Wall Street Journal Dropped Ball On Madoff Scam Too
The Wall Street Journal wrote frequently about how the SEC ignored Harry Markopolos' warnings about Bernie Madoff. It slammed the agency for investigating "without much energy." Left unsaid: the Journal was itself apathetic.
Markopols testified to Congress today that he spent three years talking with an eager Journal reporter about the accused con man. But it all came to nothing, possibly because of the paper's editors:
[Pat Burns, communications director at Taxpayers Against Fraud] put me in contact with John Wilke, senior investigative reporter for the Wall Street Journal's Washington bureau. Mr. Wilke and I would become friends over the next three years. Unfortunately, as eager as Mr. Wilke was to investigate the Madoff story, it appears that the Wall Street Journal's editors never gave him approval to start investigating. As you will see from my extensive e-mail correspondence with him over the next several months, there were several points in time in which he was getting ready to book air travel to start the story and then would get called off at the last minute.
Funny how none of this made it into the paper's frequent, often front-page, coverage of Markopolos' years of Madoff warnings to the SEC. (Madoff is accused of disguising a massive pyramid scheme as a hedge fund for the rich.)
Maybe the paper was treating Markopolos as a confidential source and thus could not write its contact with him. In that case, the paper could have sought a waiver from the Boston money manager; given his Congressional testimony, it's hard to imagine why he would not have granted one.
In any case, the paper's caustic editorial page, independent of the newsroom, now sounds a bit hypocritical in its Dec. 17 editorial against the SEC and other government regulators, "To Catch a Thief:"
Neither current AG Andrew Cuomo nor Mr. Spitzer appears to have had a clue about Mr. Madoff's conduct....
The SEC's failure is business as usual. The real news would be a case when the SEC did prevent a fraud. Typically, its enforcers wait for a phone call and then pursue the tip, or in the case of Mr. Madoff pursue it without much energy.
There's a lesson here for investors and Congress. Instead of shoveling more money and power to the regulators who already had plenty of both, let's take care not to overregulate the people who actually warned about Mr. Madoff's miracle returns.
By that logic, there may be a "lesson here" for Journal subscribers, as well.