I’m currently reading No One Would Listen, a book by Harry Markopolos, the guy who blew the whistle on Bernie Madoff with this lengthy memo to the Securities and Exchange Commission. I find the book very interesting for the various colourful characters that populate the financial industry.
One of the colourful people in the book is Rene-Thierry Magon de la Villehuchet, a French nobleman who ran a hedge fund of funds called Access International. Access is said to have lost more than $1.4 billion of Thierry’s own money, his family’s fortunes and other rich and royal families of Europe in the Madoff Ponzi scheme. Sadly, after learning about the Ponzi scheme and knowing that it was not possible to get even some of the money invested back, Thierry committed suicide in his office by slitting his wrists.
What I found incredible is the due diligence Mr. Markopolos says Access employed to select hedge fund managers:
Several months later, we discovered another method Access used to conduct due diligence. When we started to work on another project, Thierry asked Frank [one of Mr. Markopolos’ colleagues] and another man to submit handwriting samples, which were then sent to a handwriting analyst in France. This analyst supposedly could determine from an individual’s handwriting whether he or she were honest. This pseudo science is called graphology, and in the United States it definitely is not admissible as evidence in the courtroom. In fact, voodoo magic probably has more credibility as a crime-fighting tool than graphology. We were never able to confirm that Madoff had submitted a handwriting sample; but as Access was very serious about it, we assumed that he did. Incredibly, that was the level of Access’ due diligence, that and the fact that a check arrived every month, every single month. And money always makes a strong statement.
We know that some investors use astrology and phases of the moon to divine market direction. But graphology? That’s certainly a new one, at least for me.
