SEC pummelled as Madoff whistleblower testifies

By Rachelle Younglai and Karey Wutkowski

WASHINGTON (Reuters) - Harry Markopolos, a former investment manager who tried to warn U.S. regulators about Bernard Madoff, joined lawmakers in blasting the Securities and Exchange Commission but said he was forwarding more tips to the agency.

Markopolos told a congressional hearing on Wednesday that SEC staff were neither willing nor able to uncover what Madoff, arrested in December and charged with a record-shattering $50-billion fraud, was really doing.

Calling SEC staff "too slow, too young and too undereducated," Markopolos said the regulator was hindered by lawyers, did not understand red flags, could not do the math and was captive to the financial industry.

"They looked at the size of Madoff and said he's a big firm and we don't attack big firms," said Markopolos, who became aware of Madoff when the firm he worked for tried to pursue the same kind of strategy Madoff did but never got the same steady, strong returns.

Members of the House Financial Services subcommittee hailed Markopolos but excoriated five SEC officials who declined to answer specific questions about the Madoff case, citing ongoing investigations.

"You couldn't find your backside with two hands if the lights were on... You have totally and thoroughly failed in your mission," said New York Democratic Rep. Gary Ackerman,

Markopolos said he knows the names of a dozen so-called feeder funds that helped Madoff raise money from pension funds and wealthy investors and that he would turn these over to regulators this week.

Markopolos, now a fraud investigator, said Madoff could not have acted alone, citing accountants and people helping convey money to his scheme. Madoff was arrested after his sons went to authorities saying their father had confessed to them.