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Madoff—because I’d mistakenly sent a copy of my 2005 submission to the wrong e-mail address.

Among several things in this report that we didn’t know was the fact that the SEC had received other warnings about Madoff and had ignored them, too. In 2003, for example, an unidentified fund of hedge funds manager alerted the SEC as to his suspicions about Madoff, explaining during a conference call that “he couldn’t understand how [Madoff was maintaining his performance” and “he couldn’t figure out how he was ... earning returns.” This manager’s firm had responsibly conducted due diligence on two Madoff feeder funds—apparently using Mike Ocrant’s MARHedge article as at least a partial blueprint—and submitted its own list of red flags that, in many cases, pointed out many of the same problems we had tried to warn the SEC about. The SEC branch chief who handled this complaint pointed out that MARHedge was a respected industry publication, but “not one that she believed the Commission usually received.” And just like all of our submissions, this was lost in the bureaucracy.

The fact that Madoff’s scam was widely known in the industry and easy to rip apart was proved in 2004 by an SEC compliance examiner. As Kotz reported, while conducting a routine examination of Renaissance Technologies LLC, this investigator discovered e-mails between executives of that fund that professionally analyzed Madoff’s strategy and returns and concluded there was no way to explain Madoff’s activities. As one of those executives told Kotz, “This is not rocket science.” The reason they had not notified the SEC was that all the information they relied on to reach these conclusions was readily available to the SEC. “It’s not like we needed a PhD in mathematics to do the ... study on the OEX.”

In 2005 the SEC received an anonymous tip from a former investor who had taken his $5 million out of Madoff. The informant claimed he was “deeply concerned that Madoff is running a very sophisticated fraudulent pyramid scheme,” adding, “I know that Madoff [sic] company is very secretive about their operations and they refuse to disclose anything. If my suspicions are true, then they are running a highly sophisticated scheme on a massive scale. And they have been doing it for a long time.” The SEC has no record of ever investigating this claim.

Reading this, it almost makes me wonder why the SEC believed Bernie Madoff when he claimed to be the mastermind of a $50 billion Ponzi scheme. If they had needed any more clues, they received an anonymous letter in March 2008, apparently mailed from the New York Public Library, which concluded, “It may be of interest to you that Mr. Bernard Madoff keeps two (2) sets of records. The most interesting of which is on his computer which is always on his person.”

There is no stronger evidence of financial fraud than a second set of books. Nobody keeps a second set books for fun. But rather than investigating this detailed claim, which seemed to me to indicate some insider knowledge, Simona Suh responded, “[B]ecause the letter is anonymous and lacks detail, we will not be pursuing the allegations in it.”

Kotz’s conclusion was obvious: The SEC never took “the basic and necessary steps to determine if Madoff was operating a Ponzi scheme,” and if it had it could have uncovered the scheme “well before Madoff confessed.” Personally, after reading all 457 pages of this report I have great admiration for David Kotz. He took on his own agency and shredded it with the truth. As I said later, Kotz and his team reaffirmed my faith in government. That’s how strongly I supported his report.

A lot of people disagreed with me—they were very disappointed with the report because it didn’t assess blame. They wanted to see the people responsible for this debacle named and punished. And like Frank, they found it very difficult to believe that the failure of the SEC was due to inexperience and stupidity, rather than collusion or even corruption. But I was at the center of the storm, and I never caught even a whiff of corruption, only incompetence and arrogance.

David Kotz investigated what went wrong at the SEC and why, and the evidence he presented makes it obvious who should be blamed. It also wasn’t his job to determine how Madoff actually was able to pull off this scam for decades. In our investigation we didn’t go after that, either. I don’t even remember discussing it. Who knew?

My team didn’t even attempt to find evidence that anyone else, including his wife, his two sons, his brother, his friends, his landscaper, or any of the employees of his money management firm knew about the mechanics of his scheme and helped him pull it off. But I believe it was impossible for him to have done it without considerable help. My family couldn’t even operate one Arthur Treacher’s Fish & Chips franchise without assistance. This was a $65 billion international scam that operated successfully for decades. Madoff’s Ponzi scheme was too large an operation for one person to have done it by himself—unless you’re talking about Superman, of course. And truthfully, Bernie really wasn’t that smart. He wasn’t particularly sophisticated with the numbers. For example, the reports provided to investors every month had to be prepared, and whoever did that had to know that the numbers were based on fairy dust. There was no mathematical basis for them. But who knew and when they knew it may well take years to be settled.

One member of my team did hear a story from a potential Madoff investor who had met with Bernie only two months before his surrender. This man was a fund executive who was interested in making a substantial investment, but insisted on meeting Madoff personally. Madoff agreed, and spent more than an hour with this executive in his office, answering every question and carefully explaining his strategy. It was, according to this man, an impressive performance. But at the end of

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