Harry Markopolos: A Selection from Malcolm Gladwell’s Talking to Strangers (2019)

“In early February 2009—just over a month after Madoff turned himself in to authorities—a man named Harry Markopolos testified at a nationally televised hearing before Congress. He was an independent fraud investigator. He wore an ill-fitting green suit. He spoke nervously and tentatively, with an upstate New York accent. No one had ever heard of him.

‘My team and I tried our best to get the SEC to investigate and shut down the Madoff Ponzi scheme with repeated and credible warnings to the SEC that started in May 2000,’ Markopolos testified to a rapt audience. Markopolos said that he and a few colleagues put together charts and graphs, ran computer models, and poked around in Europe, where Madoff was raising the bulk of his money: ‘We knew then that we had provided enough red flags and mathematical proofs to the SEC for them where they should have been able to shut him down right then and there at under $7 billion.’ When the SEC did nothing, Markopolos came back in October 2001. Then again in 2005, 2007, and 2008. Each time he got nowhere. Reading slowly from his notes, Markopolos described years of frustration:

‘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.’

Harry Markopolos, alone among the people who had doubts about Bernie Madoff, did not default to truth. He saw a stranger for who that stranger really was. Midway through the hearing, one of the congressmen asked Markopolos if he would come to Washington and run the SEC. In the aftermath of one of the worst financial scandals in history, the feeling was that Harry Markopolos was someone we could all learn from. Defaulting to truth is a problem. It lets spies and con artists roam free. . . .

Markopolos . . . was armed with all the same facts but none of the faith in the system. To him, dishonesty and stupidity are everywhere. ‘People have too much faith in large organizations,’ he said. ‘They trust the accounting firms, which you should never trust because they’re incompetent. On a best day they’re incompetent, on a bad day they’re crooked, and aiding and abetting the fraud, looking the other way.’

He went on. ‘I think the insurance industry is totally corrupt. They’ve had no oversight forever, and they’re dealing with trillions in assets and liabilities.’ He thought between 20 and 25 percent of public companies were cheating on their financial statements. ‘You want to talk of another fraud?’ he said at one point, out of the blue. He had just published a memoir and was now in the habit of scrutinizing his royalty statements. He called them ‘Chinese batshit.’ The crooks he investigates, he said, have financial statements ‘more believable than my publisher’s.’

He said the one fact he keeps in mind whenever he goes to the doctor’s office is that forty cents of every health-care dollar goes to either fraud or waste:

‘Whoever is treating me, I make sure I tell them that I’m a white-collar-criminal investigator, and I let them know that there’s a lot of fraud in medicine. I tell them that statistic. I do that so they don’t mess with me or my family.’

There is no high threshold in Markopolos’s mind before doubts turn into disbelief. He has no threshold at all. . . . If everyone on Wall Street behaved like Harry Markopolos, there would be no fraud on Wall Street—but the air would be so thick with suspicion and paranoia that there would also be no Wall Street.”—Malcolm Gladwell, Talking to Strangers: What We Should Know about the People We Don’t Know (2019)