Madoff put into perspective

[heyyou]

One person alone cannot generate that many ficticious trades. There has to be others who were aware and aiding some of the fraud even if they didn't know the depth and size of it.

 

[Notmuchlonger]

One person alone cannot generate that many ficticious trades. There has to be others who were aware and aiding some of the fraud even if they didn't know the depth and size of it.

Yeah. He goes into saying his family was all proper and legit.
Maybe so but it raised my eyebrow.

 

[Grep]

My impression is that his is a disappointing and unfortunate tale, but a trival, distracting soap-opera side-show to the staggeringly-huge disasters befalling global economies (unless, of course, you are personally one of his victims).

 

[youbet]

I agree to some extent, 10+ years of 12% interest is quite alot. However, the guy had been around since the mid 80s. No reason to suspect he wasn't on the up-and-up. That combined with the fact that the SEC basically gave him their vote of confidence, and I can see how otherwise smart and respectable people could be deceived.

Sheeesh....... I know I'm just an ole fuddy duddy, but I wouldn't have given a nickle to someone offering that kind of yield and promising it to be "safe." I take more than my share of risks (I own ISM - see the thread) but I understand there's risk and the thrill is my reward. But to have someone offer you returns normally associated with risk but promised as safe is an absolute, positive 100% guaranteed signal it's a rip-off.

People were blinded by GREED.

Madoff should be put in a cell with a 300#, horny Bubba for the rest of his life. And the folks who let their GREED overshawdow their common sense should be made to write on the blackboard 1,000 times a day "I am a GREEDY duffer."

 

[Koolau]

People were blinded by GREED.

Maybe so, but they were also blinded by a professional confidence man. I have no such excuse for losses (much smaller, TG, but significant, none the less) I took in the '80s. A good "friend" convinced me that some "non-conventional" investments (think tax shelters ala Willie Nelson) were perfectly safe. He "personally guaranteed" them. Good enough for me - 20 years ago.

Here's the thing that gets me. He made money - what? maybe 8% of my investment? - I lost my total investment and the IRS gigged me for half again as much as invested. So my "friend" sold me out to make a relatively small amount of money while I lost many thousands of $. At least Madoff got most of the money! As Bogart said to Peter Lorre, "I don't mind a 'confidence man', I despise a cut-rate one."

 

[youbet]

Maybe so, but they were also blinded by a professional confidence man.

All the more reason they need to step up to the blackboard and write "I am a GREEDY duffer" 1,000 times everyday. It's a tough world out there, as you and I both know!

I'm NOT unsympathetic towards the folks Madoff screwed. In fact, I'd like to think they'll be too smart and aware that GREED trumps reason to let it happen again. The first step to getting that smart and aware is admitting that GREED is one of their character flaws, just like most of the rest of us!

In the meantime, perhaps Mr Madoff could be placed on his head in a bucket of poop while he whistles "Dixie."

 

[RonBoyd]

Maybe so, but they were also blinded by a professional confidence man. I have no such excuse for losses (much smaller, TG, but significant, none the less) I took in the '80s. A good "friend" convinced me that some "non-conventional" investments (think tax shelters ala Willie Nelson) were perfectly safe. He "personally guaranteed" them. Good enough for me - 20 years ago.

Here's the thing that gets me. He made money - what? maybe 8% of my investment? - I lost my total investment and the IRS gigged me for half again as much as invested. So my "friend" sold me out to make a relatively small amount of money while I lost many thousands of $. At least Madoff got most of the money! As Bogart said to Peter Lorre, "I don't mind a 'confidence man', I despise a cut-rate one."

First, let's all agree that the mere fact that one is investing denotes greed to some degree. Of course, there are those that take it to the extreme end of the scale but we shouldn't paint every investor with the same brush.

I would suspect that the great majority of those caught up in this mess did so as you describe, Koolau. In fact, CBS News, last night, had a group interview by Katie Couric. It is, unfortunately, 6½ minutes long but there is one lady who knew Madoff personally (at the 5½ minute mark) and she said, "Bernie never really ever asked for money, he had to be asked."

Anyway, youbet, the other folks being interviewed run the gamut from "greedy" (in your sense of the word) to amazingly naive.

 

[Orchidflower]

Enron preached how "special" their employees were encouraging group-think psychologically (much has been written about that environment), and resulting in a blindness to what was really going on with Lay, Skilling, Fastow et al. The employees were in a "one for all and all for one mode," and, therefore, blindly unquestioning.
Madoff took in enough of his fellow Jews that he "never really ever asked for the money," but, this too, was a "special" group (in this case, Jews led by one of their own), which would encourage, again, group-think psychologically. "I'm so special that Bernie Madoff has tapped me to be his special investor" was probably what they thought at the time. The people who invested in a firm and had no idea even that their money was with Madoff were the real victims to me.
Group-think can be positive (think the Marine Corps., IBM or even the disciplines in college departments) and do much good, but in the hands of scammers it destroys lives.

