Ed felt as terrible about it as I did, but there was nothing he could do about it. He reminded me that Boston and New York had a competitive relationship. If a referral came to New York from Boston, the New Yorkers were more likely to think Boston was trying to dump a crap case on them rather than respecting policy. Probably the last thing they believed was that Boston had a career-making case and was handing it over because it was the right thing to do. It was like the Red Sox trading Babe Ruth to the Yankees.
I was furious with Meaghan Cheung, but I understood that none of this was really her fault. She was simply a product of the system. She had all the training that the SEC required; she had all the resources that were available to someone on her level; and it wasn’t nearly enough. The SEC’s capital markets work experience requirements were way too low, the exam quality standards were abysmally low, and that started at a level much higher than Meaghan Cheung. As an employee she was no better and no worse than most employees of the agency. In fact, we later found out that none of these people, Cheung, Bachenheimer, or their assistant, enforcement attorney Simona Suh, had ever investigated a Ponzi scheme. They wouldn’t have known what to look for, and as part of the bureaucracy they didn’t want to look unqualified or unprepared by asking someone like me for assistance. It’s the Ed Manions and Mike Garritys who are the exceptions, whereas she was typical.
While this was going on, Cheung and the other executives in her office spent their time investigating minor frauds and getting an occasional conviction and headline. They were going after the fleas instead of the elephant, which is what they had been trained to do, and there was no incentive for them to do anything beyond that. In the world of the SEC, a case is a case, and going after a hard target like Madoff counts the same as going after some tiny retail broker. There are no bonuses for doing the big cases that require a tremendous amount of work; in fact, that may create problems because those big guys, the sacred cows, are often major political donors. I was told by a government agency, for example, that at some point New York Senator Chuck Schumer called the SEC to inquire about the Madoff investigation. There is absolutely no evidence of any wrongdoing on Schumer’s part at all, zero, and no suggestion that there was any intent on his part to interfere. Senator Schumer apparently made the call on behalf of his constituents. The problem is that the SEC is funded by Congress, so its employees are particularly sensitive to congressional inquiries. So for a middle-level SEC employee with ambitions, any case in which an important politician is involved is a case he or she wants to stay far away from. It’s a lot safer to go after small potatoes.
As the weeks passed, it became obvious to me not only that Cheung wasn’t going to do anything to stop Madoff, but that she didn’t seem to appreciate the danger I was in. What was really frightening to me was the fact that she knew my identity. It was clear to me that she was incompetent for this type of case. It was possible she was corrupt—although I had no evidence of that, but it would not have surprised me if she was also careless enough to allow my name to get out. The more I considered the potential danger, the more anxious I got. I began wondering if I had raised my head too much. It seemed like every time we peeled another layer of the onion it became a little more frightening because we found another layer. From the large but local fraud we originally discovered this had grown paper by paper into a massive international scheme spread across several continents and involving the rich, European royalty, and probably some of the most dangerous men in the world.
I was boxed in: I was trying to alert the government about how big this thing was, but because it was so big the government refused to take me seriously. Basically, their attitude was nothing could be that big without being discovered, so they wouldn’t take the actions necessary to discover it. To the SEC, I suspect, I was simply crying wolf, and it seemed like every time they ignored me that wolf got bigger, which made it less likely there actually was a wolf.
The fear was growing inside me. I’d experienced something like it before. In September 1985 the army had sent my National Guard infantry brigade’s command group to Germany for training and we had been targeted by the Red Army Faction terrorist group then waging a bombing campaign in Frankfurt. We’d been put through a pretty good training course that taught us how to protect ourselves, which included checking vehicles for bombs and what to do if we were taken hostage. The enemy then had been a well-organized terrorist cell that had prepared a hit list; they were gunning for us. But this was different. This time the enemy was a grandfatherly philanthropist, the most respected man in his community, perhaps the very last person anyone would suspect of violence. But we already knew that his reputation was his disguise, and that in fact he was a world-class criminal. What nobody could predict was how far he would go to protect himself—and what the consequences would be to anyone in his path. If it did reach that point, I was nothing more than an inconvenience to him.
Looking over my shoulder when I walked down the street or checking underneath the chassis and in the wheel wells of my car before I turned the key no longer seemed like enough protection. I had started carrying an airweight Model 642 Smith and Wesson everywhere I went. Finally I decided it was time to get some outside help.
I knew the only people I could depend on to be there for me and my family 24 hours a day were the officers of the Whitman, Massachusetts, police department. I trusted my local police department far more than any federal agency. I’d spent years being disappointed by the federal government. To the Massachusetts state police, or even the Plymouth County sheriff’s department, I was simply another citizen living in their jurisdiction. That left the local cops, whose station was only a few blocks from my house.
