Madoff Securities = Ponzi Scheme. Where were the regulators?

Apparently, on the case since 1999:

An executive in the securities industry, Harry Markopolos, contacted the SEC's Boston office in May 1999, urging regulators to investigate Mr. Madoff. Mr. Markopolos continued to pursue his accusations over the past nine years, he said in an interview on Thursday, and according to documents he sent to the SEC that were reviewed by The Wall Street Journal.

"Bernie Madoff's returns aren't real and if they are real, then they would almost certainly have been generated by front-running customer order flow from the broker-dealer arm of Madoff Investment Securities LLC," Mr. Markopolos wrote to the SEC in November 2005.

The SEC declined to comment on the matter.

It is easy to say and hear "we need more regulation". It doesn't mean it works. (Except for the people who get paid from it--including special interests and their favorite election campaigns).

If investors cannot get better auditing--as the auditors are paid by the managers--then perhaps we do need a government program to audit financial services. With my libertarian sentiments, government is usually my last resort. But for liberties, rights, justice, infrastructure, land deals (e.g. Louisiana and Alaska purchases), and neglected basic research (internet), government has proven to be more successful than the private sectors.

UPDATE: Felix reports that the Madoff auditor certainly looks fly-by-night.