By Donna Westfall , Opinion Piece- April 25, 2021
Bernie Madoff is dead at 82
Quick recap. He swindled investors out of billions of dollars. How many billions? About $65 billion but that includes fake profits. How he did it for so many years is a mystery since the Securities and Exchange Commission (SEC) investigated him but could find nothing. Actually the SEC tried over 8 times to investigate his dealings. It took the 2008 recession to expose his gigantic Ponzi scheme. While thousands lost their investment, his family lived in the lap of luxury. When he finally told his wife, and sons what he had done, his sons went to their lawyers and then to the FBI. That was December 10, 2008. The next day the FBI arrested Bernie. He was tried and convicted to spend 150 years in prison.
Now you have to wonder about this. How in the world did the SEC miss this fraud over a 16 year period and it brings to mind something I went through with our Crescent City, City Council connected to allegations I made about fraud on the Wastewater Treatment Plant upgrade/expansion and then my censure by my fellow council members. But we’ll get to that another time. Let’s unveil some of the earmarks there were problems like 46% returns. Matter-of-fact whistleblower, Harry Markopolos, wrote a book called No One Would Listen, A true Financial Thriller. His warnings were largely ignored by by the SEC. But he was right and calling the SEC investigators inept was an understatement.
Bernie helped launch the National Association of Securities Dealers Automated Quotations (NASDAQ). He was so well versed and ingrained in the financial industry that I compare him to the fox first building and then overseeing the hen house.
The scam by Madoff wiped out $19 billion that thousands of wealthy investors, pension funds, hedge funds, charities and celebrities had entrusted to him starting as long ago as the 1970’s and some say even as early as the mid 1960’s. How many investors. Around 37,000 people in 136 countries. The liquidation of Madoff’s investment firm has recovered or settled around $14.4 billion so far. Victims with smaller claims are being paid off faster than larger victims. About 1,400 claims put in for under $1.36 million have been repaid in full. Those that withdrew more than they invested are experiencing “clawbacks.” For example, Recovery Trustee, Irving Picard, got back $7.2 billion from Jeffrey Picower’s widow. Picower was the single biggest beneficiary of Madoff’s scheme.
For years, Madoff doctored client accounts with phony trades and multi-billions in fake profits, until the 2008 financial crisis exposed the fraud and led to the collapse of his investment advisory firm. Up until then he had a reputation for being respectable and generous; involved in many charitable organization. Referrals from satisfied clients helped build his business. But when 2008 rolled around and new clients were no longer investing while older clients wanted their money out his house of cards came tumbling down.
What about insurance? Per Scott Cohen, published December 11, 2018 in CNBC, ” Many thought they should have been covered by the Securities Investor Protection Corp., the industry-funded nonprofit organization — of which Madoff’s firm was a member — established in the 1970s to protect clients of failed brokerage firms. SIPC guarantees customers’ securities up to $500,000, and cash up to $250,000. But SIPC — and Picard, who is paid by SIPC — argued that the guarantee doesn’t cover a fraud like Madoff’s in which no securities were actually purchased!”
The question one has to ask is how did he accomplish this for so many years? Well, he promised returns of up to 46% per year while only charging $.04 per share commission. Actually, some investors (friends) made from 13% to 300% over the years. Get’s back to the old adage, if it’s too good to be true……
On April 14th they say he died of natural causes in the prison hospital, however, he was battling terminal kidney disease. His sons predeceased him. Mark by suicide and Andrew by cancer. His wife, Ruth Madoff, is currently renting a home in Connecticut. The government allowed her to keep $2.5 million after her husband’s plea.