Small-town Bernie Madoff

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Chuckanut said:
We had a guy like that at our church. Big Talk, good friends in all the HIGH places, big house, two fancy cars, volunteered for all sorts of church activities, etc. etc. etc. He hooked a number of people on a great business opportunity refinishing bathrooms in only a day or two using new techniques, IIRC. Three years later he disappeared, with a number of church members wondering where their money had gone to.
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Affinity fraud is common. People let down their guard with someone who is perceived to be "one of us". There was a guy around here who stole $2 million from the local Greek Orthodox Church's endowment fund about 7 years ago. He got 25 years in federal prison for it. As the guy in charge of my own church's endowment fund for over 14 years, I followed the case with interest. The victimized church had poor financial controls in place. When one of my fellow congregants talked to me about the case, he said "we trust you." I said, "I'm honored, but you shouldn't trust any one person, which is why we have structural safeguards in place to prevent me from doing the same thing."
 
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There have been lots of them where we live. In some cases hundreds of millions. Usually people in about to retire or retirees. Most often some sort of affinity fraud.....a church group, service club, etc where the members trust other.
 
Gumby said:
Affinity fraud is common. People let down their guard with someone who is perceived to be "one of us". There was a guy around here who stole $2 million from the local Greek Orthodox Church's endowment fund about 7 years ago. He got 25 years in federal prison for it. As the guy in charge of my own church's endowment fund for over 14 years, I followed the case with interest. The victimized church had poor financial controls in place. When one of my fellow congregants talked to me about the case, he said "we trust you." I said, "I'm honored, but you shouldn't trust any one person, which is why we have structural safeguards in place to prevent me from doing the same thing."
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Somewhat similar.
Long ago, my favorite family owned outdoor store went bankrupt. Turned out their accountant/book-keeper for 10 yrs had been stealing money, it was over $1 Million.
They only found out as she got sick and had to go to hospital, so they hired a temp. The temp saw the strange entries, and told the owners.
 
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Sunset said:
Somewhat similar.
Long ago, my favorite family owned outdoor store went bankrupt. Turned out their accountant/book-keeper for 10 yrs had been stealing money, it was over $1 Million.
They only found out as she got sick and had to go to hospital, so they hired a temp. The temp saw the strange entries, and told the owners.
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Above emphasis added.

One of the things I learned from my data security days was to watch for people for rarely took well earned time-off. Often their schemes require them to tamper with the books on a weekly basis. One week minimum was the recommended vacation time. Two weeks was even better. They should also miss at least one end-of-month cycle a year. That was a hard one, since often Helen in Accounting was the only person who knew how to do the end-of-month. <--- another warning sign.
 
We were required to take 2 consecutive weeks off in the Wall St. firms I worked at.
 
Chuckanut said:
Helen in Accounting was the only person who knew how to do the end-of-month. <--- another warning sign.
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Have probably mentioned this in the past because it's a show that's stuck with me:

1969, with my first wife in London, raining, watched TV.

- half hour show...opening scene company CEO's house, dinner party for execs.

- men in tuxes, wives dressed accordingly....except one, who looked like a stripper.

- 'stripper' and husband make excuses and leave early.

- CEO says he'd love to promote departee to VP status but his wife would be an embarrasment.

- Scene switch: 'Stripper' removes wig and flashy attire, and husband says "That was close, I can't afford to be moved from this job until I've embezzled enough money so that we can make a run for it".
 
Nemo2 said:
- Scene switch: 'Stripper' removes wig and flashy attire, and husband says "That was close, I can't afford to be moved from this job until I've embezzled enough money so that we can make a run for it".
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That's great!

You know, this whole thing about taking a break away from work so the company knows if they can deal without you is important.

You'd think more companies would do this! It isn't just to smoke out embezzlers. It is also a way to prove backup plans. Oh, and for today's vicious corporate culture, it also proves you can lay off anyone.

