Bernard Madoff

Just how exactly does one steal fifty billion dollars without getting caught at say, seventeen million?  Or three hundred million?  Who am I kidding, I’m always the one afraid of getting caught of taking two pennies out of those “need a penny, take a penny” bowls next to cash registers.  I’m always concerned the clerk will say, “If you need two pennies, get a job.”  Clearly, Bernard Madoff doesn’t share the same reservations the rest of us do.  He boldly stole fifty billion dollars before getting caught.  Apparently, the SEC dropped the ball at some point and he managed to bypass the scrutiny of the auditors who, had they done their jobs, would’ve picked up on his “Ponzi” investment scheme years ago.  In fact, since he began his hedge fund in September of 2006, the Securities and Exchange Commission hasn’t darkened his doorway one time.  As a result, over thirty investors have become unlikely victims.  Unlikely because they include incredibly intelligent businessmen and women who have built their fortunes by trusting no one.  As he was being led out of his firm last Wednesday, he told his employees it was all a lie. 

But it’s who brought him down that caught my attention.  It took his two sons to make a phone call that drew the attention from federal investigators.  Apparently, he confessed to the two men shortly before the FBI appeared at his door.  He told the agents and his sons there was no innocent explanation.  He also told both the FBI and the SEC that neither of his sons were involved and had no knowledge of what he was doing.  I can’t imagine how traumatic it must have been to these two men.  Their seventy year old father is quite likely the greatest  con artist of our lifetimes and they were the ones who had to make a choice that would not only affect their lives, but the lives of the investors whose money is now gone.  But that’s not even the point, this man put this burden on his two sons - and left them with that burden of choosing what to do with the information.  A quick visit to his site revealed a message from the US District Court of the Southern District of New York that stated a law firm would be answering any questions as well as overseeing the assets and accounts, or rather, what’s left of the assets and accounts.

Nicola Horlick, one of the clients who was bilked out of millions, had some unpleasant comments about the SEC’s lack of interest in its collective role, “It’s astonishing this apparent fraud seems to have been continuing for years, possibly decades.  The allegations appear to point to a systemic failure of the regulatory and securities markets regime in the U.S.” 

With so much talk of a Ponzi scheme, I had to do a little research to figure out what that entailed.  According to the SEC’s website, Ponzi schemes are named for Charles Ponzi, who, in the 1920s, convinced thousands of people to invest in a postage stamp scheme.  His goal was to manipulate the differences in U.S. and foreign currencies as they related to international mail coupons.  He promised a forty percent return in only ninety days to his investors and used the 5% rate banks were currently paying for savings accounts as the comparison.  Incredibly, he raised one million dollars in three hours.  Keep in mind, this was in the early 1920s.  He invested a grand total of $30.00 to purchase the mail coupons.  Since then, the Ponzi scheme has been too much for some to resist, which is what allows it to remain one of the biggest pyramid schemes and continues to draw those in wishing to get rich quick.

The only thing that’s certain is this has only begun.  It will likely go down in history in a way we wouldn’t want our own life stories to be remembered and retold.