A great piece in the Wall Street Journal today discusses the dedicated efforts of a Mr. Harry Markopolos in trying to alert the Securities and Exchange Commission to the Bernard Madoff ponzi scheme as early as 2000.

In 2000 Markopolis was a former employee of a rival firm to Madoff’s, and later in 2004 began his own fraud investigation practice. Markopolis (and a few of his friends) spent eight years trying to figure out how Madoff was illegally generating 12% returns for his investors amidst a terrible market. They went so far as to say they made a hobby out of trying to figure out Madoff’s secret.

From the article:

“Some people play fantasy sports, that was how it was with us — Madoff was our fantasy sport,” Mr. Markopolos recalls. “We wanted him nailed.”

According to the article, the SEC determined that “Mr. Madoff personally ‘misled the examination staff about the nature of the strategy’ used by the Fairfield funds and other hedge-fund accounts, and also ‘withheld from the examination staff information about certain of these customers’ accounts.’”

The article continues:

The staff recommended closing the investigation because Mr. Madoff agreed to register his investment-advisory business and Fairfield agreed to disclose information about Mr. Madoff to investors. The SEC report said the staff closed the case “because those violations were not so serious as to warrant an enforcement action.”

Back then Madoff only managed around $10 billion. Too bad he wasn’t discovered until his portfolio reached five times that size…

Take a look at the WSJ’s story, which also includes a number of documents Markopolos sent to the SEC over the past few years.