It got very scary. As he explains, “I was scared. I’ll bet I rotted out a dozen shirts from sweat. I was drinking heavily. One night in Boston, I remember, I’d been drinking and I was driving home late at night. I looked in my rearview mirror and realized a car was following me, tailgating me. Whoever was driving made no attempt to hide the fact he was trailing me. I took back roads I knew and he stayed right on my ass. Finally I got to my house. I raced into the driveway and slammed on my brakes, rolled down my window, and leaped out of the car. As the other stopped by my driveway I scrambled to get behind my door for protection. As I did I pulled out my .357, and as soon as I got behind the door I pointed it through the open window at the driver. He just sat there, staring at me, then pulled away. I never saw his face. I do believe they were sending me a message: They knew where I lived. I got the message; believe me, I got it.”
Gradually, Frank’s strategy began working. He took his gains in small pieces—$10,000, $15,000, occasionally $100,000. It was painfully slow, but it was working. Finally the lawyer called again. As Frank remembers, “He said, ‘This isn’t fast enough. You got one week or we’re gonna have to do something about it.’
“That was it for me. I called the broker who brought me into the deal and told him, ‘You call that lawyer in Carteret and you tell him if I receive one more call I’m coming down to get them. Trust me—they won’t even know what hit them.’ I never got that call. I successfully moved $1.1 million of the one and a half million dollars before the end of the year. I wanted to get out then, but these people loved the profits and insisted we stay in. I had positions that were worth millions of dollars and I did not have discretion over the account so there was nothing I could do about that. They wouldn’t let me out. They thought it was a money-making machine; they didn’t understand it simply deferred taxes. I told them this was designed for one purpose, to move $1.2 million in two weeks. ‘I just built you the atom bomb,’ I said. ‘Trust me—you don’t want to use it.’ But all they saw were the profits.
“Of course they eventually lost most of it and left me with a debt of a hundred twenty thousand dollars. I actually wanted to sue them for the money, but Merrill Lynch was beginning to understand that this was potentially a bigger problem than it was worth to them and pushed me into arbitration. I got most of that money back. Merrill Lynch eventually absorbed the remaining losses.
“But there was no question in my mind that my life was at risk if this strategy had failed.”
Professionally, the European trip was a failure. For my product to be profitable we had to raise at least $10 million, and we came home with commitments of slightly more than $6 million. It wasn’t going to be profitable enough to pursue. And the truth was that these funds didn’t need me; they had Madoff. There was no reason for them to invest in riskier products. At no time during the trip did I even consider revealing what we knew to any of these asset managers. There was no reason for them to believe me, and they were already addicted to his returns. Just like the American funds, they needed him to survive—and they needed him a lot more than they needed me. Who knows what they might do if they knew I was trying to expose him? So it was just too risky, and in retrospect that probably was one of the most intelligent decisions I made during this whole investigation.
When I got home from Europe, I did two things: First, I told my team, “You wouldn’t believe it. He’s bigger in Europe than he is here. Fourteen of the twenty funds we met with there have him, and obviously there are a lot more.” And second, I began seriously upgrading my home security.
From that moment on there wasn’t a day I didn’t consider the security of my family and my team before taking any action. It wasn’t just money—I believed that lives were at stake. I had been careful to keep the names of my team secret. Mine was the only name on my submissions. If someone in the SEC was revealing information to Madoff (and considering how close he was to the SEC in New York that certainly was a possibility), Markopolos was the only name they could give him. I’d learned in the army that a leader leads. I’d gotten Frank and Neil into this, so it was my responsibility to protect their identities. And personally, I began carrying a gun.
I really didn’t know what to do next. My two submissions to the SEC had been ignored, the two articles that should have prompted an investigation of his operation were long forgotten, and Forbes had ignored me. The only thing I knew for sure was that until my information was made public my life would be in jeopardy. Once it was published or the SEC took action, I would be safe. So I had to find some means of exposing Madoff to the public. I was just beginning to feel the first tinges of desperation.
Only three people have impressed me with their efforts to regulate the worst practices of Wall Street: William Galvin, who was elected Massachusetts secretary of the commonwealth in 1994, which put him in charge of the state Securities Division, and New York State’s attorney generals: Andrew Cuomo and Eliot Spitzer. These are the