My story: I was a high school computer student. I was the star student that year. The teacher fell suddenly ill, and me and the science teacher were tasked with figuring out how to run personnel jobs on the computer! A friggin' student! Of course, I was under heavy supervision and the teacher would not let me watch the print-outs. I mean, this was stuff like payroll. It was a nightmare and they came up with a completely different plan after the computer teacher recovered.
 
I have a friend that lost about 300k to one of those scammers about ten years ago. He bragged about the money he was making and talked to me about joining. All on paper. My alarm bells were going off and I kept telling him to take his money and run. But greed is what hooks people like my friend and suspicion goes out the door. After the court case, he only got about 15k after what was left and distributed to the "investors".
 
I have a friend that was con by a relative. The conman was to be investing his money but as of the last few years now, he has realized he was scammed. My friend has been fighting this to prove what has happened, but the processes has been long and a hard fight.
It was close to 1M he gave to him to invest. My friend wasn't the smartest person thou and he made mistakes alone the way also.
 
Chuckanut said:
Above emphasis added.

One of the things I learned from my data security days was to watch for people for rarely took well earned time-off. Often their schemes require them to tamper with the books on a weekly basis. One week minimum was the recommended vacation time. Two weeks was even better. They should also miss at least one end-of-month cycle a year.
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+1
For critical systems, we required the backup person to "run the job" periodically for 2 or more weeks at a time, depending on the specific job. There was still the risk for "collusion" so we would rotate the backup person on occasion too. Just a good security practice.
 
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Sue J said:
We had a local office of Fair Finance. I remember seeing ads in the very local paper for their high interest CDs. Always higher than the banks and definitely not FDIC.
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racy said:
Particularly among the religious? is the question this article explores: https://tinyurl.com/yy76vwud
As my favorite atheist says, "Faith is not a reliable pathway to truth".
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Fraudsters try to blend in with their prey. It can be through church or synagogue or mosque. It can be through veterans groups. Or college alumni societies. Or political support groups.

They are con artists who USE these groups to gain trust. It says nothing one way or the other about the validity of the causes that they are masquerading under.
 
Did Bernie Madoff steal or lie about returns and that he was investing with amazing returns? Stealing is different than misleading people/banks/charities/investment companies into bad investments. I looked at the list of investors on Wikipedia and they look like financially savvy investors. Stealing is taking something without permission. All these entities gave money to Madoff with permission. The ponzi part is illegal but aren't some pyramid scheme companies like ponzi schemes?

In our earlier days of investing a Merrill Lynch advisor suggested buying Enron bonds. Before we invested she told us she would check into some things first. Then, she came back and advised against the investment. This was before Enron's public downfall. I always wondered if she had inside information about the company. We were small time investors. So new and naive. Maybe she felt sorry for us. This was before we learned about Vanguard. I think ponzi schemes are everywhere and it's buyer beware.

Everyone should follow "due diligence" practices. Talk about complicated! If the SEC made huge errors in figuring out Madoff's scam, how could an investor?

"While it's easy to blame the SEC, you can only imagine the arduous task of reviewing and tracking such a large volume of companies with such limited resources. (For more, see our slideshow on Biggest Stock Scams.)"

The article posted below is hair raising and makes me more comfortable with our investments in Vanguard.

https://www.investopedia.com/articles/fundamental-analysis/09/investing-due-diligence.asp
 
I believe that it comes down to one or a combination of greed, stupidity, and abject naivety.

Expecting incredible above average guaranteed financial returns from a rock solid safe investment with your principal 'guaranteed' only means one thing to me. Ponzi.

it is not a head scratcher. DW's dopey cousin probably still has a big box of Iraqi dinars that she purchased a few years ago. DW advised her at the time it was a scam and to check the internet.

But no, she bought it because someone at her church said it was a great investment and her son did a lot of research. He probably just asked others at that same church what they thought. SO they paid $3K, which they probably could not afford, for a box of worthless paper on the advice of a know nothing friend in the expectation that it would turn into several hundred thousand a year later.

