The Mysterious Mr. Madoff

Tonight, judge Denny Chin of the Manhattan U.S. District court will reach a verdict that will probably send Bernhard Lawrence Madoff to jail for the rest of his 71 year long life.

He had a kind of grey eminence in the New York financial world. A self-made man who worked his way up from the bottom, a distinguished philanthropist and statesman for those in the business, and the rock solid “Uncle Bernie” to those who knew him personally. Today, Bernie Madoff is world famous as America’s greatest con artist ever.

“I am ashamed and cannot say how deeply I apologize,” Madoff allegedly told police when he was arrested in December of last year. He has confessed to every crime he is being prosecuted for and is expected to make a statement expressing his deep remorse again today. But the Madoff case is still far from over. Key questions still linger in the air: how many of those who are claiming to be victims should have seen this coming a long time ago? And could one man really engineer a scam of this scale all by himself?

There is no doubt that Bernie Madoff fooled a lot of people. Two have committed suicide and thousands of investors lost more than $65 billion on the pyramid scam that, according to Madoff himself, he has been running since 1991. Small-time investors, the richest in the country, charitable organizations, and American and foreign finance corporations, including one Norwegian firm, were all listed as patrons of Madoff Investment Securities LCC, established in 1960.

Clients were often told of a secure ROI of 10-12 percent, a rate at which some could stand to make more than one hundred percent profit a year. But the profits only existed in Madoffs head; no trades were carried out and the fund stayed afloat only by old investors getting paid from new funds injected by new investors. “K.I.S.S.”, Madoff repeatedly told his employees. It meant, “Keep it simple, stupid” and it worked well for a long time.

It was the financial crisis that punctured the bubble, when a group of clients wanted over a billion USD quickly to secure their funds. The money simply wasn’t there. “I knew all along that this day would come”, Madoff said, and insisted that he, alone, was to blame. When something seems too good to be true it usually is but as long as the money came rolling in, few bothered to check the paperwork.

A competitor, Harry Markopolos tried to sound the alarm in 1999, and has since then repeated his claims that Madoff was running a pyramid scheme. Among those he alerted were the SEC and the IRS. Why it took them almost ten years to react to the accusations is a query yet to be answered. Madoff’s high social status, his former employment as the head of Nasdaq, and the fact that he was an advisor to many of the organizations that were supposed to keep him in check are partial explanations but not excuses.

Now that the bill is ready, trustee Irving Picard has also reported about twenty investors to the authorities whom he thinks form a network that either helped Madoff or knew about and profited from the system. It is a fact that many people withdrew large amounts of cash before the bubble burst. These people are now blaming each other, demanding more blood while at the same time claiming they are victims of Madoff’s vindictive scheme.

This spring, New York Magazine printed a cover with Madoff as the Joker from the Batman movies and the heading “Bernie Madoff, monster”. Vanity Fair painted a very different portrait with an 8 page long interview with the man’s private secretary of 25 years, Eleanor Squillari. This piece draws an interesting picture, not at least because of her claims that Madoff knew he would be caught sooner or later, an understanding that gave him ample time to stage how events would unfold when it happened.

Commentator Bill Singer recently speculated in Forbes Magazine that perhaps something good could come of this situation. This type of scheme, Singer says, is not that unusual; many have done it before him and more will come after him. There are also hopes that the fact that Madoff has become the face of everything sick and twisted on Wall Street before the financial crisis will force new regulation and cleaner markets. Madoff-victim Burt Ross has another dream: “I hope Madoff lives as along as Metuzalem, and that he has to spend all of those 969 years behind bars”.

The prosecutor has asked for 150 years imprisonment. Madoffs attorney has asked for 12 years, based on the assumption that his client has 13 years to live, and the argument that the crime is non-violent.

The judge is not likely to consider the argument. Bernie Madoff will probably never see the light of day again.