Madoff and Markopolos at least agreed on one thing: The SEC is really a “financially illiterate bunch. Madoff clearly had a low opinion of the SEC and knew exactly how to navigate the rules and coax the regulators.
The phone conversation transcript that Massachusetts Secretary of State William Galvin released yesterday, in which he coaches a potential SEC witness, is yet a further embarrassment for the agency.
From the transcript: So, you know, they typically—you know, we run through this all the times. The guys come in to do a books and records examination and they—they whatchamacallit—you know, they ask a zillion different questions and we look at them sometimes and we laugh and we say are you guys writing a book? And we say, you know, and they know that brokers – you know, because these guys they work for five years at the commission then they become a compliance manager at a hedge fund now. Or they go work for a proprietary desk. Nobody wants to stay there forever.
Madoff, who calls the SEC’s examination a typical “fishing expedition,” warns the witness that “the less he knows about how the firm operates, the better off he will be.
Your position is say, listen Madoff has been in business for 45 years you know, he executes a huge percentage of the industry’s orders, he’s, you know, a well known broker.
You don’t want them to think that you’re concerned about anything. With them you should—your best off you just be, you know, casual.
He also puts him on hold for a moment to take another call, then goes on to say: “I’m sorry, if I get anymore solicitations for charity, I’m going to kill myself.”
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