January 4th, 2009
06:26 PM GMT
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LONDON, England – It never rains but it pours.  Hot on the heels of last year's financial turmoil came the revelation that the New York hedge fund manager Bernard Madoff had said that he had run a giant Ponzi scheme, allowing him to defraud investors to the tune of $50 billion.

Bernard Madoff is accused of a mulit-billion dollar fraud scheme.
Bernard Madoff is accused of a mulit-billion dollar fraud scheme.

Little by little the details have been coming out in the past few days as regulators and now U.S. legislators get to work on their investigations - but the fact is, we will probably never ever discover the whole truth about how much was ripped off, or where Madoff, a former chairman of Nasdaq, has squirreled it away.

That staggering headline number may be as bogus as Madoff's promise of generous and genuine returns: 12 percent a year. We have only Madoff's word for it, and his word is worth less than ... well, you can insert your own well-chosen words here.

Meanwhile, the ninepins are falling.  A charitable trust.  An Austrian bank.  Several wealthy individuals.  All brought to their knees because they trusted a man likely to go down as the greatest fraudster of all time.

Of course, none of this is directly related to the brutal falls suffered by global stock markets in 2008, the collapse of leading investment banks or to the U.S. housing bust that triggered both those events.  But they and the Madoff scam would never have been possible had it not been for the willingness of sophisticated and responsible adults to cast aside wisdom and experience and to be taken in by the lure of money - to forget that if a thing seems too good to be true, it probably isn't.  Even at the height of the bull market, which reputable fund manager ever promised 12 percent returns?

And of course regulators have once again failed in their task of nailing the untrustworthy and their dubious practices. We are left with the gullible in pursuit of the negligent as well as the fraudulent.

Bernard Madoff, we are told, is cooperating with investigators, falling into line with a court-ordered deadline of December 31, 2008, for him to submit a list of assets, liabilities and property to the U.S. Securities and Exchange Commission.  But so far he alone has been charged, though it seems hard to believe that he ran so extensive a scheme without the support of at least a few confidants.

Not everybody who invested in the Madoff funds lost money. By the very nature of a Ponzi scheme, anyone who took their money out before the scam collapsed would have made the promised mint. But by the same token they have in effect become accomplices of Madoff, or at least fellow profiteers.

This one will run and run; it's probably the first big financial story of 2009.

 What do you think? Is Madoff solely responsible? What consequences should he face, along with anyone else who contributed to the fraud? And should investors who made money unfairly from his Ponzi scheme be forced to help bail out those who lost out?

Given that any returns would have been purely the fruits of fraud, are any investors entitled to anything more than the money they invested in the first place?

Post your questions and comments below, and we'll put them to an expert on Friday's edition of Business International. (It's helpful if you also say where you are writing from, and please confine your comments to the Madoff affair.)



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soundoff (54 Responses)
  1. Ash Homaidan

    Bernard Madoff stole monies from some investors and gave those monies to other investors.
    The Questions are:
    WHO are those who benefited? Were they Americans or Israelis?
    Needless to say; the Treasury/Justice/State/etc... departments know the answer....should know the answer.... but they are in BED with the likes of Bernard Madoff .....such as the TAX DODGER MarK Rich who was pardoned by the CLINTONS!

    January 4, 2009 at 7:23 pm |
  2. Anton

    What in theory is going to be required in a huge reconciliation of what investors should have earned vs what they did in by virute of this being a Ponzi scheme (assuming Madoff did invest the assets somewhere?).

    The excess returns made should then be repaid to compensate those that lost money. For example if Madoff had been able to achieve a return of 5% p.a. for a certain period and paid an investor 12% p.a., the difference 7% is effectively stolen money that should be repaid.

    In practice unless extremely good records were kept, this is going to be practically impossible. The costs of this exercise will keep many forensic accountants busy for quite some time. This is one big Scrambled Egg that will be impossible to Unscramble!

    January 4, 2009 at 7:39 pm |
  3. Augustine Nnadi

    Please, I want to know how long this said ponzi game of madoff lasted, and would also want to know if the AMERICAN GOVERNMENT AND PEOPLE WERE TOTALY UNAWARE OF THE INVESTMENT SCHEME? Madoff was such a big name as i can see,how come all his acts seem to be unknow to the law and the people till now? FROM AUGUSTINE NNADI (IN NIGERIA)

    January 4, 2009 at 8:08 pm |
  4. Georg Richard KURZ

    Re Madoff affair: At the base of the whole affair is once again to see how naiv or unexperienced a lot of people still are when it comes to their money, in believing they could make a superior return out of it in a relatively short time, investing in such an 'attractive' scheme as Madoff's seemed to be. If one has some knowledge how to trade on the stock markets and is speculating with part of his money he can and accepts to loose in the worst case, he can do much better in most cases. Now, investors who made money, even unfairly from Madoff's scheme, are just the lucky ones and should not bail out the loosers. A game is a game, a winner, a looser! Of course Madoff, even not solely responsible for the whole mess, from what I think, has to respond before justice and take the consequences.

