Swindler’s list: the Bernie Madoff story

Or were institutions like Yeshiva University (lost US$110 million), HSBC, Austria’s Bank Medici (potentially lost US$2.1 billion through its funds Herald USA and Herald Luxemburg, mentioned in ABC1's Four Corners program), Switzerland’s Union Bancaire Privée, hedge funds, and the biggest “investor” in BMIS of all, Fairfield Greenwich (a “feeder fund”) which ploughed US$7.2 billion in BMIS and was rewarded with US$0.5 billion in fees willing accomplices?

In addition, a vast array of charities lost so much that their very existence hangs in the balance.

If he really had $17 billion and was geared say, 3:1, then one can say his portfolio controlled $50 billion. This is the number repeated ad nauseum by the likes of the New York Times but such figures are misleading. Of course he didn’t need to leverage a jot, because he didn’t invest the money, he just shuffled it through his Ponzi scheme. His crime was not losing money but running the Ponzi scheme.

The authors interview Mr John Najarian (an acquaintance of Madoff’s and an options trader for decades) who asks: what did the staff at BMIS really do? Not trade and yet receive annual bonuses? For not making money? And if they did trade, they certainly could not be making money using the strategy BMIS claimed to be employing. Najarian explains that Madoff’s strategy of using options cannot constantly yield double-digit returns as Madoff claimed. “It’s just not possible”. And he should know.

While much has been said regarding Madoff’s swindling of charities per se, Lawrence Leamer, the author of Madness Under the Royal Palms: Love and Death Behind the Gates of Palm Beach, interviewed in the book is convinced that charities were collateral damage, and the real target of Madoff’s scams were philanthropists with whom he congregated, be it in country clubs or at A-list parties.

To appreciate the class of crime perpetrated by Madoff, according to a former federal prosecutor, Douglas T. Burns, one must see Madoff not as someone who one day decided to steal, say, US$50 billion. That is not what happened. What happened, in this case is that this guy (Madoff) started robbing Peter to pay Paul. And then robbing some other rich shmuck to pay Peter.

In the unlikely event that Bernard L. Madoff swindled on his own, as he claims, then he alone knows the full extent of his wickedness. But if, as is more likely, Madoff had assistance in executing his nefarious deeds, he will have to decide whether to surrender his co-conspirators to the authorities.

Of course even if, one day, Madoff does sing like a canary, would he be singing the truth? The whole truth and nothing but the truth? So help him Mammon?