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article imageOp-Ed: The niggling grain of truth in Madoff’s interview

article:304177:36::0
By Michael Cosgrove     Mar 1, 2011 in Business
Bernard Madoff’s recent interview with New York Magazine, during which he blamed not only himself but also his investors’ “greed” and their role in his Ponzi scheme, has enraged many of his victims. But he does have a point.
The Madoff Ponzi scheme was the biggest financial fraud in history, with prosecutors estimating its worth at around $65 billion. His clients included banks, hedge funds, charities, universities, and wealthy individuals. He was jailed for 150 years and has restitution debt of $170 billion hanging around his neck. The fallout from the scheme’s collapse was enormous, with many individuals and businesses going bankrupt. Several people committed suicide, one of whom was his son Mark, who was himself under investigation in relation to the affair.
It is hardly surprising in that context that many people have harbored a bitter grudge against him ever since the extent of their losses became apparent. One of Madoff's better-known victims is Elie Wiesel, the Nazi concentration camp survivor and Nobel Peace Prize winner. He invested almost all his money as well as that of his foundation, The Elie Weisel Foundation For Humanity. His losses are said to be around $15.2 million, and Weisel has since called Madoff “one of the greatest scoundrels, thieves, liars, criminals.”
The lengthy and fascinating New York Magazine interview saw Madoff both realistic in his appraisal of his past actions and he accepts what he sees as being his part of the blame. But he enraged many of his victims with his claim that they were partly to blame too.
"Everyone was greedy,” he said. “I just went along. It’s not an excuse." He went on to say with respect to individual investors "Look, there was complicity, in my view. Their friends had told them, ‘How can you be making 15 or 18 percent when everyone is making less money? Believe me, if you don’t think they had doubts, they had doubts … I would say, certainly, by the mid-to-late nineties.” He reserved some of his fiercest criticisms for four investors in particular. Carl Shapiro, an apparel manufacturer, Jeffry Picower, a Wall Street investor, Stanley Chais, a money manager, and Norm Levy, a real-estate developer who Madoff claimed had told his children to "trust Madoff" on his deathbed. Madoff claimed they made billions of dollars between them, all of it legitimately.
It's hard not to have some sympathy with him. Many major banks, financial institutions and individuals trusted him with their money in the mid-eighties, when he would sometimes pay them returns of up to 15% on their investments. Those are almost unbelievably high rates of return, but they apparently suspected nothing.
He also says that even when macro-economic factors forced him to lower his returns they were still situated at around 10%, which in itself is extremely high, particularly in what were sluggish economic times.
And he says that investment still kept pouring in even when it was becoming common knowledge in the mid-nineties that institutional investors were beginning to desert him as rumors about his business methods were beginning to circulate.
He is right to point that out.
The fact that investors did not heed the warning signs was proved during the trial. Even as returns of 12% every year were being paid out to them they asked few questions and that was also demonstrated during the trial. Those kinds of returns sustained year after year in that kind of equities market are highly improbable if not impossible.
Why didn't Elie and the other individual investors demand to pull out or at least ask serious questions before it all blew up in their faces? Why were the banks so silent for so long?
They are entitled to feel aggrieved at Madoff for his willingness to persuade them to invest in his Ponzi scheme in the first place, but it seems clear that even once suspicions began to be voiced in the world's financial press - that which they could not have been unaware of - they stuck with him.
They stuck with him because they had been as guilty of ignoring the realities as Madoff had been in dreaming it all up in the first place. They blame Madoff for his scheme? There are many others who would just as easily blame them for their unforgivable naivety at the beginning when they signed up, their tacit agreement as it continued, and their fearful hopes that it would all somehow survive the inevitable reckoning which took Madoff and themselves down.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
article:304177:36::0
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