    January 4, 2009 at 8:46 pm |
  5. lauro silva Brazil

    That Madoff apparently seems to be a very smart and skillful man, on the other hand, seems to be a crazy person trying to deceive not only ordinary investors but also world-wide financial institutions and that sooner or later he would get into a very serious trouble. Or maybe, he already knows in advance that anything won´t come against and that will manage to get away from the mess. If we think a little further about there´s no doubt at all that behind Madoff exists a well organized evil gang for how come a single person woud be able to engender such a trap across the world. Nobody knows about any supposedly dirty money delivered to Madoff for laundering and expecting to make money hand over fist. In case that supposition exists, then the 50 billion is only the summit of the iceberg what will be easily returned by Madof but the rest held out on his naive investors.

    January 4, 2009 at 10:47 pm |
  6. Sergio Ortiz

    I don't know if the law has anything to say about this, but it seems to me that it would be impossible to recoup anything from early investors in the scheme who got out before the collapse. Let's say you made $10,000 and then invested that and lost it. What then? Or let's say you bought yourself a new car (or, knowing the kind of investors involved, a new yatch!) with the winnings? No, I'm sorry, but any investment is by nature risky, whether fraud is involved or not. You could argue that the entire collapse of the stock market was due to fraud perpetrated by over-zealous mortgage lenders. Am I now eligible for some kind of compensation because my retirement fund tanked? I'm not holding my breath!

    Sergio, Madrid

    January 4, 2009 at 11:29 pm |
  7. earle,florida

    In fairness to oversite, the "SEC" is taken the biggest hit, when all the long the last Four Administrations have basically cut their operating budget to Zip! The government has turned a blind eye to all that's happened, and those of the press find it hard to get the story-out without facing retribution! The only caveat being the deliberate dropping of the up-tick rule (2007-08) by the SEC Chair that brought the on-slaught of massive short-interest which excellerated the debacle. Mr. Madoff is guilty of high crimes,and perhaps treason,and whomever was an accomplice should be, "Publicly Hanged"! I see no reason going after the top tier, to get financial retribution,for it all was driven by greed and selfishness with all envolved probably fully aware of a good thing (don't rock the boat, baby) wall street attitude.Finally, his (Madoff) business model was a mirror image of the US Social Security system run by the government today,....ironic isn't it?

    January 4, 2009 at 11:50 pm |
  8. d. griffith,TX

    If wicked problems were dealt with when the poor was harmed, this would not have happened. When will regulators and legislation learn that problems have no respect of person. Problems affect everyone even. It's sad no one seems to care until home is hit. By then the problems are way out of control growing like cancer.

    January 5, 2009 at 12:53 am |
  9. James Smith

    Why should those that "received more", cover shortfalls of those that "received less or lost funds"; and/or why should investors be awarded for fraud acts, especially when it was obvioius that 12% was not in align with the market.

    It appears greed was the driver in this situation. And lest us not forget that investors take risks every time they enter into any arrangement.

    How would one ever determine who would get how much and when as this is a global issue corsing country boundaries. Any actions to reimburse might appear discriminatory.

    I suggest the salvaged funds be used to fund global issues such as famine, global warming, AIDS, Diabetes, etc., and the investors loose totally.
    ---
    I am an American writing from an on-assignment location in Asia-Pacific as a senior financial risk assessment advisor. When I uncover such fund activity, my advice is to jettison the investment immediately on the basis of too high of a risk factor and not within the bounds of the market.

    January 5, 2009 at 2:53 am |
  10. Stephen

    if these investors knows its a scam, then they are liable, But if they join by the promise of high return, impress by other high sounding names of persons or institutions, then there's no difference with other investors who plays the stock market.

    Madoff should be made to return those money and if not, the law should make sure he or his family members will never enjoy the fruit of their scam.

    January 5, 2009 at 4:28 am |
  11. hideaki nagano

    regulators is not good.
    so what is it cute?

    good is good.

