I don't know-if something might happen to me,

I have to get rid of these; can you"-

he was going on and on and on.

He points up to the TV,

'cause at that point, we had the news on,

and it was-Bernie Madoff had turned himself in.

He had information and documents

that he had to fax over right away

to a reporter for The Wall Street Journal,

And so we're there for 90 minutes

trying to fax all these documents.

And we finally get them through,

and I'm on the phone with Greg Zuckerman.

He says, "Harry, I got every last single one of them.

Thank you."

Wall Street veteran Bernie Madoff

has been arrested and charged with...

His name is Bernard Madoff,

The SEC accusing Bernard Madoff...

And Greg Zuckerman's working the story hard.

He's calling me up.

And he goes, "Are you sure you're for real?"

And I said, "Why are you asking?"

And he said, "Cause this stuff is too good to be true.

"You're telling me you gave this

to the government, and they did nothing?"

And I said, "Yeah, you're talking about weeks

"and months and years,

hundreds and hundreds and hundreds of hours."

And that was sort of the stumbling block

for the first few days.

He couldn't believe that my stuff was that good,

and the SEC ignored it.

He just couldn't fathom

how it could go over their heads like that.

He never figured it out, until...

I was very concerned to learn this week

that credible allegations about Mr. Madoff

had been made over nearly a decade

and yet never referred to the commission for action.

"Mea culpa.

"We had known about this case.

"We had credible and specific warnings

"for a period of at least a decade

"that we didn't pay any attention to.

"Our staff failed miserably.

"They never brought this to the commission's attention

"for any action.

"I've tasked the SEC's inspector general

to launch an immediate investigation."

And at that point, at that instant in time,

as soon as that was released,

The Wall Street Journal believed everything I said.

The press was relentless.

There was constant requests coming in.

And I just had to ignore them

because I was being invited to testify

before the House Capital Markets Subcommittee.

And I had already been told that I was,

and I'd gotten contacted by the SEC's IG.

We wanted to understand from his perspective

how his interactions with the SEC were.

"We want to make sure we get the accurate story.

Can you help us, Harry?"

I said, "Sure, Mr. Kotz, I'd be happy to help you."

The night that Bernie blew, my phone rang.

Beep!

Hey. Hi.

How you doing, Harry?

And he said, "Madoff blew.

"We were right. We're vindicated."

What? You're kidding me.

My second cell phone rings.

Hold on. My other line's ringing.

Hold on.

Michael, I got Harry on the other line.

Then my house phone rings,

and my wife says, "It's a business call.

And he won't identify himself."

And it was Abe.

And Abe said, "Are you talking to Harry?"

And I said, "Yes."

He says, "Well, first of all, I want to tell you guys,

"I want to thank you,

and I want you to convey this to Harry and Mike."

He says, "Thank you for your efforts for nine years.

"And thank you, personally, Frank,

for trying to save my butt."

I said, "Well, what happened, Abe?"

He said, "I read it to my father word for word,

my father-in-law."

And he said, "The man sat down, and he said,

"This is incredulous.

"I can't believe it.

"Bernie's been a friend for life.

"I don't believe it.

"I won't believe it.

"Bernie would never do this to us.

"Your guy has it wrong.

"He probably did his research, but he's off base.

He's wrong."

He says, "We just lost everything."

I said, "Abe, I'm so sorry."

Madoff is expected to plead guilty

to ripping off investors to the tune of $50 billion.

He surrendered because he had made too many enemies

in too many different countries.

To steal billions and billions of dollars,

it has to take a very special kind of person.

He had no place to run, no place to hide.

He'll never get it.

He really will never get it.

For him, it's all about money.

He didn't mount a defense in court.

He just copped a guilty plea.

And he went down without talking.

As the news came out, we were just overly shocked.

We never conceived that an investor

could come in directly to Madoff and invest.

That's just not the way Wall Street works.

Everybody's a victim of their training,

and we were institutionally trained.

And so we had blinders on,

and we totally missed the individual angle, totally.

Totally missed it.

These people typically went all in, 100%.

So the individual investors oftentimes just got wiped out.

Tens of thousands of victims were damaged beyond repair

for no other reason

than putting their trust in the wrong person.

The man had no need to take down charities.

He had no need to take down people.

And for that, the man ought to burn in hell.

And, of course, we came on a sad postscript.

After Bernie Madoff imploded...

Police discovered Rene Thierry Magon de la Villehuchet

dead in his Manhattan office early Tuesday.

7:00 in the morning, I believe,

an employee was not able to get in,

asked security to go up and open the door.

Security did go up and open the door,

and they found the man at his desk.

Police say he committed suicide,

They say both wrists were...

He took some painkillers.

He took a box cutter.

He cut his arms like this.

He stuck them into a trash can and bled out.

He wrote, apparently, a note that said,

"I understand that if you fail your friends,

your clients, then you must face the consequences."

It's out of fashion today,

but that's the way noble people go out.

