Blank stares, disdain and tears. Harry Markopolos encountered all three during his nine-year struggle to convince the American Securities and Exchange Commission (SEC) that Bernard Madoff's returns were, in fact, mathematically impossible.
SEC officers didn't grasp the numbers until the Ponzi scheme had swelled to $65 billion (Dh239bn), as Markopolos shows in No One Would Listen, a disturbing firsthand account of his quest to expose one of the most powerful men on Wall Street.
Markopolos, a self-described "proud Greek geek", is a former chief investment officer at Rampart Investment Management in Boston. His investigation began in 1999, when a colleague learned of Madoff's investment returns and urged Markopolos to replicate his strategy, he writes. Markopolos soon concluded that the numbers didn't add up.
"There's no way this is real," he recalls telling his colleague. "This is bogus."
So began his surreal journey into the warped world of Bernie Madoff, the broker-dealer who was producing too-good-to-be-true returns of one per cent to two per cent per month. Markopolos's odyssey pitted him against bosses who urged him to match Madoff's results, against investors who didn't want to hear the truth, and against SEC staffers who either didn't listen or couldn't understand what they heard.
By the time Madoff was arrested on December 11, 2008, Markopolos had reported his concerns to the SEC five times and had begun to wonder if Madoff was untouchable. Fearing that he and his family were in jeopardy, he packed a Smith & Wesson and even considered killing Madoff if need be, he says.
"If he contacted me and threatened me, I was going to drive down to New York and take him out," Markopolos writes.
The truly shocking thing about this book is its cumulative effect, not any individual revelation. Step by step, Markopolos exposes the dangerous "mismatch in skills" between SEC lawyers and the market pros they regulate. Time after time, Markopolos offered SEC officials mathematical evidence that they seemed ill equipped to comprehend.
In May 2000, for example, Markopolos says he met a senior SEC enforcement official in Boston to explain why Madoff couldn't be making money, as claimed, with a stock-and-options trading strategy known as a split-strike conversion. All Markopolos got for his trouble was a blank look.
"It very quickly became clear he didn't understand a single word I said after hello," he writes.
One money manager who ignored red flags about Madoff was Rene-Thierry Magon de la Villehuchet of Access International Advisors, the man who first alerted Markopolos and his colleagues to the fact that Madoff was managing money.
Though they warned De la Villehuchet of their suspicions, he wouldn't listen, Markopolos says. He was later driven to suicide by his firm's Madoff-related losses, his brother said. He was found dead in his Madison Avenue office, with his arms and wrists slit. A box cutter and pills were nearby.
Though Markopolos praises De la Villehuchet as a man of honour, he sadly forgot a basic rule of investing: If something sounds too good to be true, it usually is.
- Out now from Dh135