    January 5, 2009 at 5:01 am |
  12. Andrew

    Those who invested in Madoff's scheme must have been quite dazed by the amount of return they thought they would get. My 7th grade Econmics Teacher always taught me that the higher the interest rate the higher the risk. But greed sometimes get's the better of us all.

    January 5, 2009 at 5:53 am |
  13. Chris

    Investors who made money off the scheme should not be made to pay back these profits, because they invested their monies and took the risk not knowing beforehand that this was a Ponzi scheme. Each investor who lost money must unfortunately bear the brunt due to not performing due diligence. On the other hand, Madoff, the SEC oversight as well as auditors should be brought to book.

    South Africa

    January 5, 2009 at 10:19 am |
  14. Nam(South Korea)

    greed = a Ponzi scheme = a zerosum game = nothing

    January 5, 2009 at 2:10 pm |
  15. Sam in Spain

    Charles,
    And so here we go again, after Enron etc. we now have Madoff who has Made Off with $Billions. Once he is found guilty- Life In jail, in solitary confinement, all assets down to his last pair of shoes repossessed. All investors to have their money repaid and in the event that they can not recover all the investors should be repaid by the SEC due to their GROSS NEGLIGENCE.

    I remember a similar scheme which was operated by a construction company in the 60's building in Spain offering 12% GUARANTEED, they of course went burst.. It never fails to amaze me how gullible some people are but it happens all over the world and there will always be others even now doing similar that we haven't heard of yet.
    at least the Banks and politicians usually do it legally.

    January 5, 2009 at 7:16 pm |
  16. Abel

    What do you think? Is Madoff solely responsible? What consequences should he face, along with anyone else who contributed to the fraud? And should investors who made money unfairly from his Ponzi scheme be forced to help bail out those who lost out?
    I don’t think Madoff solely responsible. All who contributed to the fraud are responsible. Especially, SEC, the Audit firm/auditor, the accountant of Madoff and others who knew what Madoff was doing like his wife.
    I think all his asset will be sold and redistributed proportionally for investors who lost their money. And Madoff (will be jailed for the rest of his life) and others will also be jailed for some years
    I think most investors did not know what Madoff was doing and those who made money have already taken the risk which is associated with their investment. It is difficult to say that they made money unfairly. Therefore, they do have to be forced to help bail out those who lost out. One of the interesting part s of investment is to take the risk associated with the investment. Therefore, all investors have to accept the risk that is happened by Madoff .

    By the way investing money is not an easy task. How someone invest without looking at the audited financial statements of the company? How someone invest without taking in to account the advice of their financial advisor? How regulatory organizations (like SEC) didn’t find out this mess early? Etc
    Dagi
    Ethiopia

    January 5, 2009 at 7:51 pm |
  17. gatkin09

    I think we are seeing an example of a lack of resources at the SEC etc. The regulations and checks are fine if they can be carried out more widely across the financial sectors. However we should not pretend that more regulators or tougher regulations will prevent all future such events, people will always find a way (as they always have) to try and trick people out of their hard earned money.

    Greg Atkinson
    Shareswatch.com.au Blog

    January 6, 2009 at 3:21 am |
  18. ejiro edenya

    one thing i have learnt from this Maddof affair is that financial fruad is not limited to Nigeria. If this can happen in America then transparency international should start looking at america properly, what with illinious governor selling Obama's seat to the highest bidder. i think america is corrupt but people still dont realize.

    Edenya, Lagos Nigeria

    January 6, 2009 at 8:07 pm |
  19. Sam in Spain

    So now "Made Off" is posting jewellry to his relatives in France. How stupid can the law get, giving him bail only gives him further opportunities to cover up what he may have swindled.

    Revoke bail and keep him locked up until he stands trial, food? how about just bread and water 3 times a day? and no visitors.

    January 7, 2009 at 1:25 pm |
  20. pietro

    the truth is that in this world nothing is ever created or destroyed, it is simply transformed. In a Ponzi scheme some people did get their 12% year while others lost everything when it collapsed. So the money was redistributed but was never cancelled from the face of the Earth, in fact if you ask someone who lost 40% this year on his protfolio they will almost never realize that they are back where they were 3 or 4 years ago before investing in such a fund. Sorry to put it this way but if you made 12% a year for ten years and lost 30% of your portfolio in 2008, you still made a heafty 80%return over ten years, so don't complain. You shouldn't have been so greedy to reinvest all of the gains from Maddoff's funds but should have diversified over the years. Greed....greed is the problem. It's like playing casino, so easy to put money in but so hard to pull out when you're actually winning. This crisis is actually good, it will bring real principals and morals back, it will discourage adventurous people from improvising themselves as financiers, real-estate moguls or m&a Gods. People should stick to their business model for a lifetime and in the end will reap the benefits of working hard and re-investing in their businesses. Cheers for a brand new start.

