August 2009

There's Something About Harry
By Peter Goldmann

Who says accountants are boring?

The 2009 ACFE Fraud Conference & Exhibition in Las Vegas featured Harry Markopolos, the humble hero who started blowing the whistle on Bernard Madoff in 2000, only to be repeatedly brushed off by investigators at the Securities and Exchange Commission (SEC).

That story is now legend and Harry is anything but just another fraud examiner working hard to identify financial miscreants in need of some harsh comeuppance.

But more important than having finally received the recognition he long deserved for sniffing out the sleaze in Madoff's operation is the broader message Markopolos brings to the business world.

At the ACFE conference, he went beyond recounting the ordeal and frustrations of trying in vain to wake up a regulatory agency snoozing at the wheel. He called for radical — and I mean radical — revamping of the mindset of government regulators who are in jobs intended to catch bad guys with their hands in the cookie jar.

Specifically, he told the more than 2,000 ACFE conference attendees that while he had the utmost respect for President Obama's SEC chairwoman, Mary Schapiro, he challenged her in rather blunt terms to produce major results in acting against large corporate securities law violators within a year... or else.

Speaking Up and Speaking Out
Mr. Markopolos made several allusions to the personal danger he felt in the wake of his sudden notoriety as the country's best-known scam buster. One wonders who he's most afraid of - angry SEC employees whom Harry placed directly in his verbal crosshairs, some invisible Madoff mob out to whack him for busting the boss, or other champions of financial evil.

Nonetheless, he presses on, bringing his message to audiences around the country and is working on a book to be released early in 2010.

Markopolos received two standing ovations during his ACFE address. The question now, though, is: Where are the other Harry Markopoloses this country so desperately needs to lift it out of its moral and ethical morass?

Madoff stole $65 billion. But more importantly, Madoff's crime is just one of tens of thousands like it perpetrated every day. Collectively, however, the growing population of Ponzi schemers, mortgage fraudsters, identity thieves, book-cookers and check counterfeiters, to mention just a few, have succeeded in finally giving financial fraud a competitive shot at media attention along with the standard newsroom favorites of murder, rape and kidnapping.

This reaffirms what most of Markopolos' ACFE audience already knew: that more people are committing more frauds at a faster and faster pace. The reasons are almost immaterial. Yes, the research shows that employees steal more when the economy is down. But the data also show that embezzlement, financial reporting fraud, securities violations and identity theft have been rising at alarming rates since well before the current economic downturn set in.

This trend, which everyday pulls yet another stitch out of America's moral fabric, will only be reversed if more Harry Markopoloses come forward and challenge our government, civic and business leaders to do what they're supposed to do - set the example of doing the right thing; inspiring, imploring or, if necessary insisting through punitive action that employees, bosses, colleagues, friends, neighbors and public servants get back to the basics of fair play, self-accountability and moral rectitude.

Markopolos' challenge to SEC Chairwoman Schapiro to stand up and set the right example in defending the integrity of the U.S. securities markets is just one such example of the kind of bold moral leadership of which this country is now in such short supply.

President Obama, to his credit, has similarly called for a re-embracing of fundamental American values that built the nation: hard work, respect for and compassion for neighbors and co-workers, and the strengthening of family cohesiveness.

Cry for Help
The latest financial crisis is a sort of cultural cry for help. It painfully demonstrates the urgent need for greater willingness on the part of government, cultural, civic and business leaders to buck the mindset of "anything goes" that has gripped the nation and corrupted virtually every social, political and civic institution. But Markopolos and Obama cannot do it alone. There is a desperate need for ethical activism on the part of everyone in positions of leadership and responsibility, be they in business, government, education or international relations.

Harry Markopolos got standing ovations for busting Madoff. What he should really have been saluted for is his unflappable patriotism; his insistence on seeing to it that right overpowered wrong and for caring enough to persevere against the odds until the job was done.

Will the nation's other Harry Markopoloses please step forward and do what others cannot or will not do?