I guess they could use it as wallpaper, or shred it up for insulation of some sort.

Go figure. You cannot fix stupid.
 
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Rianne said:
Did Bernie Madoff steal or lie about returns and that he was investing with amazing returns? Stealing is different than misleading people/banks/charities/investment companies into bad investments. I looked at the list of investors on Wikipedia and they look like financially savvy investors. Stealing is taking something without permission. All these entities gave money to Madoff with permission. The ponzi part is illegal but aren't some pyramid scheme companies like ponzi schemes?

....
Everyone should follow "due diligence" practices. Talk about complicated! If the SEC made huge errors in figuring out Madoff's scam, how could an investor?

....https://www.investopedia.com/articles/fundamental-analysis/09/investing-due-diligence.asp
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Bernie lied.
He took their money and didn't do what they thought he was doing (investing), so he Stole their money, Committed Fraud and Theft.

He spent the peoples money instead of investing it. He printed out fake documents to substantiate his claims of high earnings.
In his office, staff (except few in on the deal, mostly family) were not allowed to enter the 17th floor offices. This was to hide the printing of fake performance returns.
Bernie lied to SEC, along with lying to all the investors.
Bernie did not invest in bad investments, he didn't invest hardly at all.
One of his son's committed suicide from being dragged into his Father's crimes.
 
Interesting thread. My wife and I know someone who was recently charged and awaiting trial for stealing $4.7 million in a Ponzi scheme. He was formerly a real estate attorney, but then started his own business of buying and flipping using investors money then returning to them their principal with excellent interest rates (10-12%)...he just deposited the money, then used the next investor's money to pay off the previous investors.

My wife and I actually met with him about 6 years ago and it did seem suspicious to us and I never followed up with him. The latest on him is that he was a flight risk to South America so he is sitting in jail and had to surrender his passport. He also got debarred earlier this year.
 
The recent novel The Glass Hotel by Emily St. John Mandel offers an interesting take on the Madoff scam. The critics really liked it too.
 
Years ago I worked as an Investigator for the USDL. We audited compliance with the wage provisions of the Service Contracts Act. Part of the process was to interview employees. During an audit, one of my peers couldn't find several employees listed on the payroll. As this was a cost-plus contract that rang a lot of bells and the Contract Officer was contacted. The bookkeeper was issuing payroll checks and depositing them in her personal account. The employer was notified and the bookkeeper was arrested for defrauding the US. I believe that the employer had to make the contracting agency whole and likely was bankrupted.

I live in a housing co-operative. A few years ago a couple made an offer on a unit. They submitted their financial statement on a thumb drive insisting that only the Treasurer review it. It is the practice that all members of the Board review prospective buyer's submissions. The application was 'unique' prompting a little poking around on Google. We discovered that the husband had changed his name and that under the old name members of his congregation sued him for improper financial activity associated with the congregation's assets. We insisted that he submit his financial statement on paper. He withdrew his application.
 
We had one in my former home town. He took about $25m from relatives, friends, associates. Over a period of many years.

Many complained to our Investment Regulator after the scandal broke.

The thing is NOT ONE of his customers over all those years ever bothered to call the Investment Reg. office to see if he was licensed. If they had, they would have discovered that he was not AND he would have been immediately investigated and closed down by the authority. They only called after he disappeared and it was apparent that something was wrong.

Exact same thing happens regularly where we currently live. Many people do more research when they are buying a new fridge or tv than they do when investing their life savings. Never could figure this out.

We have a rule. NEVER invest with friends, business associates, and especially not with relatives.
 
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brett said:
...

We have a rule. NEVER invest with friends, business associates, and especially not with relatives.
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I don't have this rule.
My parents best friends, so close he was my "uncle" died and the investment evaporated.
I am as suspicious of friends as I am of strangers for investments.
 
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