    January 7, 2009 at 11:47 pm |
  21. Mario Suleman

    I would like to know if,either Obama or McCain,were financed in their campaigns by Mr.Madoff?if that happened,which im almost sure,isnt that somehow "illegal"?after all in this article and in some of the comments posted here,the profiteers should be punished as well as Madoff.in this point of view one or both of them (Obama and McCain) were using "dirty" money on their campaigns!!correct me if im wrong!thank you!Dear Mr Charles Hodson,if it is not possible to post my comment,kindly send me an email with your opinion in this matter!thank you in advance.

    January 8, 2009 at 12:35 am |
  22. Mitch

    As an American who has lived overseas for some 13 years, I continue to be amazed at the downward spiralling ethical and moral direction America has pointed in over the last decade or so.

    The slogan these days in the USA is, "get rich quick", "rip someone else off", "fake them out", "teaser rates", etc.

    Our country was founded on ideals that if you have ambition, exert yourself, and work hard, you can achieve almost anything. And now that Obama has been elected president, that should apply to ANYONE of ANY background in the United Sates!

    Problem is, people nowadays want to get rich quick at the expense of whoever happens to stand in their way. Madoff was living the high life off of the suckers who bought into this scheme. I mean he had the mansions, the yachts, etc. There must not be one iota of self consciousness in this man if he CONTINUED to live the high life over ALL those years, knowing that he was ripping people off.

    But this is the pulse of the day (to get rid of that tired saying, "at the end of the day"). Everyone is out to RIP SOMEONE ELSE OFF!! Look at all the ads on the TV-it's all about deceit!! "Pay nothing now", and then a year from now get socked!!! Or, "do this at home, little effort, make a fortune off others"

    Or there is the "I want to be rich without working for it" mentality. The lottery, for example. Why should someone get 207 million for nothing??? Is that hard work? Is that what our founding fathers fought so hard for? Not only that, but all those millions of other people, mostly poor I should say, who spend half of their earnings on lottery tickets--I mean really folks--shouldn't they have put that money toward some useful purpose? Like to their kids education?

    Then there's our favorite playground-Las Vegas!! Should we really be supporting gambling in this manner? (See above). Plus, what kind of life motto is that--"what happens in Vegas, stays in Vegas". Is that what we should be teaching our kids as something to live by?

    Responsibility, Responsibility, Responsibility folks!!!!!

    Mitch

    January 8, 2009 at 2:16 pm |
  23. Lacey Patterson

    Madoff with billions.

    January 8, 2009 at 6:35 pm |
  24. Cezary

    To the uneducated people here who think that '12%' returns are unimaginable, it wasn't his promise of a 12% return, which is decent, but not outstanding, but the safety/security and the trust he exhumed.

    You have to remember Buffet has averaged something like 22.6%, well a bit lower now, but 22.6% a year, for over 30 years. That's over 193,000%.

    January 8, 2009 at 7:45 pm |
  25. Ian Rivlin

    Put all these corporate thieves in a glass prison, where everyone can walk by and look at them, like the zoo animals they are. Such degrading punishment would deter anyone from even considering defrauding the public.

    January 8, 2009 at 8:00 pm |
  26. otto

    You must be joking if you think anyone can find out where the money has gone. Ask Madoff. Even he wouldn't know. People would still be looking for money after the investigation is over. More work and money for people who will keep explaining the paper chase. Obama will have that much less headache to find jobs for people who would be making money explaining about Madoff.

    January 8, 2009 at 8:16 pm |
  27. Paul

    Madoff should go to jail for the rest of his life and not in one of the so-called Club Fed institutions. The distinction between white collar crime and other crimes is bogus. It is based on the idea that no one is really hurt in white collar crime. I think this idea acrtually encourages the Madoffs of the financial world to do this kind of fraud. They rarely pay in kind for the lives they destroy.

    January 8, 2009 at 8:27 pm |
  28. Jon

    I'm with you, Mitch!

    America needs to look itself in the mirror. What we see today resembles little what and who we were. Wake up folks and smell the coffee. Unless we revise our corrupted ways soon, we will spiral down further and further.

