What Happens When You Blow the Whistle and Everyone Ignores You?


If a tree falls in the forest and nobody is around to hear, does it make a sound? The answer to this quantum theory question depends on the interpretation of perception and reality. Whistleblower Harry Markopolos must have felt entangled in this conundrum as he made lots of noise about Bernie Madoff, but nobody seemed to hear him.

Long before the Madoff empire toppled, Mr. Markopolos questioned the surreal returns on investments made with Bernard L. Madoff Investment Securities LLC. In his duties as portfolio manager at Rampart Investment Management, Mr. Markopolos noticed unusually consistent returns each month from the Madoff-run hedge fund. He took the initiative to conduct an investigation and determined that Madoff’s strategy could not possibly have produced that amount of money in the volatile markets of the late 1990s and early 2000s. He concluded that Mr. Madoff was running a Ponzi scheme.

Mr. Markopolos blew the whistle on Mr. Madoff in the spring of 2000, when he filed a complaint with the Securities and Exchange Commission (SEC). But the agency ignored his concerns. Over almost a decade, Mr. Markopolos made several further attempts to sound the alarm on Mr. Madoff, but time and again nobody listened. Mr. Markopolos published a book in 2013 that details his whistleblowing efforts, including the following:

  • Mathematically demonstrating that Mr. Madoff’s returns were fraudulent in 1999
  • Filing a formal complaint with the SEC in 2000
  • Submitting a second, more detailed analysis to the SEC in 2001
  • Investigating the international sources of Mr. Madoff’s new money that fed the Ponzi scheme in 2001
  • Delivering documents about the scheme to the former Attorney General of New York in 2002
  • Producing a comprehensive report, The World's Largest Hedge Fund is a Fraud, which he delivered to the SEC in 2005

At the end of 2008, Madoff’s Ponzi scheme collapsed. In early 2009, Mr. Markopolos testified before the U.S. Congress about the biggest, most damaging securities fraud scam in history. After thousands of people were hurt and the economy was left in ruins, the world finally listened intently to what Mr. Markopolos had to say.

The case highlights the importance of being heard as a whistleblower.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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