Wall street Journal ignored tip on Madoff for years

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The Wall Street Journal Blew Chance to Expose Madoff
February 04, 2009 | about stocks: NWS

Gary Weiss

A bombshell is buried in Harry Markopolos's prepared testimony (.pdf) to a House panel today: he contacted the Wall Street Journal on the Bernie Madoff fraud three years ago, and the newspaper did nothing.

It seems that the Journal missed an opportunity to achieve one of the biggest scoops in financial history, win a Pulitzer Prize and all that other good stuff -- and extinguish the biggest fraud in financial history.

Markopolos says as follows:

[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. I never determined if the senior editors at the Wall Street Journal failed to authorize this investigation.

According to his timeline, he contacted the Journal in December 2005. The emails to which he alludes can be found here.

At another point in his testimony, Markopolos pays the Journal the ultimate non-compliment by lumping together the newspaper with the lunkheads at the SEC, saying, "Unfortunately neither the Wall Street Journal nor SEC were inclined to even pick up a phone and dial any of the leads I provided to them."

Amazing, huh? Not to me. As I pointed out in Wall Street Versus America, in the mid-1990s "a few traders tried to arouse the interest of the Journal in the inside details of Mob infiltration of Wall Street firms -- and the Journal, after some initial interest, did nothing."

Back then, the traders went to another highly regarded reporter. No point in mentioning his name, because the fault, as with Madoff, was apparently with his editors.

However, Markopolos's experiences with journalists weren't all quite so dismal. He contacted Michael Ocrant, a reporter at MAR/Hedge, who ran his own article on Madoff in 2001, several days before the more widely reported Barron's article on the same subject. Greg Newton, now writer of the terrific Naked Shorts blog (which alluded to the Journal's failure yesterday), was publisher of MAR/Hedge at the time. But back then Markopolos didn't have all the information he had developed by 2005, which he was willing to give to the Wall Street Journal on a silver platter.

UPDATE (11:20 a.m.): Markopolos just raised the issue of his contacts with the Journal at the hearing, saying "I believe that senior editors of the Journal respected and feared Mr. Madoff" and wouldn't let him "get on the plane" and meet with him on the fraud. So I guess the cat is out of the bag, unless the media continue to ignore this intriguing aspect of the Madoff story.