    When your government (the people) lives off Treasury Bill auctions financed by the rest of the world, how is this different from Mr. Maddoff's Ponzi Scheme?

    January 8, 2009 at 9:20 pm |
  29. Nina Gomez

    Isn't it true that when it comes to investing money in the stockmarket the higher the risk, the higher the returns? Since investing your money you know the risk of losing it wouldn't this mean that the investor understands the risks? In the giant Ponzi scheme of Madoff was that what he was counting on in the end if he didn't get caught?

    January 8, 2009 at 9:22 pm |
  30. Ran

    Wake up world!

    Where are the "smart" accountants, auditors and examiners. Shame on you. Madoff is not stupid. He took advantage of them.

    The media should report on problematic areas of the this world and stop being purveyors of stupid tabloid news.

    January 8, 2009 at 9:53 pm |
  31. Lance Chambers

    People were warned about Madoff many times but they failed to listen or to even make the most cursory of checks.

    A number of investment houses wouldn't go near him as their calculation led them to believe that there was something not right about his claims.

    This is a problem with a wide array of culpable people – those who perpetrated the fraud, suspected what was happening but told no one, those who were told and did nothing, those who were told and did not do enough. The only ones who retain honour (English, Australian, New Zealand, South African, etc. spelling Just not US spelling – sorry) are those who suspected and told.

    Madoff rose during an era where the worst of excess was praised as good business. He was simply one victim of the 'Age of Greed' and should not be pilloried because he bowed at the alter of Mammon – he was one of millions. The real difference between him and many others was that he was better at it and a very competent business person who got away with it for a long time.

    Let us hope that the last 4 months of economic chaos will bring about a new way of overseeing those who control the economy, those who manage other peoples assets and those who have responsibility will not be blinded by wealth and authority within their own ranks.

    But be aware there will always be those who seek to make themselves wealthy via any route they can – legal if possible but illegal if not.

    January 8, 2009 at 11:39 pm |
  32. DaPegger

    Bernie and his crew should do 10 years, have all their assets seized and be on strict probation for life. The terms of their probation should mandate them to work for the rest of their lives, washing dishes and cleaning toilets in rescue missions. Regularly publish updated stories about how much they are enjoying their new careers.
    The only real punishment that would register with narcissists like this bunch is being forced to do the grungiest menial work possible.
    Locking them up in Club Fed or even a supermax only validates their self-image.

    January 9, 2009 at 12:04 am |
  33. Netcentric

    Suck it up. You knew the rules when you sat down at the table. We didn't hear anybody screaming "No Fair!" when they were winning now did we? Grow up and take responsibility for your own lives and your choices and actions.

    January 9, 2009 at 12:16 am |
  34. Ratti

    1) The SEC failed – What needs to be done to make it work
    2) Regulation wasn't enforced – where was the external oversight.
    3) If it sounds to good to be true – it probably isn't true. Guarantee a 12% return sounds inprobable and did not happen. So invest only in what you truly understand. I don't invest in shares or other peoples schemes. By law in Australia we have to put 9%of our income into super schemes which for me, have proved sofar to be less effective overall than the short term money market.

    I do have other investments; but I own those investments directly and hopefully have a reasonable understanding and so can react as needed to new directions.

    I.e take charge and responsibility for your investments and then you can't blame anyone but yourself. If you give someone else the responsibilty for your security without safeguards you have abrogated responsibility for your your own financial security.

    Sorry absolutely no sympathy coming from my direction.

    January 9, 2009 at 12:34 am |
  35. Jaysonrex

    Everybody has an opinion about everything – so I decided to join the trend:

    Whether Madoff is guilty or not of defrauding people and banks, this is frankly immaterial. All things considered, so many defrauded most everyone and for so long that one gangster more or one less is really not that significant. The financial world is full of con people, a truism no one is willing to admit. And the various governmental agencies in charge of protecting the public managed to perform in ways very similar to the "players" that were doing the actual stealing.

    Madoff? Lock him up and throw away the key. Then start putting the entire house (of cards) in order – once and for all. When one wants to handle other people's money, that person must accept to be permanently under control. Privacy is a privilege that, in spite of the current legislation, cannot and should not be extended to everyone. Sorry!

    January 9, 2009 at 12:35 am |
  36. peter from Australia

    Put him in jail and let him rott!

    January 9, 2009 at 12:47 am |
  37. peter from Australia

    Bad luck for Madoff that he is not yet convicted.
    Otherwise he would be most likely on top of the presidential (Busch) pardon list.

