We spoke on February 6 with Philip Michael, an attorney for Harry Markopolos, who testified last week before a Congressional committee concerning his warnings to the SEC about Madoff's operations. In his testimony, Mr. Markopolos stated that he had "feared for the safety of his famiy until the SEC finally acknowledged, after Madoff had been arrested, that it had credible evidence of Madoff's Ponzi scheme." Mr. Markopolos also told the committee members, "For those who ask why we did not go to FINRA and turn in Madoff, the answer is simple. Bernard Madoff was chair of their predecessor organization and his brother was former vice chairman. We were concerned we would have tipped off the target too directly and exposed ourselves to great harm. "
While the media gave significant attention to these statements, Mr. Michael put them in context.
"It got blown out of proportion because of the sexiness of organized crime and Russian mobsters; it sort of sucked the wind out of many other aspects of the story, so there was more emphasis on it than it deserved. In essence, Harry was saying: 'There's no doubt some of the money that ended up with Madoff came from very disreputable sources'--people who were cheating on their taxes or it could have been organized crime money or this woman who had the bank in Vienna. And there was discussion that she was pulling in money from Russians and then forwarding it to Madoff, and then it seemed like she disappeared after the whole thing blew up.
"So Harry's feeling about all that was that Madoff could have figured that [given that these types of people don't take no for an answer] if his scheme were revealed, he, Madoff could really be in danger. Therefore Harry's thinking was: If Madoff knows that I, Harry, reveal what he is doing and that puts Madoff's life in danger, Madoff may try to take care of me so that he won't be put in danger--that if his scheme became known, Madoff might do something very radical because Madoff had to protect himself and his own family from retribution.
"Harry didn't have any actual threats and did not seek protection. But he took the other steps: he tried to remain as much under the radar as he could. That's why he wanted to limit the number of people who knew his name in terms of the information he was providing on Madoff and that's why he concluded that he didn't think there was corruption at the SEC because he said there were people at the SEC who did know his name and if they were corrupt they would tell that to Madoff, and then maybe Madoff would have done something."
Concerning the attitude of Mr. Markopolos today:
"Elation! That whole burden was lifted off his back. He feels he's finally had his day in court, that he's finally been listened to and taken seriously. He's very grateful for that."