Dan DiBartolomeo tells me how he recognized Madoff's fraud in 1999

Listen to the most recent episode of FactSet’s podcast to get a closer look at the Bernie Madoff scandal from the perspective of someone who recognized the fraud years before it was uncovered.

I interviewed Dan DiBartolomeo, President of Northfield Information Services, who performed initial analysis on Madoff fund data that pointed to suspicious activity more than eight years before the fund manager turned himself in. Dan explains:

We did about three hours of analysis on the return history and tried to match it up with the strategy as described in Manager B’s marketing material. And we concluded after a couple of hours that something was seriously wrong, that essentially there were three possibilities.

One, the strategy was something other than was being described and that the Manager B, whoever that was, was incredibly skillful. The second possibility was that the strategy was being misrepresented and was somehow being illegally enhanced through insider trading or front running or some other type of activity that would have improved it illegally. The third possibility is that the entity in question, Manager B, was a fraud.

Dan goes on to explain how he eliminated the first two possibilities, when he found out Manager B was Madoff, how the SEC handled this information, his ideas for regulation, and the responsibilities hedge fund managers have to their investors. You may have seen Dan on Fox News, or read his quotes in The Wall Street Journal.

Listen to our podcast in iTunes or on the web. Or, read the transcript in its entirety.

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