    Peter

    January 9, 2009 at 1:17 am |
  38. Ardian Sejdiu

    Mr Madoff is not guilty indeed. For what the financial system has bean created it . For peoples like Mr Madoff to gain enomorous of capital from peoples that gain those money by hard working . thats is the main reason why the U.S financial system will fail. There is not writen law that dont allow this kind of fraud even if this fraud have bean in public its matter effect that if you know how to find holes in the us constitution us law than you can take or can steal money as much as you want. Dont be affraid to do that cuz even congres can be bought as long as this financial sysem keep it alive by you US citizen.
    My regards
    Ardian Sejdiu

    January 9, 2009 at 1:49 am |
  39. Joseph Sanok

    I find it interesting to hear people make comments like "It would be impossible to figure where all the money came from and where it went". I know exactly where every penny was invested and or lost. My broker can re-trace every transaction I've ever made. Anyone who lost money with this guy will know about it and have records to show. It's a question of how badly they want to go after it.

    January 9, 2009 at 2:00 am |
  40. ingar

    I think we should execute them but torture them first. They have contributed too much to world suffering and it should serve as a warning to anyone else who wants to put insane wealth over ethical behavior.

    January 9, 2009 at 2:21 am |
  41. Marine0311

    I smell BAILOUT coming for the connected Madoff investors. The actions or inactions of (pick one, some, or all) corrupt, stupid, lazy, inept SEC government workers must not require that the rest of us continue to break our backs during these trying times to reward Madoff investors with our tax dollars for their naivete at best, or their benign, winking complicity at worst. Those investors were smart guys, they knew something was wrong with the Madoff scam. But they sure wouldn't blow the whistle as long as the gravy train was running their way. But now that the joyride is over, they act the fool victim, only to push for a bailout at the expense of the rest of us taxpayers down here in the trenches.

    January 9, 2009 at 3:07 am |
  42. L. D. (Puerto Rico)

    Bernard Madoff carried on a very tempting, and "profitable" financial
    operation and many fell for it. Needless to say that there needs to be a legal issue to uncover who was part of this fraudulent scandal and who just participated due to such an attractive revenue -12% -

    This legal issue looks like it will take time and the law should be
    applied accordingly to whoever is found guilty of knowingly participating in it. For those that are found not guilty of being part of
    it and just went fo it as investors, the laws should be applied as
    the legal system provides for this type of situation.... This could be the biggest FRAUD of our century!

    January 9, 2009 at 3:49 am |
  43. Garret

    So why isn't Bernie in jail? Why haven't they kicked him out of his penthouse and confiscated all his property? Why should he be treated any different than a common thief or shoplifter? Logic and justice demands that punishment should be in proposion to the crime. Or is it that even our system of justice is not blind to ill begotten wealth after all?

    January 9, 2009 at 4:07 am |
  44. Dharmar

    Madoff should be severely punished for his crimes and may be that the greedy investors would invariably suffer losses .

    However what is significant is that this happenned in US, the world leader in regulating virtually everything, and the crime committed is by an individual who was a key figure in Wall street (The Mecca of Financial world) holding top posions.

    Although Madoff eventually succumbed, he was able to hoodwink a very sophisticated system with stringent regulations set up by top notch Gurus.

    So under this circumstances combined with the crumbling world finance & bankruptcies primarily due to greedy capitalistic instincts, can the US still calim that it provide leadership to the world?

    January 9, 2009 at 4:17 am |
  45. chartguy

    It's the nature of a Ponzi scheme like this that almost no investors will withdrawn funds before it collapsed.

    Of the few that did, they deserve their money. If they had the courage to withdraw money from something that had been making such a big profit, they deserve it. They walked away from what the greedy expected to be profits. If Madoff had been legitimate, nobody would have offered to pay them what they gave up, to walk away.

    January 9, 2009 at 5:16 am |
  46. Shane Toppin

    It's obviously a serious flaw in the regulatory authorities monitoring [of] the activities of so called "investment advisors." Surely they would require records of investment initiatives, schemes, etc? Other countries in the world require stringent records presented each year with investors funds, amounts, returns, etc. Madoff exploited a very large gap. Are there others?? What should happen? A total siezure of all assets, gifts, personal jewellery, etc. to be sold at auction with the funds distributed to investors. Madoff should not go to jail but be given a community-based job, living on court order for the rest of his life in the poorest suburb, serving those he chose to steal from.

