Chasing Madoff, directed by Jeff Prosserman, is willy-nilly a memorable parable of the Great Recession and the treacherous political tradition that led up to it, including earlier financial calamities, even though the movie is often heavy-handed, even sometimes amateurish. It is a tense, terse drama of discovery about the Financial Sector sadly, and despite the labored and hopefully not stillborn Dodd-Frank, no doubt still valid almost as much as it was in the nine years it covers, namely, the years during which Harry Markopolos, “obsessed,” failed to bring down Bernie Madoff before no less than the Great Recession exposed that legendary con artist.
The point of the parable is that seemingly nothing, absolutely nothing, could have brought down the simplistic and huge con artist Madoff other than a collapse of the financial system itself.
The greatest insights of Chasing Madoff consume only minutes, literally.
First, Markopolos, a talented worker in the investment community with a quick sense of the mathematical, says quite believably that circa 2000 it took him “eleven minutes” of studying a hard copy of the history of ROIs generated by the Madoff firm to know that Madoff was practicing fraud, specifically a Ponzi scheme. How? The underlying dynamic of investment throughout history made impossible the consistently rising curve of Madoff’s ROIs. That was it. Pure and simple. Madoff’s was a blatant fraud; small wonder con artists are cynical. Markopolos had other analysts confirm his finding, most probably, you sense, because Markopolos was astonished. Yes, the analysis needed to expose Madoff conclusively was trivial, elementary.
Second, nine years or so later, a group of SEC officials was lambasted by a congressional committee over the officials’ failure to follow the leads provided them by Markopolos over those nine years and stop Madoff’s con in time at least to save many of his herd of investors. As in: herd, foolish behavior thereof. Two or three exchanges at the hearing, lasting perhaps five minutes in sum, were all it took to (a) demonstrate that Congress is at its best when publicly livid after the horse has left the barn (and the cameras are on) and (b) the SEC, and by extension the government (at least in those bad times), was absolutely futile in protecting investors in major financial catastrophes brought on by cons and their various frauds and that government financial regulatory officials were often unwilling to discuss revelatory information with Congress and at times (who knows how many?) were not compelled to do so. For example, not a single member of the SEC staff ever called a stock exchange to confirm a single one of Madoff’s “investments.” That would be SEC Fraud Detection 101. Or something else altogether. It’s been a pleasant day, so let’s not go there.
Actually, beyond these two brief episodes, the movie needn’t have been more than another twenty minutes long. Jeff Prosserman might as well simply have had Markopolos sit in a chair by himself in a spotlight on an otherwise dark stage and make a few points.
1. No one to whom Markopolos presented the analysis ever exposed Madoff. Not the SEC, Forbes, The Wall Street Journal, etc. The pattern was the same everywhere. The initial government contacts–several mid-level fraud investigators (“investigators”?)–would excitedly take in Markopolos’s analysis but they would be unable to get higher permission to pursue it; well-known reporters would excitedly take in Markopolos’s analysis but the stories would be squelched by high-level editors. Markopolos tried several versions of the analysis, eventually (and holding his breath about the conspiracy angle) writing the equivalent of A Moron’s Guide to the Madoff Fraud to make it easy for the SEC fraud “investigators,” but with no success.
2. Given his personality, Madoff’s duplicity wasn’t especially subtle. Only one very brief scene of Madoff speaking is shown. He is in shirtsleeves and joking with a small group of listeners. Madoff is smirking about how investors invest as though they were in deep thought about the wisdom of their bets. He mimics the fake thoughtful expression on an investor’s face at the moment of commitment. Madoff is at ease as a Dark Angel of Scorn. He didn’t, by the way, become a hog at his trough; he took a lot, but not nearly as much as you might imagine such a con-artist would take: he was hooked on the excitement of the easy experiment about exactly what variety of Homo sapiens is born every minute. Madoff Understood The Worst. So: you have to credit Prosserman’s superb selectivity here; in short, if you could pick only a few moments out of Madoff’s life to show….
Otherwise, Madoff is said to have made a habit of cruising funerals, Bar and Bat Mitzvahs, weddings, and other social gatherings to find marks, big and small. He went widely international in the scam. Markopolos says it is hardly likely that Madoff was not laundering drug and organized crime money as well as “investing” it. (Markopolos speculates most convincingly that Madoff may well be glad he is in prison.) Madoff was served by both naive and complicit “feeder” firms. A principal director of one of these funds, Rene-Thiery Magon de la Villehuchet, the famous French aristocrat and money manager who founded Access International, committed suicide after the Awful Revelation.
Surely no one will pass off Madoff as merely an “aberration.”
As to what are called “market discipline” and the “business cycle,” well….
3. In the most haunting anecdote in Chasing Madoff, Markopolos, afraid by then and packing a gun, comes upon a conference at which Eliot Spitzer, still the Sheriff of Wall Street, is speaking and Markopolos, shunning publicity, writes out a gist of his analysis, places it in an envelope, and has someone deliver it later to Spitzer after Markopolos has left the gathering. Spitzer, his posse larger than ever and the outlaws everywhere and those Mayflower Hotel receipts still hidden in the glove compartment, never responds to the letter. Years later, the two men have a drink together and Spitzer laments that Markopolos did not come forward to him. Spitzer lamented, “We could have changed history.”
Charlie, I’ll have a Bombay Sapphire marty up with two olives. No vermouth.