What the Madoff whistleblower did on his NZ holiday

Cling! Cling! Cling!

US fraud investigator Harry Markopolos rounds a bend on a South Island trail to find a man breaking into a donation box with a hacksaw, hammer and a crowbar.

The man is a Department of Conservation ranger but Mr Markopolos still confronts him.

"He thought I was there to arrest him," he told NBR ONLINE.

The ranger assures him he is retrieving coins stuck in the box for four weeks.

Mr Markopolos still waits at the end of the trail to ensure the man drives away in the truck plastered with the green and yellow logo.

"He had a plastic bag and you could see in it there was probably about $1000, there were a lot of bills and a lot of $2 and $1 coins, and some smaller denominations.

"Well, that's a bad internal control."

Even on holiday, Mr Markopolos still has an eye for fraud.

Chasing Madoff
The fraud investigator, a former stockbroker and US Army reservist, was the star turn at the Serious Fraud Office's Economic Crime Network meeting in Auckland, a three-day conference to strengthen ties between anti-fraud agencies.

As a little-known number-cruncher working at a Boston equity derivatives firm he realised that returns from Bernie Madoff's wealth management business could not possibly be legal.

He told his bosses that to emulate Madoff's returns they'd have to break the law.

Mr Markopolos knows – and loves – numbers and can spot inconsistencies in financial returns at a glance.

But he also has a heart.

During a media conference early this week he said economic crime causes far more damage to an economy and society than violent crime.

Think about it: you can rob more as the ceo of a bank than a robber.

White-collar criminals do the most harm, including leading people to commit suicide, he says.

“I know the Madoff case has a very high body count.

“It’s really not publicised. People are ashamed when a family member commits suicide."

It's overlooked, he says. Hidden.

"The losses and damages to society, the loss of trust, the loss of trust in government – it’s incalculable. It gets ignored.

"I know it’s more glorious for the media to cover things with bloodshed and stabbings and shootings, but our crimes, while they don’t involve violence, leave the families in desperate straits and they really harm a lot of people in some grievous ways."

NZ 'vulnerable'
Considering his encounter with the DOC ranger, Mr Markopolos has a dim view of New Zealand's safeguards.

"Your country is so trusting – I notice the lack of internal controls everywhere I go.

“On the internet service I hand over $10 for 24 hours at a hotel and I have to ask for a receipt.

“No one’s making a recording of that transaction so if the employees were dishonest at the hotel front desk they could keep the money.”

In the United States, the DOC ranger's money would be in a locked, steel container and the person collecting it would not have a key. 

"They would take it to a counting room where two individuals would count the money at the same time with a camera overhead.

"Then you have another person record the amounts, so you have a segregation of duties.

"Everyone's so trusting here. I think you're vulnerable here, very vulnerable."

It hasn't put Mr Markopolos off – he plans to return and go hunting and fishing.

Perhaps then he will be formally introduced to New Zealand's all-pervasive "she'll be right" concept. 

The smart money says he won't like it.

dwilliams@nbr.co.nz