    January 9, 2009 at 6:48 am |
  47. Mohammed Dohadwala, CFA, Muscat

    Madoff surely could not have perpeterated the fraud alone. In September, I met their Risk Manager, stationed in the Bahamas (!) and actually asked why the odd location, and was told that it saved costs.

    The auditor was surely part of the fraud, and after the Satyam affair in India, even the Big 5 seem unable to maintain professional audit standards.

    The law must surely take its course, and the punishment should be heavy enough to discourage wanna be fraudsters from even trying.

    Going forward, whatever we have taken for granted in the financial services industry – audit, ratings, due diligence, risk models etc. should all be re-examined.

    Finally, there is no substitute for personal integrity and a sense of responsibility and respect towards enterprise owners and the public at large.

    January 9, 2009 at 8:18 am |
  48. Akachukwu Ifechukwu, Lagos

    The Madoff case again shows how high-profile individuals can obtain our trust without us asking questions. With a 12% annual returns offer coming from a former chairman of Nasdaq, surely he knows something about the market that I don't. No questions asked. How wrong.

    I expect a painstaking prosecution process for Mr. Madoff. Profits made through this "evil" scheme MUST be returned. Madoff should be made by all legal means to disclose the whereabout of the funds and who his accomplices are – no matter how long it takes. Investors should get back ONLY their principals as there were no real transactions but shuffling of cash. Madoff is going down and his accomplices should go down with him. Period.

    Madoff has shown that investor's trust and often greed can be "profitably" abused and exploited. Is this going to be the last? I doubt. But this is a call on regulatory agencies to keep a closer watch on investor managers/corporate institutions and how they invest investor's funds.

    January 9, 2009 at 8:28 am |
  49. Mariel

    I do believe that the investors who made money unfairly, have to pay back so those who lost it unfairly and get some back. Is Madoff alone, just look at his face, for sure not. Anyone in the investment business knows the higher the returns the greater the risks, don't tell me all those investors had no idea what he was up to, what I'm sure they didn't know was that the bubble was going to burst when it did and that there would be panic and everyone wanted their monet back.. After all a Ponzi scheme in not a new word on the block.

    January 9, 2009 at 8:46 am |
  50. dan

    The incentive to fraudsters lies in the "Chinese Walls" between private and corporate assets. This is the time to get the world to agree to legally disregard those walls in all criminal and fraudulent cases. In other words, whatever proceeds of crime or swindle, fraud or malicious intent (add others) should always be regarded as belonging to the originator and be susceptible of recuperation, wherever they were sent or in whomever's possession they are later. This should go for directors of car companies that go bust and for bankers that speculated away whilst cashing multimillion dollar yearly paychecks. A fundamental change this way could take out the lure of white collar crime, when the loot cannot be stashed away nor given away to family or private foundations. Politicians to be included. Utopia?

    January 9, 2009 at 9:31 am |
  51. Michael Turner

    GREED is one of the 7 sins. Their seems to be a lot of that these days not to mention all the disasters and the environment. Just might be the end of days you never know,but the signs are pretty clear!!!!!

    January 9, 2009 at 10:45 am |
  52. CATSoares

    All those so-called Executives of whatever kind of instituion, conglomerate,company etc that were involved in either irresponsible management that led to their companies either going bankrupt or going to their national governments for bailouts should be brought into a "Black List" and forbidden to , forever, hold any managerial postions in any kind of business or government services.
    the world has had enough of these "superstars" ( or so they think...) that could not manage their companies / portfolio properly and in their demise affected not only their employees, their shareholders but now all the taxpayers irrespectably.
    Governments should stop using their countries' money and let these incompetently managed companies fall, once and for all.

    January 9, 2009 at 10:46 am |
  53. Uma in Liverpool, UK

    There was an 'economic psychologist' on the programme, talking about how Madoff was able to pull off his con with his plausible, 'avuncular' demeanor. This 'psychologist' went so far as to suggest that investors put their faith in 'parent figures'.

    *pardon me whilst I spit horsefeathers*

    What a load of tommy-rot! This is not only insulting to investors, but also downright infantilising. While the sort of con-artists who bilk lonely old ladies and vulnerable young trust-fund youths out of the occasional million might meet those criteria - needing someone they 'trusted' - a 'daddy-figure' - to manage their money, that is not the sort of person upon whom Madoff preyed.

    If the beady-eyed investment-strategists at Stephen Spielberg's Foundation, and the hardened actuaries who managed the numerous other Foundations which Madoff robbed, were fooled, it wasn't because they wanted their Daddies!