And he made a horrible mistake, and it cost him his life.

I thought he committed suicide because he was wiped out.

I've come to find out

that that probably wasn't the reason.

We had warned Thierry and his senior staff,

and they ignored our repeated warnings,

and now we know why.

Bernie was paying top dollar for new victims,

and so he got lots of new victims.

If one believes that

it's an old man and a dog in a back room

that perpetrated this fraud, then they're very naive.

No man could build this empire alone.

He set up, effectively, an infrastructure

where people were doing all his dirty work for him.

And he had his capos,

and he had his lieutenants, and he had his soldiers.

And they were all out there in the feeder funds

and the fund of funds, doing his bidding.

There were multiple feeder funds set up,

not only in the U.S., all around the world.

They took the money,

and now they're trying to get away with the money,

and we shouldn't let them get away with it.

They need to be in prison.

The government's out there chasing terrorists,

and the financial terrorists are getting away

with financial murder.

I don't have billions of dollars.

I don't live in a mansion.

I don't own any property in the Bahamas.

And I'm like you. I am you.

'Cause they didn't just take money from us.

Bernie Madoff took away part of our real lives.

The plans, the hopes, the dreams

for what we were going to do in retirement

are shambles at this stage.

They'll never be recovered.

There's not enough time left.

If it happened to me, it could happen to you.

This all could have been stopped

if the Securities and the Exchange Commission

had done their job.

When you lose confidence in anything-

and God forbid we lose confidence in the U.S. dollar-

the repercussion is going to be horrendous.

We meet today to continue our review

of the $50-billion Ponzi scheme

allegedly perpetrated by Mr. Bernard Madoff.

And we are pleased to have Mr. Harry Markopolos.

I was pissed.

I was so angry at what they did.

I was eight and a half years their doormat,

and I finally get a chance to shoot back.

Well, hell, I'm gonna do a lot of shooting.

Mr. Markopolos, it's all yours.

Thank you, Mr. Chairman.

Good morning.

Thank you for inviting me here

to testify before your committee today

regarding my nine-year-long investigation

into the Madoff Ponzi scheme.

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.

If a $50-billion Ponzi scheme

doesn't make the SEC's priority list

then I want to know who sets their priorities.

The current staff has led our nation's financial system

to the brink of collapse.

The SEC is also captive to the industry.

The SEC continues to roar like a mouse

and bite like a flea.

They haven't earned their paychecks,

and they need to be replaced.

This concludes my oral testimony.

Thank you, Mr. Chairman.

Thank you very much, Mr. Markopolos.

We're delighted with your willingness to come forward.

We thank you for that.

We want to work with you closely

as we move on toward regulatory reform.

I would like to just say, for the record,

that I see you as a modern-day Greek hero.

You've done your country a great service.

Thank you, Mr. Chairman.

It's been a singular honor. Thank you.

Thank you very much.

Well, the goal was to tear down the SEC

and take them to the lowest point

in their 75-year history

so that they could rebuild.

So, yeah, I wanted to hold the SEC accountable.

I was damn angry.

I wanted to make that clear to that agency,

that they were a total, miserable failure.

In the SEC, I don't think

anybody's been held accountable personally there.

Several people have been allowed to resign.

I think that wasn't good enough.

I think they should have been fired and disgraced.

They are systemically incompetent,

not qualified to hold those jobs.

And the SEC was really mad.

Lots of crooks that are gonna be under arrested in the SEC.

They're not sure what to make of it.

The twins think that Madoff was a bank robber

and I stopped him and I caught him,

which is not what happened.

And-but that's what a six-year-old understands.

My dad is my hero.

And they see people come up to me in restaurants

and shake my hand and tell me that I'm a hero,

which...

I'm no hero.

So they're not sure what to make of it.

I don't compare very well to Spider-Man,

who they really love.

So I think 10, 15 years down the road,

they'll understand.

Today we're in Las Vegas

for the Association of Certified Fraud Examiner's

20th Annual Fraud Conference.

And it is the premier event of the year for fraud examiners.

Each annual conference,

our CFE of the Year award is presented to a CFE

who has demonstrated outstanding achievement

in the field of fraud examination.

He's receiving this award because he has demonstrated

the character, the quality that we expect

out of a certified fraud examiner.

To say he was the obvious choice is an understatement.

Ladies and gentlemen,

it is my privilege to present to you

Mr. Harry Markopolos.

I feel that I'm a $65-billion failure.

My name is next to that failure.

It's a bit harsh, but it's true.

We didn't save anybody.

I think part of the reason he takes it personally is,

he tried so hard for so long.

I mean, I don't know what else Harry could have done.

You know, I feel like a fraud getting this award.

I just don't think I'm worthy.

I was pretty depressed.

I mean, this was the largest case in history.

It was nothing but a massive failure.

I was holding myself responsible.

People call you a hero. I just don't like that.

I just feel if you're doing what you're supposed to do,

that's your duty.