08/25/2011 02:26 pm ET | Updated Oct 25, 2011

Can Anyone Stop the Next Madoff?

In late 1999, Boston-based securities analyst Harry Markopolos discovered in five minutes that former chairman of NASDAQ and prominent hedge fund manager Bernard Madoff was running a fraud. In 2000, Markopolos submitted an initial report to the Boston office of the Securities and Exchange Commission (SEC) in an effort to stop what grew to swindle investors around the globe for $65 billion of fictitious returns. This was the largest Ponzi scheme in world history. Markopolos and his team of investigators pursued the truth for nearly a decade presenting their findings to government officials, journalists, and executives in the financial services industry only to find no one would listen.

Markopolos risked everything for the truth only to be ignored for nearly a decade. Facing incalculable personal risk and fighting against seemingly insurmountable obstacles, this is the classic story of the lone man who stood up for what he believed in.

Since the Madoff scheme collapsed, Markopolos and his team's investigation has become a case study for financial reform. The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed on July 21, 2010, promised to better police the crimes that run rampant in the financial services industry. The bill included provisions to ramp up enforcement staff and introduce a whistleblower program at the SEC. One year later, although the SEC has begun to target larger firms, they continue to blunder investigations. This allows Wall Street to continue business as usual, for the most part, unscathed.

In many ways, the fall of Bernard Madoff was only the tip of the iceberg. Hundreds of firms have been identified for aiding and abetting the scheme and less than a dozen arrests have been made. Although much of the senior staff at the SEC has been replaced, not one person has been held accountable for this egregious calamity. Markopolos presented 29 red flags to stop the Madoff scheme in 2005, 29 facts that could have prevented many investors from devastating financial losses. So, why did no one listen to Markopolos and who else is guilty that has yet to be brought to justice?

On August 12, 2011, the SEC launched a whistleblower program to reward individuals willing to come forward with original evidence that indicts fraudsters. If a whistleblower voluntarily provides the SEC with original information that leads to successful enforcement, the whistleblower will be eligible to receive 10-30 percent of the money collected. The program stipulates that cases are only eligible if the SEC obtains more than $1,000,000 in damages and the reward percentage is at the discretion of the SEC. Markopolos has praised the program for having a human being return his phone calls related to other enormous fraud investigations he currently has underway. On the surface, this sounds like a pretty good deal.

But, if the nation's financial police were incapable of stopping Madoff, Lehman, AIG, and every other firm that contributed to America's ongoing economic turmoil, what is the likelihood that they are capable of stopping the next one? In March 2011, when interviewed by CNN Money on the newly founded SEC Office of the Whistleblower, SEC Director of Enforcement Robert Khuzami explained "we not only can't hire, but we can't even fill the positions that become vacant," and "we're staffing it [the whistleblower's office] through borrowing resources from other parts of the enforcement division." Khuzami makes a convincing argument for potential whistleblowers to keep their day jobs.

On August 17, 2011, Rolling Stone published Matt Taibbi's "Shredded Justice: Is the SEC Covering Up Wall Street Crimes?" In his exposé, Taibbi reveals SEC enforcement lawyer Darcy Flynn blew the whistle on the agency for illegally destroying case documents related to thousands of preliminary inquiries. Flynn estimates that the SEC has destroyed at least 9,000 preliminary inquiries since 1993. Preliminary inquiries that were destroyed could have stopped the Madoff scheme and other heavy-hitters that contributed to the 2008 financial collapse. SEC spokesman John Nester has stated that the agency has since stopped destroying documents. But again, like with Madoff, supposedly no one is to blame.

Revolving door employment and backroom deals aside, when did we accept this culture of complacency led by morally ambiguous leaders that dance around accountability? The financial services industry and U.S. government are not looking out for our best interest. There are enough laws on the books. There are just not nearly enough people like Markopolos who are playing financial defense. If we accept this moral hazard, there will be nothing to prevent this from happening again. So, in our turbulent economic times, can you help stop the next Madoff?

Harry Markopolos was assisted in the Madoff investigation by Frank Casey, Neil Chelo, Michael Ocrant and Gaytri Kachroo. Chasing Madoff screens in select theaters starting August 26, 2011.