Journalism in the Public Interest

Madoff Calls Big Investors ‘Complicit’ in Jailhouse Interview

In an interview with the Financial Times, Bernard Madoff names four associates who he alleges knew that his business wasn’t on the level.


(Reuters/Lucas Jackson)

A recent jailhouse interview conducted by the Financial Times with Ponzi mastermind Bernard Madoff could shed light on one of the enduring mysteries of his multibillion-dollar scheme. Who else was involved?

The Feds have already charged a number of former Madoff employees. The trustee, Irving Picard, tasked with recovering money for Madoff victims, has cast a wide net, filing lawsuits that level accusations against the banks that facilitated the scheme and a number of investors who benefited from it.

Last June, ProPublica looked at several of the investors and money managers singled out in federal and civil filings. Now, in his interview with the FT, Madoff says that several of his oldest clients knew "something was amiss.""

In particular, Madoff names Jeffry Picower, Stanley Chais, Carl Shapiro and Norman Levy, his four largest investors.

At the outset, Madoff insists that one of the ground rules for the interview is that "nothing that I say should be taken as an excuse" for his behavior.

Yet later, he paints himself almost as a victim of Picower, Chais, Shapiro and Levy. "I was at their mercy," he says.

Madoff describes how he started managing money for the men in the 1960s. After the 1987 market crash, he says, he found himself locked into investment positions that his four stalwarts refused to close out. In order to keep the business going, they referred other investors to him. Madoff says that by 1992 it had become a Ponzi scheme and his big clients knew.

"They were complicit, all of them," Madoff says.

Of course, Madoff has been sentenced to 150 years in prison for orchestrating one of the biggest scams of all time, swindling investors out of more than $20 billion.

None of the men he accuses in the interview have been convicted of crimes. Chais and Levy are dead. The latter's estate settled with the trustee for $220 million without admitting wrongdoing. Chais' survivors have contested allegations made by the trustee and the SEC. Picower, the scheme's biggest beneficiary, also has died. His wife has pledged to return all $7.2 billion that her husband reaped from Madoff and says he did not know the business was a Ponzi scheme. Shapiro also has settled with the trustee for $625 million while denying any wrongdoing.

Which banks “facilitated the scheme”?  I’ll bet it’s the same ones that “facilitated” the mortgage fraud…

One has to wonder what government officials were involved in addition to the baks. Unfortunately we will never know as they all move to cover up their tracks.

It is up to the government to weigh Madoff’s allegations and determine what charges are viable.

This interview raises an interesting question. Madoff says (if true) his largest investors prevented him from closing out specific large positions. The next question is WHY? Who held major stakes in those businesses and why would honest business ventures be structured in a way that left them dependent on receiving an monthly cash infusion from Madoff’s investors. I would be curious to know more about these businesses which much like Madoff’s Ponzi scheme were continually needing new money to stay viable.

So what else is new?
  Of course, Madoff was aided and abetted by banks, the well-positioned. He also had the abundant help of a government dedicated to protecting the people who buy and pay for most of our elected officials. How else could Madoff have escaped scrutiny for as long as he did? I agree with the man, we live amidst the ashes of a ponzi scheme far more grandiose than his; it has effectively laid waste the country, and continues to plunder it non-stop for whatever juice is left.
  Perhaps the powers that be were afraid that pointing at Madoff would lead to scrutiny of them as well.  But they would have been dead wrong. Obama, like every president starting with Truman—with the possible exception of Eisenhower—never intended to bite the hand that fed him. Calling the people who aided and abetted his candidacy and election to account would betray the system itself.
By giving Bush/Cheney a pass, ‘we don’t look back, we must look to the future,’ Obama handed himself the same pass. 
Which is the way it has ever been.

Lets look at the facts:

As early as 1999 a respected college professor with a background in finance announced to anyone who would listen,  that Madoof’s results were mathmatically impssible.

Well, no one would listen but these claims were all over the Wall Street Journal, and all of the financial periodicals to include the NY Times and particulalrly the Boston Globe.

You must assume that the people running the banks and trust funds that invested with Madoff were not total boobs, so it is an absolute that they read those articles or discussed the articles and the facts with associates.

They had to know the “real deal” but kept playing the pyramid for all it was worth.

It is very easy to find the guilty minds that knew the “deal”. Just look at the individual accounts and you will see that Person/Bank/Fund Manager “A”  gave Madoff $1M.(example)  and then monthly, quarterly etc. withdraws the earnings from that fund. At 4.7 years, using the rule of 72, the investor had its entire investment back and then were playing on house money. 

Unfortunately, Madoff conned the rich and famous and for that he has the rest of his life as a guest of the government.

Conversly Goldman Sach, although doing exactly the same tricks or worse tricks than Madoff, spent their loose change buying elected and appointed officials and became TOO BIG TO FAIL.Not only are those criminals and their many, many associates not charged with crimes they’re back at their old tricks ripping and clipping millions.

Most anything Bernie says is probably true.

My bet is that nothing happens to thosel criminals.

The cannery sings, indictments to follow

Johnny Z- Great idea, ain’t goin’  happen So long as the cash keeps rolling in,  the police will be told to do nothing .

Ralph Chernoff

April 12, 2011, 2:45 p.m.

Think about the basic idea of these Ponzi/Madoff schemes. It’s not that difficult to understand and it was, no doubt, invented long before it occurred to either of these two rascals. In fact, it must be as old as the investment “industry” itself, i.e., the market in speculative “paper”, the stuff you buy low and - you hope -  sell high. 

But aren’t all speculative markets - including the “legitimate” ones (the stock, futures, etc., markets)  - merely variations on
the basic Ponzi/Madoff theme?

Here’s how it works. The big shots push up the price of stock A by buying a million or so shares. The little shots - the suckers - see A’s price go up, rush to buy this hot stock, thereby pushing its price still higher, and, thereby, adding to the (as yet) unrealized gain of the big shots who already own lots of stock A. Then the big shots realize that gain by dumping the stock. Therby enriching themselves at the expense of the little shots.

So how does this differ, in any essential way, from what Madoff/Ponzi did?  And what countless other swindlers have done and will, no doubt, do again?

Disagree? Let’s hear from you.

Ponzi schemes and derivatives are two different markets. A derivative sold with out the capital to back it is not a Ponzi scheme it is just a folish investment for the buyer.
I am also a bit sceptical about the buyers knowledge or suspension of belief how you can obtain such even returns over decades. My guess is that for most folks when they hear about consistant double digit returns in a single digit return market they do not want to hear anything except how can they also participate. Most folks never measure their portfolio against any benchmark and have not idea if their returns are realistic, good, bad or ???
Anyway that is one cynic’s belief.

Ralph and David:

Ypou are both on point but for different reasons.

Se my prior comment. Everyone knew or should have known about Madoff as early as 1999. He was exposed by a noted financial/mathmatical expert and all of the periodicals carrier the article.

Either everyone working in the financial investment busiess is an idiot or smart like a fox. I prefer to go with the “Fox Theory”

Anyone with Ecoco 101 knows that double diget profits every year is impossible. The expert that brought Madoff out of the closet in 1999 put this same message on paper and proved it.

My contention is that everyone in the industry knew what was happening or had a real good idea and with that suspicion they did one of two things.

A. Played the Ponzi scheme for all it was worth.

B. Stayed completely away.

Based upon what I have seen it appears that “Plan A” was followed by everyone in the financial industry to the highest level of their tolorance.

Now I ask again:


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