Numbers cruncher says Madoff math didn't add up

BOSTON (Reuters) - "Oh, geez" were the first words that ran through Daniel diBartolomeo's head when he heard that Bernard Madoff had been arrested.

"I hadn't thought of him in about 10 years," remembered diBartolomeo, who is paid to crunch numbers by pension funds and other profession investors.

DiBartolomeo had once been asked by a skeptical investor to run Madoff's numbers and failed to match the results. Now he knows why.

Last week, prosecutors accused Madoff of running what could turn out to be the world's biggest Ponzi scheme, orchestrating a fraud that could run as high as $50 billion.

About 10 years ago, Harry Markopolos, then chief investment officer at Rampart Investment Management Co in Boston, asked diBartolomeo, president of Northfield Information Services outside of Boston, to run Madoff's numbers.

According to diBartolomeo, Markopolos told him that Rampart was pursuing the same strategy as Madoff, but Rampart's numbers were not as good as Madoff's, and Markopolos wanted to find out why.

"After spending about three hours playing around with regression analyses and various kinds of calculations, I could not reconcile it," diBartolomeo said in an interview.

"The problem with Madoff's strategy seemed to be that it did well all the time, no matter what," said diBartolomeo, who earned his bachelor of arts degree in applied physics from Cornell University. "And I concluded that something else was going on."

To diBartolomeo, this meant Madoff had shifted his investment style, which was perfectly legal, or was front-running his clients or making up the numbers, which were not legal.

Armed with his suspicions and diBartolomeo's data, Markopolos approached financial regulators several times about the matter, beginning in 1999.

Ignored or forgotten for nearly a decade by the U.S. Securities and Exchange Commission, Markopolos felt dejected, diBartolomeo remembered.

DiBartolomeo, who spoke to Markopolos this week, said his friend "now feels good that the matter finally came to light."

"He certainly deserves a prize for perseverance," diBartolomeo said.

Markopolos could not be reached for comment.

On Tuesday, SEC Chairman Christopher Cox said he was deeply troubled by the Madoff affair.

(Reporting by Svea Herbst-Bayliss; editing by Jeffrey Benkoe)