Whitman is a typical New England small town, with a population under 15,000. We have a long history and a small town center, which has always been a good place for neighbors to meet. Some of our houses date to before the Revolution, and it’s possible to determine on which side of that fight the residents were by looking at their chimneys—loyalists to the crown had a black stripe around the top, which in some cases is still there. Later Whitman became the home of Toll House cookies. Faith and I had lived there happily for almost seven years, but suddenly I began to see the most familiar places in a different kind of way. Would that corner be a good place for an ambush? Or who was that person sitting across from us having a slice of pizza in the Venus? It was odd; Bernie Madoff had become a central figure in my life—and my fervent hope was that he didn’t even know I existed.
Whitman measures only 6.97 square miles, meaning it would take a police car about a minute to get to my house from anywhere in the town. And no one cares about the citizens of the town of Whitman more than our local police department.
When Faith and I had moved to Whitman, I had gone to the local precinct to apply for a firearms permit. I had met Sergeant Harry Bates that day and since then I had often seen him around our town center. It was always pleasant, always calm, so when I came barging into his office one afternoon pale as a ghost, sweating profusely, he knew that whatever was bothering me was serious. “I need to talk to you,” I told him, “in your office.”
Truthfully I don’t remember exactly what it was that had set off my panic button. It might have been something as simple as a hang-up call or a car that stopped in front of my house and sat there too long. Maybe it was something I read, a seemingly innocent comment somebody made, or two pieces of information that didn’t fit together easily. But whatever it was, it pushed all my buttons. I realized suddenly that I had to make sure somebody was going to come running when I yelled for help. Somebody with firepower.
Harry Bates settled comfortably into his chair. “What’s going on, Harry?”
I laid out the broad strokes for him. Basically, I told him I had uncovered a multibillion-dollar Ponzi scheme that was global and the biggest fraud in history and I was afraid people might try to kill me to shut me up. While he didn’t know what a Ponzi scheme was, he certainly understood billions of dollar
s.
“What do you want us to do?” he asked. “Where do you want me to take this?”
“You have to keep this very quiet,” I explained. “If you put this in the precinct log and the newspapers pick it up, my life is going to be in jeopardy. If you talk about it and the word gets out, my life is going to be in jeopardy.” It took a little while for Sergeant Bates to understand I was deadly serious about this, but to his credit he began working with me to set up the safest possible situation. We agreed on a simple plan. He knew if I called for help he had to come running with the whole cavalry. He knew if my home alarm went off it wasn’t a going to be a false alarm.
Then he asked me, “You carrying?” We talked about guns for a while. Obviously he knew I had a license; he’d filled out the forms. I told him that I was now carrying a weapon with me wherever I went. I’d opted for a lightweight gun, I said. I felt it was better to have a weapon I could fire rapidly than something with massive stopping power. He reviewed the state gun control laws, particularly what was permitted in public. Massachusetts has tough regulations and he didn’t want me to have any problems.
Then he asked me if I wanted to wear body armor. I had thought about it. The army had taught me there were three things you had to be able to do to protect yourself: shoot, move, and communicate. I certainly was trying to communicate; I had been trained pretty well to handle the shooting part; that left mobility—which was why I decided not to wear a bullet-proof vest. I actually tried on several different types, but all of them restricted my movement. If Madoff wanted to kill me he was going to use professionals, and that meant a double-tap with two bullets to the back of my head. In that situation a bullet-proof vest wasn’t going to be any help. I knew that my only hope in that situation was to survive the initial attempt, fire as many shots as quickly as I could, and either get out of there or get help. There were no good options.
By the time I walked out of Sergeant Bates’s office I had calmed down. His confidence had been somewhat reassuring. I knew that if anything happened to me, my family would be protected.
But in addition to meeting with him, I took several additional precautions to make sure I was never put in that situation. I upgraded the alarm system in and around my home, including pick-proof locks. I began altering the routes I traveled to get home at night. I never drove more than a couple of blocks without checking continually in my rearview mirror. In addition, Faith got her handgun license and took lessons in properly handling a weapon—and firing it to hit the target. Eventually she became an excellent shot. We kept guns safely locked up in the house, but always within quick and easy reach.
By nature I’m a cautious person. I am actually one of those strange people who will stand on a street corner waiting for the walk sign, even if I don’t see a car coming. In this situation I was taking every possible precaution to stay alive. There was no way of knowing if, or when, Madoff would figure me out. And finally I made a decision. If he contacted me and threatened me, I was going to drive down to New York and take him out. At that point it would have come down to him or me; it was as simple as that. The government would have forced me into it by failing to do its job, and failing to protect me. In that situation I felt I had no other options. I was going to kill him.
Chapter 6
Didn’t Anyone Want a Pulitzer?
My father was a tough man. For a while he owned two diners and two bar-lounges in Erie, Pennsylvania. He also owned the storefront next to the New York Lunch, as one of the diners was named. He had rented that space to a motorcycle repair shop, which, naturally, became the hangout for the local chapter of the Hell’s Angels. I was in that restaurant one afternoon when my father threw a biker out of the place for causing some kind of problem. A few minutes later the biker came back, tearing through the front door on his Harley, and started doing circles in the middle of the restaurant.
