The man who uncovered the world’s biggest investment fraud says Queenstowners need to be aware of elaborate wealth management schemes.
Harry Markopolos, an independent fraud investigator, proved US businessman Bernie Madoff defrauded thousands of investors through his $65 billion Ponzi scheme.
Markopolos visited Queenstown for two days this week ahead of a scheduled public talk on economic crime in Auckland next Monday.
His visit’s been organised by New Zealand’s Serious Fraud Office. During his Queenstown pitstop he caught up with ex-SFO boss Adam Feeley, now the Queenstown Lakes District Council chief executive.
Markopolos is aware of the recent collapse of Ross Asset Management (RAM) – an investment company favoured by several well-heeled locals – which, it’s alleged, could turn out to be NZ’s largest Ponzi scheme.
Receivers appointed to RAM, its owner David Ross and 10 other Ross entities have so far found about $10 million out of a purported $450m portfolio held by 900 investors.
Several Queenstowners are believed to have large amounts of money at risk.
“There are some basic building blocks common to all Ponzi schemes,” Markopolos tells Mountain Scene.
“The first is they almost never register with the authorities.
“The second feature is the returns are too good to be true, with few – if any – negative return months or years.
The reason they do that is they want to give the victims the perception of safety and high returns, because most people are behind in saving for retirement,” he says.
“And they don’t just want some of your money – they want all of your money, and they want all of your friends’ money.”
Ponzi schemes also offer a sense of exclusivity amongst investors, Markopolos adds.
“They think they’re lucky, they’ve been invited to join the exclusive money club.”
Markopolos, a finance industry veteran, spent nine years cracking the Madoff case – although it only took him five minutes to realise that Madoff was a fraud.
“I was a portfolio manager managing billions of dollars’ worth of equity derivatives portfolios. So I knew the math, and I knew those numbers did not exist in finance, because I’d managed products similar to what Madoff was offering.”
The hardest part was convincing America’s Securities and Exchange Commission, which is why it took so long for Madoff to be apprehended.
Madoff admitted charges of fraud and money laundering in March 2009, aged 71. He’s currently serving a 150-year prison sentence.
Markopolos’s 2010 book No One Would Listen: A True Financial Thriller is a New York Times best-seller and forms the basis of a 90-minute television documentary Chasing Madoff.
A keen hunter and fisherman, Markopolos plans on returning to Queenstown in the near future.