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The revenge of Madoff’s victims

August 6, 2009

By Lynnley Browning
(Lynnley Browning is a guest columnist. The views expressed are her own. She is a frequent contributor to the business pages of The New York Times and is a former Moscow-based correspondent for Reuters, where she covered energy and commodities.)

Some have argued that the victims of Bernie Madoff’s enormous fraud should simply take their lumps for having trusted their money to the greatest con artist in history.

The victims, not surprisingly, disagree. More important, many of them are organizing in a way that could change the way investors are treated in the future. As the Obama administration pushes to add greater protections and even a new agency for investors, the Madoff victims stand to make an impact that goes beyond simply being objects of pity.

Two groups of Madoff investors, the Madoff Survivors Group and www.madoff-help.com, are trying to persuade Congress to overhaul the rules that limit the ability of investors to try to recoup their losses.

The Madoff groups want the Internal Revenue Service to extend the time that investors can reclaim taxes paid on fictitious Madoff earnings beyond the current limit of five years. They are also backing legislation in Congress that would create tax breaks for phantom profits and extend carry-back losses to 10 years.

And the Madoff victims are pressing for changes at the Securities Investor Protection Corporation, the government chartered insurance agency that is funded by the securities industry and whose mission is to protect and reimburse investors.

SIPC has infuriated many victims by saying it will only reimburse, up to the $500,000 limit, those who invested directly with Madoff, instead of those who went through feeder funds like the Fairfield Greenwich Group.

It has also angered some victims by using a new definition of “net equity” that largely limits recoveries to how much money the victims initially put into Madoff’s scheme, minus what they took out — not how much money Madoff said they had on their balance statements.

The government, says Sherry Morse, a victim, “is disenfranchising a whole class of investors.” Ronnie Sue Ambrosino, coordinator of the BernardMadoffVictims.org Coalition, argues that the SIPC is not doing what the SEC authorizes it to do: to borrow money, by issuing bonds or other notes, to repay swindled investors. Mary Schapiro, the SEC chairman has said that SIPC lacked the money needed to repay all the Madoff victims.

Lawrence Velvel, the dean of the Massachusetts School of Law and himself a victim, contends that the government should issue bonds that would reimburse victims for their losses. The bonds would be bought by the securities industry, which would pay the interest and principal to the victims.

“Industry will end up financing the payment to the victims, because the whole meltdown is because of the industry,” he says.

The battle pitting early investors in Madoff, who withdrew gains over the years, against later investors, who typically lost more and paid taxes on phantom profits, is a wedge that could blunt the coordination of all the efforts.

But it’s not an intractable division, said Frank Partnoy, a professor of law and finance at the University of San Diego, who says that the victims’ demands dovetail with those voiced in recent years by activist shareholders.

Arthur Levitt, a former SEC commissioner who is now co-chairman of the Investors’ Working Group, a new, independent task force aimed at protecting investors, says the Madoff victims’ efforts mark “the empowerment of the investor community as a political force.”

In recent weeks, the Madoff Survivors Group has formulated what its main spokeswoman, Ilene Kent, calls the “adopt-a-congressman” strategy, aimed at helping compelling victims to court key members of Congress.

The Madoff groups are considering a fund-raising effort among survivors who were not wiped clean to bankroll the estimated $1.5 million needed to hire a Washington lobbyist.

The Madoff victims’ efforts represent a potential turning point in the crusades of activist investors because of the resources they can muster — many of the victims are still wealthy even after being defrauded — and because the scandal is a rare instance of late where the wealthy, largely because they are individuals and not abstract banks or insurers, are seen sympathetically.

On this drive for new protections for investors, Morse says, “we’re the canary in the coal mine.”

Comments

Aw, poor babies!
Does that mean they will help me get my investment dollars back from the Citicorp stocks I lost money on? What audacity, to think that those Madoff investors are any more entitled to bailout money than me and others who have lost? Does it have to be a swindler who takes the money, to qualify? Anyone who gave Madoff money with those promises of high returns should look inward at their gullability instead of outward at the government to help them out.

Welcome to the Recession!

Posted by Bob | Report as abusive
 

I have no sympathy for the losers who handed over untold fortunes to a single fund/manager. The real criminals are the federal agencies providing false security blankets with a seal of approval.