I remember people scrambling to get out of the way, but my father didn’t hesitate. He came running out from behind the counter and knocked him off his bike, then started fighting him. He didn’t care that this guy had a gang backing him up. He was just protecting his livelihood, protecting his family. The fight ended when the short-order cook, Rusty, called the police, ran into the back room and came out pointing a double-barreled shotgun at the biker. A 12-gauge ends a lot of arguments.
I never saw my father back down. I saw him challenge customers who tried to walk out of his place with silverware. I remember him coming home from one of the bars some nights with his face swollen and his knuckles bloody because he’d had to throw a drunk out. I had learned right and wrong from him and that whatever the cost I was supposed to fight the bad guys. So for as long as possible I would continue to fight Madoff with documents, but now I was aware it could get much more dangerous.
In my head, I had worked out my plan to go to New York and kill him if he threatened me. I didn’t tell anyone about it; I certainly didn’t tell Faith or Frank or Neil. I didn’t want to make any of them an accessory to murder. I knew how they would respond if I told them. At first they wouldn’t believe me: Harry? Kill someone? Forget it, it isn’t going to happen. But when they realized I was serious, they would try desperately to talk me out of it.
I wasn’t interested in those conversations. I knew how crazy my plan sounded, but I also knew it was my life and my family’s lives that were in jeopardy.
We had been pursuing Bernie Madoff for almost five years, and the cost of this fight was continuing to rise. Five years earlier I had been in comfortable control of my life. I was earning a reasonable salary working on the equity derivatives desk of a respectable firm, and if it wasn’t particularly exciting most of the time, at least it was interesting. Then Frank Casey dropped Bernie Madoff into my life. I’d ended up leaving that company, in fact leaving the entire industry, because of that, and here I was working in an attic office, never leaving my house without being armed, and always being careful to avoid shady areas. I hadn’t earned a paycheck in more than a year, and I was forced to watch helplessly as Madoff continued to steal billions more dollars and the people who could stop him instead treated me as their enemy.
Only the fact that I was part of a team made it tolerable. Frank Casey, Neil Chelo, and Mike Ocrant continued to gather information and feed it to me, and whenever we heard something new or got hold of a Madoff document, a flurry of angry, funny, sarcastic, ironic, and occasionally bitter e-mails would circulate among us. Early in 2006, for example, Neil finally found a former employee of Madoff who was willing to talk. This man had worked for Madoff for three years in the mid-1990s and was currently at a hedge fund. Neil certainly gave him no indication he was investigating; it was normal business chitchat. This man was pretty open with Neil about Bernie. He had no reason not to be—he believed Bernie’s operation was honest. But he had worked on the 19th floor as a proprietary trader in the brokerage, and had little knowledge about the hedge fund. He’d left on very good terms, convinced that Bernie was “the real deal,” although he admitted that having knowledge of the order book was a big moneymaker. He never saw any of the options transactions, he told Neil, but that didn’t bother him. Bernie and his sons were “brilliant and hardworking,” he told Neil. As Neil concluded his e-mail to me, “He believes in Bernie.”
This type of communication between us was very common and because of that, I never felt like I was in it alone. In addition to the three of them, I also had come to rely on a man named Pat Burns for advice. Pat Burns was the director of communications for Taxpayers Against Fraud, a whistleblower organization in Washington, D.C., and had seen this kind of insanity up close several times before.
Being a whistleblower is extraordinarily lonely, and eventually I had begun searching for other people in a similar circumstance, people who understood what I was going through and who shared my fears. I had found Pat Burns’s organization through an Internet search. I called him and introduced myself, explaining that I had several good cases and I was interested in learning more ab
out the bounty programs.
I was exploring a new world, a world in which people took great risks to expose corruption, and Pat Burns became my guide. We spoke on the phone often and traded e-mails, but it was actually more than a year before we met in person. Pat is tall and balding and, like me, has a broad sense of humor and a visceral dislike for bad guys. He hates to see them win as much as I do. And in the sometimes chaotic world of whistleblowers he was the steady hand. I think it’s accurate to say that he knows more about white-collar fraud in the United States than any man in history. He knows how lawyers and lobbyists work to protect their clients and what can happen to whistleblowers, both the bad and the good. He told me right from the beginning that there was considerably more bad than good, that few whistleblowers ever win and go on to live happily ever after. He’s seen lives destroyed. But beyond answering my questions and helping me navigate through these unfamiliar waters, his presence served as a constant reminder that I wasn’t hanging out there alone.
Eventually I had told Pat everything about our Madoff investigation. I sent him the 2005 submission with the instructions, “If anything should happen to me you’ve got a green light to go to the media immediately. Give the story to anybody who’ll print it.”
No One Would Listen: A True Financial Thriller Page 19
