Ok for you, @Sig, just for you, I got out my Harry Markopolos' book "No One Would Listen", on page 41, Markopolos clearly stated Madoff's strategy was buying a basket of blue-chip stocks and then hedge them with OTM OEX 100 (equivalent of SPX 500) put options and then also sell OTM OEX 100 call options with equal number for each. That strategy is what's called covered call with downside protection. All of the options would've traded on CBOE and all of the stocks would've traded on their respective stock exchanges, all those agencies have to do is go down to COBE and/or to any of the stock exchange where Madoff supposedly bought those blue-chip stocks and ask for transaction records. You are telling me that those agency auditors can't even do that??!! Just checking for some transaction records? Auditors never check for the entire month or entire period of records, they just check for sample of them, like several weeks or few days of them to see if they match. SEC might be underfunded to do that but what about FBI, DOJ? They have surveillance equipment that's worth millions more working for them and they set up shop in downtown NY to investigate the guy, you are telling me they can't simply go down to exchanges to ask for some transaction records???!! I don't buy it. They just needed to check for ONE and they would've uncovered the fraud lot earlier because there was NOT ONE transaction record that existed.
And as a matter of fact, SEC, to its fairness, actually made an attempt and probably the only attempt among all agencies to check Madoff's transaction records. And it involved even simpler than going down to the exchanges to check for transaction records. It actually asked for Madoff's DTC account number to check for transactions during one of their Enforcement Investigation and Madoff gave them a fake DTC account number. Even Madoff himself thought he was done and he was actually expecting to be done because all SEC had to do was to go down to DTC to check for all of the cleared transactions and they would've discovered there were no transactions whatsoever and even the DTC account number was fake and his scheme would've been exposed. Because no matter how much statements he can do, he would not be able to fake DTC number, a broker-dealer identifier no. assigned to each dealer for clearing transactions. But for some very incredible and unexplained reason that even astonished Madoff himself, SEC never followed up or contacted DTC to check, and no else after them ever did either. DTC is actually an agency with SEC and they didn't even bother to contact SEC's own internal agency. And so Madoff narrowly escaped again. There is something very wrong when the crooks that you are supposed to catch even thinks that he should be caught and fully expects to be caught and is astonished to find instead that he's not. WHY didn't SEC simply just go down to DTC to just check out the number??!!! There is no math, or talent, or "fraud-minded" required, just doing the routine of checking out a number??!!
As much as I understand government's hiring limitations for talent, I just think this is not the case here. Letting Madoff to have a ponzi scheme to go on for so long undetected is simply a lack of due diligence and laziness and complacency on those governmental agencies' part, aka dropping the ball on the American people. This is not a skill issue. This is an attitude issue.
