feel’ was ‘necessarily…ridiculous.’” The SEC defaulted to truth, and the fraud continued. Across Wall Street, in fact, countless people who had had dealings with Madoff thought that something didn’t quite add up about him. Several investment banks steered clear of him. Even the real-estate broker who rented him his office space thought he was a bit off. But no one did anything about it, or jumped to the conclusion that he was history’s greatest con man. In the Madoff case, everyone defaulted to truth—everyone, that is, except one person.
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.
Or is it? Here we come to the second, crucial component of Tim Levine’s ideas about deception and truth-default.
2.
Harry Markopolos is wiry and energetic. He’s well into middle age, but looks much younger. He’s compelling and likable, a talker—although he tells awkward jokes that sometimes stop conversation. He describes himself as obsessive: the sort to wipe down his keyboard with disinfectant after he opens his computer. He is what’s known on Wall Street as a quant, a numbers guy. “For me, math is truth,” he says. When he analyzes an investment opportunity or a company, he prefers not to meet any of the principals personally; he doesn’t want to make the Neville Chamberlain error.
I want to hear and see what they’re saying remotely through their public appearances, through their financial statements, and then I want to analyze that information mathematically using these simple techniques.…I want to find the truth. I don’t want to have a favorable opinion of somebody who glad-hands me, because that could only negatively affect my case.
Markopolos grew up in Erie, Pennsylvania, the child of Greek immigrants. His family ran a chain of Arthur Treacher’s Fish & Chips outlets. “My uncles, they would chase after the people that did the dine and dash. They would go out there and catch them, make them pay,” he remembers.
I saw my dad get in fights with customers, chasing customers down. I saw people stealing silverware. Not even silverware—tableware.…I remember one guy, he’s huge, and he is eating off of other people’s plates that have left the counter, and my uncle says, “You can’t do that.” And the guy says, “Yes I can, they didn’t eat the food.” So my uncle goes to the other side of the counter, picks this guy up by his beard and lifts him up and he keeps lifting him up.…And I’m thinking, my uncle’s dead. This guy was like six foot six. My uncle’s going to be killed. Fortunately, other customers in the restaurant stood