Penn State scandal has hallmarks of pedestrian cover-up

The central allegation in the Penn State case is that university officials, including head coach Joe Paterno and the university president, learned as early as 2002 that a well-regarded coach was sexually abusing young boys, sometimes on the Penn State campus.

Upon learning about a suspected 2002 assault by Sandusky of a young boy in the football building’s showers, Paterno redirected the graduate assistant who witnessed the incident to the athletic director, rather than notifying the police. Paterno said the graduate assistant who reported the assault, Mike McQueary, said only that something disturbing had happened that was perhaps sexual in nature. McQueary testified that he saw Sandusky having anal sex with the boy.

Excerpted from Paterno Is Finished at Penn State, and President Is Out  (Mark Viera, The New York Times, November 9th, 2011)

Having learned of this conduct, and the obvious risk that it might recur, what were Paterno’s choices? He could have reported the incident to the athletic director himself, gone to campus police, the university president, the local police, local prosecutors, or local social services agency. He could have instructed the graduate assistant to do any or all of those things. He could have fired Sandusky.

Viewed against the range of possible choices, telling perhaps the lowest-ranking person (the graduate assistant) to report the incident to the athletic director, presumably one step above Paterno on the organizational chart, but in reality probably less influential than the sainted Paterno, may have been the smallest thing he could do in order to do something.

This is only one of several incidents. If Paterno believed the graduate assistant, wouldn’t he be surprised that no arrest followed? If he thought the graduate assistant had made a false allegation, wouldn’t firing be appropriate for such serious defamation?

Does this fact-pattern seem reminiscent of recent Catholic Church scandals?

Questions For Harry Markopolos – Math Is Hard – Interview – NYTimes.com

Excerpted from Questions For Harry Markopolos – Math Is Hard – Interview – NYTimes.com. Interview conducted by Deborah Solomon of The Times.

You met last year with Mary Schapiro, the current head of the S.E.C. How did that go?

I would say she was coldly polite. Her general counsel, David Becker, did most of the talking. He and I did not get along at all. He was getting ready to come across the coffee table and strangle me.

In the year since you testified before Congress about the S.E.C.’s failures, many of the agency’s employees have been replaced.

They’ve redisorganized. They redisorganized the enforcement unit. I actually approve of that. I think Robert Khuzami, the new head of the enforcement division, has got fire in his belly.

Are you saying the S.E.C. under Schapiro is about to catch fraud on Wall Street?

She has the wrong staff. They’re a bunch of idiots there.

What do you mean?

The five commissioners of the S.E.C. are securities lawyers. Securities lawyers never understand finance. They don’t have the math background. If you can’t do math and if you can’t take apart the investment products of the 21st century backward and forward and put them together in your sleep, you’ll never find the frauds on Wall Street.

So why doesn’t the S.E.C. hire finance people? Why don’t they hire you?

They’re overlawyered. They’re poisoned by lawyers.

You actually began your career as a money manager in Boston who first noticed Madoff’s monkey business when your boss told you to try and duplicate his investment returns. You realized they were mathematically impossible.

Madoff was a competitor of mine, and I couldn’t compete against him because he was making up his investment returns, and I had to manage according to the market. It wasn’t a level playing field.

What will you do with your book royalties?

Fund the three boys’ college educations. Harry Louie and Louie Harry are identical twins. Age 6. I have a 3-year-old as well.

Is that some kind of Greek tradition? Giving kids the same name?

You saw the movie “My Big Fat Greek Wedding”? Everybody has the same name. Only the people change; the names never do.

Has anyone contacted you about making a film based on your book?

Yes. All the major studios. Sony, Paramount, Tom Hanks, you name it.

Where did you learn about finance?

You don’t learn much in grad school. Half the formulas they teach you are false. It’s a lot of self-study. I read a lot of finance books, and I usually read them with a calculator because I go through the math to make sure I master the formulas.

Were you always a math whiz?

I needed a tutor in 7th and 8th grade. Whatever it was, I was having big problems with algebra.

via Questions For Harry Markopolos – Math Is Hard – Interview – NYTimes.com.

WNYC – The Leonard Lopate Show: No One Would Listen (March 09, 2010)

Leonard Lopate of WNYC interviews Harry Markopolos, who went to the SEC in 1999 requesting an investigation of Bernie Madoff:

Harry Markopolos talks about his years spent investigating Bernie Madoff and his $65 billion Ponzi scheme. While much has been written about Madoff's scam, few know how Markopolos and his team uncovered it years before it unraveled. In No One Would Listen: A True Financial Thriller, Markopolos details how the SEC missed red flags, how Madoff was able to pull off his scam, and what impact investigators will have on financial markets and financial regulation for decades to come

via The Leonard Lopate Show: No One Would Listen (March 09, 2010).

Markopolos is articulate about his reasonable fears that Madoff might retaliate.  Direct link to MP3 of interview on the Leonard Lopate show.