언제, 에 2008, Bernie Madoff was revealed as the world’s biggest ever conman, the general reaction was: “Bernie who?” Outside Wall Street, he was almost unknown. But investors around the world, most of whom had never heard the name Madoff, soon discovered they were victims of his $65bn Ponzi – or circular money – scheme.
An undiscerning fraudster, Madoff, who has died in prison aged 82, conned relatives, close friends, longstanding clients and charities as well as supposedly savvy banks and fund managers. There was no advertising. It was all by word of mouth: personal recommendations from well-rewarded Madoff middlemen at country clubs, golf courses and marinas. The pitch was exclusivity. The fund was closed – but maybe he would let you in.
Madoff’s tactics typified the classic affinity fraud. A community becomes a collective victim through trust for one of their own and reliance on the judgment of social or business peers. There was no need to question how he always beat the stock market. 그는 ~였다, 아무튼, “Uncle Bernie”, their kindly, 예의 바른, quiet, almost boring benefactor. Regular returns of 1% or more a month made Madoff the secure “Jewish T-Bill”, said one investor, comparing him to the safe-as-houses US Treasury bills. Photographs showed a soft-eyed, unthreatening figure. One victim concluded he had been “a friend to a man who apparently didn’t exist”.
A staggering $170bn had flowed through Madoff’s hands. 일부 4,800 investors lost more than $21bn – the difference between what they put in and got back. Less than $1bn was left. The cash had not bought investments, but was recycled back as phony profits.
Nothing about Madoff was remarkable – beyond the scale of his fraud. He was born in New York. His parents, Sylvia (nee Muntner) and Ralph, immigrants from eastern Europe, worked in stockbroking, although his mother ceased business under pressure from the Securities and Exchange Commission (SEC) regulator in 1963. Madoff graduated from Hofstra University and worked as a sprinkler salesman before starting Bernard L Madoff Investment Securities (BLMIS) 에 1960 와 $5,000 in savings and backing from his father-in-law, Saul Alpern. He had married Ruth Alpern the previous year.
The first 20 years or more of his business activities were perhaps legitimate. He was one of the first to specialise in electronic computerised share dealing. By the 1990s, he was the biggest broker on the Nasdaq electronic stock market and one of the best paid on Wall Street. “The owner’s name is on the door,” he reassured clients. Madoff was twice Nasdaq chairman, consulted by politicians and regulators, and a trustee of Hofstra and Yeshiva universities.
에 1983 he opened a London office. Madoff liked Savile Row suits. He used the London operation to hide the fraud and divert clients’ money to fund his lifestyle. There was a Manhattan penthouse, an ocean-front Long Island mansion, homes in Palm Beach and Cap d’Antibes, two yachts, a fishing boat and an executive jet. His only public vice was expensive cigars.
BLMIS occupied two floors of the Lipstick building in Manhattan. The fraud was run from a third floor, closed to those involved with the brokerage business.
Madoff refused then to explain how he never lost money. Even one of his sons later told the FBI his father was “cryptic” about the investment advisory business. If pressed, he would mention a complex system that involved matching buy/sell options. Those who wanted to know more could keep their money. Told at a party that his performance was too good to be true, Madoff laughed and replied: “A lot of people say that.” It later emerged that major banks and hedge funds had doubts about his magic but said nothing publicly, although at least one is believed to have tipped off the SEC.
The fraud was stunningly simple. Madoff decided what return he wanted each month then, using historical price data, pretended to have bought and sold blue chip shares at the prices necessary to deliver that figure. Then a small crew of trusted, over-paid employees generated an ever-growing flood of fake confirmations and client statements.
Madoff went global, attracting cash from banks and fund managers in the US, Europe and Latin America with low commission charges. But they charged their clients fat management fees for access to Madoff. It was money for nothing.
Pleading guilty in March 2009, Madoff said he began the fraud in the early 90s recession to meet clients’ expectations for higher returns. “I believed it would end shortly and I would be able to extricate myself and my clients. 하나, this proved ultimately impossible.” His righthand man, Frank DiPascali, disagreed, saying the fraud had begun much earlier.
Madoff was almost caught in 1992 when two accountants, who had brought in $440m for him since 1962, promising their clients up to 20% a year, attracted the SEC’s attention. Questions were raised about the high returns but Madoff’s explanations were accepted. Money was returned, and the SEC lost interest.
에 2001 Madoff had another narrow escape. Two articles, the first published in Barron’s financial magazine and the second in the trade publication MARHedge – one headlined Don’t Ask, Don’t Tell, the other Madoff Tops Charts, Sceptics Ask How – disclosed that, although not registered as an investment adviser, he was managing billions. 다시, the SEC did nothing.
Four years later, the analyst Harry Markopolos, who had first warned the SEC in 2000, sent it a report headed The World’s Largest Hedge Fund is a Fraud, showing Madoff’s consistent returns were impossible without fraud. He listed 30 “red flags”. The SEC investigated but was convinced more by Madoff’s reputation and SEC connections. He claimed they simply did not understand his secret system, while they believed he was too big and too respected to be a conman.
하지만 Lehman Brothers collapse in September 2008 panicked even “Jewish T-Bill” holders. By early December, Madoff had paid out $6bn, with billions more due. Ponzi schemes end when money out exceeds money in. Madoff knew he was going under, and orchestrated the inevitable end. 의 위에 10 December that year he confessed to his brother, 베드로, then to his sons, Mark 과 앤드류, all of whom worked at BLMIS, telling them: “It’s all just one big lie.” He had been running “a giant Ponzi scheme” and intended to turn himself in.
That night Madoff and his wife hosted the firm’s annual staff party at a Mexican restaurant as if nothing was wrong, while his sons called the FBI. At 8.30am the next day, they arrived on his doorstep. Madoff told an FBI agent, Theodore Cacioppi: “There is no innocent explanation. It could not go on.”
He cast himself as the sole villain, saying he alone had carried out the gigantic fraud – one that had clearly required the help or wilful blindness of others. He later told SEC investigators he was “astonished” not to be found out earlier. In five investigations the SEC never checked whether he was actually trading. Madoff described the fraud as “pretty open and straightforward, (hiding) everything but in an inept way”.
In court Madoff showed little emotion. “I cannot offer you an excuse for my behaviour,” he told his victims. “I’m sorry, I know that doesn’t help you.” Sentencing Madoff unusually to the maximum possible 150 years in June 2009, the federal judge, Denny Chin, who did not believe Madoff had “told all that he knows”, described his crimes as “extraordinarily evil … not merely a bloodless financial crime [그러나] one that takes a staggering human toll”.
Madoff is survived by Ruth. His sons predeceased him.