Exposing Wall Street Corruption: Beware Of Severed Horse's Head

[Genesis Of The Financial Collapse]

Harry Markopolos, the unrequited whistle-blower of Bernard Madoff’s scam, stated that he was afraid to report Madoff to NASD Regulation and the Financial Industry Regulatory Authority because of the influence of both Madoff and Peter Madoff, Bernie's brother.

Markopolos feared that NASD Regulation and FINRA would inform either Bernard Madoff or Peter Madoff that he was reporting the Madoff Ponzi scheme. Markopolos feared that he would be murdered.

I can relate to Markopolos's fears, based on my own experience as someone who tried to expose fraud on Wall Street when I was a trader many years ago.

Ironically Mary Schapiro, who was unanimously confirmed by the Senate as Chair of the Securities and Exchange Commission on January 22, 2009, was President of NASD Regulation and then CEO of FINRA, NASD Regulation's successor, during the time period that Markopolos was afraid to report his findings to both NASD Regulation and FINRA. Schapiro could not be trusted to retain confidential information.

She never should have been nominated let alone be confirmed, as I pointed out in a previous column. I have personal knowledge, based on my experience, that in some instances information sent by a whistle-blower to a regulatory authority is not only not investigated but is provided to the perpetrator of the alleged criminal activity.

Gene Weissman was a principal in Lieber and Weissman, a member firm of the Philadelphia Stock Exchange. Although I have stated that Weissman, a former member of the American Stock Exchange, was a valuable source of information; Weissman also engaged in violations of security laws.

Just as Weissman provided me with information concerning his competitors and members of the American Stock Exchange, several of Weissman's business associates provided me with information concerning Weissman's violation of federal securities laws- and Weissman spoke to me about these violations of federal securities laws.

On 23 March 1999 I wrote a letter, certified mail Z 310 350 104, to Robert Greenbaum, Senior Vice President of the Philadelphia Stock Exchange. In this letter I stated that Weissman was paying illegal kickbacks to an individual, who established a satellite trading office, which had self-employed traders and cleared through Lieber and Weissman, outside Philadelphia.

I explained that this was illegal- and that the individual had demanded personal checks as a kickback for all trades that Lieber and Weissman processed. I also stated that Lieber and Weissman had a satellite office in Chicago and in this office an individual had formed an illegal pool of investors- and that the individual had not registered with the Securities and Exchange Commission. This individual then proceeded to lose one million dollars.

I had hoped that my letter to the Philadelphia Stock Exchange would be kept confidential and that the Philadelphia Stock Exchange would initiate an investigation. I was wrong on both counts.

Weissman confronted me with a copy of my letter to Greenbaum. Weissman informed me that his partner had contacted their financial investors and that they threatened to sue me.

Weissman told his investors that I was already being sued in court and that the information that I had obtained would be used in an article. Weissman intervened and stated that he would speak to me.

Weissman asked me why I had exposed the wrongdoing; I replied that I had to do this. Several of my sources had demanded that I report these violations of federal securities laws, even if Weissman were my friend.

Weissman stated that he understood, but he told me that the Philadelphia Stock Exchange had informed him in the hope that he would sue me.

And once again Weissman brought up the fact that Arthur Levitt, then Chairman of the SEC, had personally directed the SEC not to utilize any of my information- so the Philadelphia Stock Exchange was not even obliged to investigate my charges of criminal activity.

Unfortunately in 2000 a rogue trader almost put Lieber and Weissman out of business. Lieber and Weissman limped along for several years and dissolved with the death of its founder, Gene Weissman.