    My (educated) opinion is that Madoff used an entirely different lie, to win the blind trust of those he victimised.

    The lie is 'Would a Jew cheat another Jew? We help each other!' There exists, within the Jewish-American community - particularly in New York - a subculture which is run entirely on the Honour System: the diamond trade. Built on this, there are segments of high-finance, and other commerce involving vast sums of money, which are scrupulously honest.

    Nobody who tries to cheat, in the diamond business, ever works again, because his face is faxed to every diamond centre, worldwide, and is on the wall, in the foyer, where the unobtrusive security camera is comparing him to his picture.

    Cantor-FitzGerald, Salomon Bros, and firms like that ran like families. When the CEO of Cantor-FitzGerald was at a dentist's appointment, on 11 Sept, 2001, and nobody survived, he promised to look after all his employees' families personally.

    The problem with this, obviously, is it breeds both naivete, and can turn otherwise acute judges of mathematical anomalies into fodder, when a sociopath turns up in their midst.

    (I am not talking about the Israeli Mob, who are the most-brutal, most-feared, worst perpetrators of organised crime in the USA. That's different.)

    Bernie Madoff was smart. He was subtle. He was charming. He was running legitimate businesses. He was clearly, completely sociopathic. He didn't need to break the law. He did it for kicks and grins. It made him feel powerful, to fool other people - the better-trained, and more experienced, the bigger his sense of gratification.

    People do not expect sociopathy. The truth is, functional sociopaths are fairly unusual. Most of them go too far, and show their natures, before they are thirty. One of the marks of sociopathy is usually a lack of impulse-control, and that is what tends to catch them out.

    Bernie Madoff did not have that problem, or controlled it, brilliantly. (Sociopathy tends to occur at the extremes of the IQ bell-curve. He is definitely up with my dear ol' dad, as genius sociopaths go). Another mark is the need to keep doing whatever creates that sense of gratification: witness Madoff's efforts to send his money to relatives, to outsmart the law.

    It is wholly unfair to blame the victims. As I said. people do not expect sociopaths - or the world would all be insane! (I spent decades studying them, to get over being the daughter of one.)

    Madoff had decades to perfect his 'craft', which was to be the most trustworthy-appearing, most safe-seeming, most 'one of the Good Jews'-like fraud, that he probably almost believed it himself. The only times he would know it wasn't true, was when he needed a power-fix. Since he had impulse-control, he could wait, and let them come to him.

    That he is Jewish, and bilked the Jewish community, is superficial. Had he been African-American, he would have used the African-American paths to power, and bilked African-Americans. He worked in the milieu which worked for him.

    'Daddy substitute' my hat! He was such a genius, that if his own children had not turned him in, he would still be at his old tricks.

    As for who owes what to whom, that is for the law to work out, if it can. I would say anyone who knew this was fraud, and profited from it, should be prosecuted to the fullest extent of the law. However, I believe (because I was raised by a genius sociopath, and know what they are like) that only Madoff knew what he was doing, and even he managed not to think about it, most of the time.

    There is only one way to keep a secret. That is to keep it. By telling his children, Madoff either was making a subconscious decision to be caught - borne out by his reaction when the police turned up. Or, he was testing them, to see if they would go along with his scheme. Probably a bit of both.

    He fooled everybody. That makes victim-blaming/infantilising rather ridiculous, doesn't it?

    There will always be sociopaths. Most of them are obviously not right. Every so often, one will turn up, who bewilders everybody. Sociopathy is a complex personality disorder, also called Anti-Social Personality Disorder. It is completely untreatable. The extreme cases are usually violent serial rape-torture-murderers, who don't get caught, until they have buried bodies in 36 States. Some of them are not violent. They're even less likely to be caught.

    Nobody caught my father. He died a natural death - which was the only 'natural' thing about him. He wasn't violent, either. I may be one of the only people on Earth who understands what made him tick.

    I haven't the first idea what caused Bernie Madoff's sociopathy, but it is very serious. He needs to be locked up, and the key thrown away. If he is paroled, even if he is 90, he will try again, and probably succeed!

    January 9, 2009 at 12:59 pm |
  54. kbchristiansen

    were sec-members bribed, are controls just fake in wall-street,do not jail Madoff, let him serve in the main hospitals terminal-case units as a patient carer.And may the american medias continue to watch the wrong-doers whereever they are.Yours cordially and all that,
    live from portugal:kbc.

    January 9, 2009 at 1:42 pm |

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