And if anyone really believes that Madoff's relatives weren't in on this scam, well, I have a really right purty piece of land in Florida's Everglades to sell you...

 

[TromboneAl]

If I understand correctly, there are a number of lucky Madoff investors. That is, the ones who invested early and took out the pretend gains before the scheme crashed. For example, there may be someone who got 12% per year for years, then cashed out.

I read that the government is going to ask (require?) that they give back the gains.

 

[RonBoyd]

Madoff took in enough of his fellow Jews that he "never really ever asked for the money," but, this too, was a "special" group (in this case, Jews led by one of their own), which would encourage, again, group-think psychologically.

Really. Pray tell, what "special" group do you put yourself in? Or, more to the point, what category do you place us in?

 

[Orchidflower]

Oh, puh-leeeease.... Is that supposed to be sarcastic? I was making a pretty obvious point about how Madoff and Enron got everyone to follow them unquestioningly. Nobody should take any offense at what I said on this board. If you read the Wall Street Journal you, too, would have read the same thing more or less said by them.

 

[Texas Proud]

One of the news cast I saw said a lot of the investors can apply for the $500,000 insurance on brokerage accounts... I guess they would only get the money they put in, not the fake profits..

The charities are the ones that I think 'should have known'.... you would think the bigger ones would have had some smarter people on their boards that would have questioned that kind of steady return...

Also, I saw a 60 minute piece (I believe it was 60 minutes) on the guy who tried to turn him in many times... he said NO large bank or brokerage house had any funds invested with him as they thought there was something wrong...

 

[Orchidflower]

Markopoulos was the guy's name. However, from what I gathered watching and reading the media, there were other people from time-to-time that, also, tried to call attention to it. Just Markopoulos stayed at it with true zeal.
Personally, I was cheering when I saw this same guy testify and he crucified the SEC--which, in my opinion--he should have. Bravo! At least one person had some backbone and stood by his personal beliefs, which turned out to be right on the money.
The SEC really screwed this one up. Shame, shame, shame!

 

[ziggy29]

One of the news cast I saw said a lot of the investors can apply for the $500,000 insurance on brokerage accounts... I guess they would only get the money they put in, not the fake profits..

Now if only I could figure out a way to claim that Schwab ran off with my IRA in October 2007...

But if Madoff wasn't a member of SIPC, how does this work?

 

[Orchidflower]

See if this helps:
SIPC May Rescue Madoff Victims : NPR

 

[Gumby]

If I understand correctly, there are a number of lucky Madoff investors. That is, the ones who invested early and took out the pretend gains before the scheme crashed. For example, there may be someone who got 12% per year for years, then cashed out.

I read that the government is going to ask (require?) that they give back the gains.

The receiver has a fiduciary duty to seek recovery of amounts paid out to earlier investors under a fraudulent conveyance and/or preference theory. If the rule established in the Bayou Securities case is followed, it is very likely that the (so far) "lucky" investors will be required to give up at least their "phantom" gains, and maybe some of their initial investment as well, for reallocation to those left holding the bag.

 

[ls99]

The receiver has a fiduciary duty to seek recovery of amounts paid out to earlier investors under a fraudulent conveyance and/or preference theory. If the rule established in the Bayou Securities case is followed, it is very likely that the (so far) "lucky" investors will be required to give up at least their "phantom" gains, and maybe some of their initial investment as well, for reallocation to those left holding the bag.

Ouch! I'm glad I lost money ( and gained some) in a legit manner.

 

[Koolau]

Just to add insult to injury, imagine you got paid by Madoff, got hit with the "claw back" provision and then the IRS says "sorry charlie" when you try to get your taxes back on your "gain". Don't know this would happen, but it would not surprise me. In any case, I'll bet IRS would not give you any interest on your money and I'm sure they wouldn't pay up the first time you asked. YMMV

 

[landonew]

Oh, puh-leeeease.... Is that supposed to be sarcastic? I was making a pretty obvious point about how Madoff and Enron got everyone to follow them unquestioningly. Nobody should take any offense at what I said on this board. If you read the Wall Street Journal you, too, would have read the same thing more or less said by them.

So your saying that you identify with a group of people who read the Wall Street Journal?

I am just kidding with you. Your post about group think philosophy makes perfect sense.

 

[jazz4cash]

Something I've missed in the Madoff coverage is speculation on where this money is. Did most of the money go to paying off the early investors, or is it sitting in an offshore account somewhere?

I don't think we'll ever know what happened to the money. The figure I recall being reported most frequently was $50B, but that was Madoff's figure. Obviously, alot of that was non-existant profit. Besides the investors that took withdrawals (which may be subject to clawback, btw) a lot of the money went back out to pay finder's fees to the [-]co-conspirators[/-] feeder funds. How on earth could BM be the only one in custody?

