#crime,hbo,bernie #madoff,standard,usa,business,financial #crime
Bernard Madoff: How did he get away with it for so long?
16 May 2017 • 10:45am
A s if the collapse of global financial industries hadn’t thrown up enough villains already, in 2008 stunned investors had a new hate figure: Bernard ‘Bernie’ Madoff, a then 70-year-old financier and charmer whose hedge fund ensnared wealthy Americans with the promise of record dividends. In a jaw-dropping breach of the personal trust that was supposed to grease the wheels of capitalism, he admitted stealing $50bn (£39bn) in the largest pyramid-selling scheme in history.
But for many, what cut deepest was Madoff’s betrayal of his fellow Jews in a manner that drew dark parallels with an earlier time.
Jerry Reisman, a New Jersey lawyer who knew Madoff socially and went on to represent 13 investors who lost $150 million, said: “Hitler tried to kill the Jews as a people. In one weekend, Bernie Madoff destroyed Jewish wealth in America as we know it. He preyed on his own community.”
As the scandal broke on December 11, 2008 the high society of Palm Beach, the playground of Florida’s millionaires, were at a charity event. “It was like the Titanic,” one guest told author and Palm Beach resident Laurence Leamer. “The ship was sinking, and people were crying. Everybody was drunk.”
Y et what was most remarkable about Madoff was not the scale of his greed and deception, but that he got away with it for so long. US regulators found evidence of misconduct stretching back to the 1970s.
As long ago as 1999, an independent investigator, Harry Markopolos, concluded that Madoff’s success could not be legitimate. In 2005, he sent the US Securities and Exchange Commission (SEC), the financial watchdog, a 17-page statement: “The World’s Largest Hedge Fund Is a Fraud”.
T wo years later, the commission found no evidence of fraud after an investigation that seems to have involved little more than asking Madoff whether he was a crook, and accepting his answers.
SEC boss Christopher Cox in late 2008 denounced multiple failures at his agency and launched an internal investigation of the relationships between his officials and Madoff, including Eric Swanson, who had at one point been involved in monitoring Madoff’s firm and later married his niece, Shana Madoff.
The FBI and the American Institute of Certified Public Accountants probed Madoff’s auditor, whose three employees watched over the largest hedge fund in the US from a broom-cupboard office in a suburban strip mall.
US investment banks also concluded that Madoff’s profits were too good to be true. But he circumvented their suspicions by recruiting 4,000 clients with a calculated front of charm and mystery that was so successful they begged him for the chance to hand over their cash. His Ponzi scheme, as Americans call pyramid selling, saw him suck in new investors so that he could pay dividends to those whose money he had already taken.
H is victims included Hollywood mogul Steven Spielberg, developer Mort Zuckerman, Fred Wilpon, owner of the New York Mets baseball team, and numerous Jewish philanthropic organisations, which lost their endowments and saw many of their major donors ruined. In Britain, City superwoman Nicola Horlick, HSBC and Royal Bank of Scotland lost millions.
Madoff’s drive helped him turn a $5,000 investment (earned from working as a lifeguard and installing sprinkler systems) into a company that helped create the Nasdaq stock exchange, which he later chaired. It bought him a $21m home in Palm Beach, a $7m Park Avenue apartment in New York and houses in the Hamptons and France. He owned a 55ft yacht called, appropriately enough, Bull.
J erry Reisman, who met him at the Glen Oaks Country Club in Westbury, New York, said: “He moved in some of the best social circles in New York. He worked the best country clubs. He was utterly charming. He was a master at meeting people and creating this aura. People looked at him as a superhero.
“People didn’t want to know what he was doing. If it’s too good to be true, it isn’t true. But people didn’t care. They were greedy.”
Smug, too. Jeffrey Gural, chairman of real estate firm Newmark Knight Frank told the New York Times that he was teased by his friends after Madoff refused to let his family invest in the fund because he would not put up a minimum of $20 million. He said: “They thought Bernie Madoff was a genius, and that anyone who didn’t give him their money was a fool.”
The revelation that they were the fools left Madoff investors devastated.
Take screenwriter Eric Roth, who wrote Forrest Gump. In December 2008 he found out that he had been nominated for a Golden Globe for his latest work, The Curious Case of Benjamin Button. a film starring Brad Pitt and Cate Blanchett — and that he had also lost all his retirement income. “I’m the biggest sucker who ever walked the face of the Earth,” he told the Los Angeles Times.
The fallout wrecked lives. Brad Friedman, a partner with the New York law firm Milberg LLP, represented more than 100 clients in Britain, the USA, Hong Kong and South America. He said: “It’s horrible. It’s a human tragedy that is almost unimaginable. It is the kind of thing we haven’t seen since 1929. In many cases, people have lost all their money.
“The majority were not super rich — they were people around retirement age who lost $5m to $8m but that was the entirety of their savings. However well they may have been living previously, they now have far less money than blue collar workers. People are selling their homes.”