 

[ERD50]

Wait a minute - let's do some math.

This was a ponzi scheme, he took in money and (when requested) paid out the money he took in so it appeared people were getting profits. So... money out plus account balance equals money in plus/minus any gains/losses minus whatever he skimmed off for himself.

So... if he skimmed of less than 40%, he was doing these people a favor compared to being invested in the market. I'm not so sure I'm feeling sorry for these people chasing a "for sure" 12% return.

And the people and organizations that put ALL their money in a single hedge fund - what were they thinking?!

I thought you had to fill out some form on net worth to be able to invest in a hedge fund? MAybe that form needs to add a line about diversification?

-ERD50

 

[RonBoyd]

And the people and organizations that put ALL their money in a single hedge fund - what were they thinking?!

I thought you had to fill out some form on net worth to be able to invest in a hedge fund? MAybe that form needs to add a line about diversification?

My thoughts, also.

Madoff Had Accomplices: His Victims

Afterward, the TV cameras surrounded a woman named Sharon Lissauer. She had not been wealthy, she said, but she’s lost everything. She didn’t know what she was going to do. She was weeping. It was hard not to feel sad for her — indeed, for all the victims of Mr. Madoff’s evil-doing. But one also has to wonder: what were they thinking?

And yet, just about anybody who actually took the time to kick the tires of Mr. Madoff’s operation tended to run in the other direction. James R. Hedges IV, who runs an advisory firm called LJH Global Investments, says that in 1997 he spent two hours asking Mr. Madoff basic questions about his operation. “The explanation of his strategy, the consistency of his returns, the way he withheld information — it was a very clear set of warning signs,” said Mr. Hedges. When you look at the list of Madoff victims, it contains a lot of high-profile names — but almost no serious institutional investors or endowments. They insist on knowing the kind of information Mr. Madoff refused to supply.

I suppose you could argue that most of Mr. Madoff’s direct investors lacked the ability or the financial sophistication of someone like Mr. Hedges. But it shouldn’t have mattered. Isn’t the first lesson of personal finance that you should never put all your money with one person or one fund? Even if you think your money manager is “God”? Diversification has many virtues; one of them is that you won’t lose everything if one of your money managers turns out to be a crook.

And that’s the point. People did abdicate responsibility — and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it.

 

[Midpack]

My thoughts, also.

Madoff Had Accomplices: His Victims

You just beat me to it, but worth repeating IMHO. I didn't invest with Madoff and I feel bad that people lost everything with him, but my net worth is down drastically, should I be bailed out too?

And yet, just about anybody who actually took the time to kick the tires of Mr. Madoff’s operation tended to run in the other direction. James R. Hedges IV, who runs an advisory firm called LJH Global Investments, says that in 1997 he spent two hours asking Mr. Madoff basic questions about his operation. “The explanation of his strategy, the consistency of his returns, the way he withheld information — it was a very clear set of warning signs,” said Mr. Hedges. When you look at the list of Madoff victims, it contains a lot of high-profile names — but almost no serious institutional investors or endowments. They insist on knowing the kind of information Mr. Madoff refused to supply.

I suppose you could argue that most of Mr. Madoff’s direct investors lacked the ability or the financial sophistication of someone like Mr. Hedges. But it shouldn’t have mattered. Isn’t the first lesson of personal finance that you should never put all your money with one person or one fund? Even if you think your money manager is “God”? Diversification has many virtues; one of them is that you won’t lose everything if one of your money managers turns out to be a crook.

“These were people with a fair amount of money, and most of them sought no professional advice,” said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. “It’s like trying to do your own dentistry.” Mr. Hedges said, “It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances.”

And that’s the point. People did abdicate responsibility — and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it.

 

[ziggy29]

You just beat me to it, but worth repeating IMHO. I didn't invest with Madoff and I feel bad that people lost everything with him, but my net worth is down drastically, should I be bailed out too?

I have no problem with seizing Madoff's assets wherever we find them and distributing them proportionally to those victimized. I support that much.

But if any taxpayer money goes to bail out Madoff victims or to bail out public pension plans, well.... as my signature currently says, I want to know so my 401K can get in line...

 

[Midpack]

I have no problem with seizing Madoff's assets wherever we find them and distributing them proportionally to those victimized. I support that much.

But if any taxpayer money goes to bail out Madoff victims or to bail out public pension plans, well.... as my signature currently says, I want to know so my 401K can get in line...

Absolutely agreed on the first point. Interesting dilemna for those who paid taxes on phantom gains though, should they be able to deduct that in some form now?

And absolutely agreed on bailouts. I am generally against these bailouts, can't think of one I truly support so far...but they aren't asking me. Believe me I've written my Congressmen several times.