Posted by dvictr | Report as abusive
 

You might want to direct some of that righteous anger at the SEC instead of the investors–most savvy investors always use due diligence. In this case, it was not just the fault of greedy people. The ultimate source for checking out Madoff’s legitimacy was the SEC–and they said No Problem when anyone asked, although they had been given information over and over that should have alerted them to the fraud. All investors should hold the SEC accountable for this preventable fraud.

Posted by persephone1 | Report as abusive
 

I thought this was a good article.It’s amazing that some people read the words but don’t learn a thing.Madoff victims did not LOOSE money like many did in Citicorp. They were ROBBED. They do not own stock that has the potential to come back. Madoff victims have 0.They are not being bailed out by the taxpayer. Madoff victims want the insurance company;SIPC to pay the claim.So many are blinded by jealousy and ignorance.If your car was stolen you would want the insurance company to pay.If you told the police (SEC) someone was stealing for twenty years and they said they (Madoff) weren’t you would beleive them.If you worked and saved your whole life and put your pention in “safe hands” you would want to know why no one checked.When you watch a family loose a house to a flood, a hurricane or fire do you think they diserve it?Why do they live there?Their rich?Or do you see the human tragedy?Or is it that misery loves company?

 

This is a ridiculous piece. The Madoff investors have very little interest in reformation of the rules; they are solely interested in getting the US taxpayer to give them money. At various times over the past 8 months, they have demanded that the Treasury write them checks, or that TARP money be handed over to them, or that SIPC pay them for lost fake profits. None of these demands has met with anything other than silence or well deserved scorn.

The latest bit of fantasy comes from Mr. Velvel, who is now demanding bonds to pay victims all of their lost fake profits. This scheme is entirely of his own concoction; he does not even appear to have discussed it with any other victims. It is a shame that Reuters picks this up and reports it as news.

There is no way any of these self-serving schemes will succeed. The US government will not spend tens of billions of dollars to cover private investment losses, including tens of billions of dollars in lost fake profits. It would be politically disastrous for any Congressman to get behind such a giveaway. It is inconceivable that such legislation would be introduced, let alone give serious consideration, let alone passed both houses of Congress. It is equally inconceivable that Pres. Obama would sign off on such massive giveaway (which would dwarf the 9/11 fund by 15-20X).

Nor do these people have any chance of succeeding in a lawsuit against the SEC. They will get recovery from Madoff, from the feeder funds, from tax refunds, and from clawbacks. That is more than what they deserve.

Posted by David Simpson | Report as abusive
 

@Natalie:

The SEC failed here, no question. But that doesn’t make them the guarantor of Madoff investor losses. The SEC has never been held liable for such losses at any time since it was created in the 1930s. If the Madoff investors didn’t know that and preferred to think that the SEC was responsible for conducting their due diligence, that is the investors’ problem.

Also, the investors could have looked at any of their Madoff statements and seen securities trading in fake price ranges. They also could have seen some securities that did not exist in the real world. The fact that no one ever looked at these statements and no one ever called up Madoff and asked about fictitious price ranges and securities says something about the level of stupidity, laziness, and greed of the Madoff investors. Yet after ignoring your own statements, you want to blame the SEC and have the taxpayer turn over money to you? I think not.

Posted by David Simpson | Report as abusive
 

I totally agree with David Simpon’s take on this.

In my opinion, the only real victims here are those who invested through the feeder funds. These were mostly people who were not very wealthy who mostly haven’t even heard of Bernie Madoff before. People who weren’t greedy and simply worked hard and wanted to keep their money safe in a pension fund. Hopefully there will be some type of relief for them in cases where they aren’t able to recover their investment from the feeder funds.

Posted by Russell | Report as abusive
 

I wish people would understand the bills our group is asking our reps,congress,senators to sponser HR 1389 Hr 1159. This would enable us to get the tax money we paid to the IRS on fraudent income. It is NOT stimulus money,not your money. IT IS OUR MONEY PAID IN TAXES,if we had not paid these taxes the IRS would have been after us to pay. Madoff was investigated by Sipc not once but 7 times and no one saw any fraud. Let me say my husband and I worked all our lives for an independent retirement,not this mess and fraud.
People in our group,MADOFF SURVIVORS, ARE seniors and are being forced to live in poverty,thamks to Madoff.

 

I take your point Emma Dee and you have my sympathies, but what about David Simpson’s point, why did you never question the fictitious price ranges and securities?

If you didn’t, why do you expect the American taxpayer to reimburse you for to accept the profit’s without the risk?

Also some Madoff victims are demanding reimbursement of not only their investment but also lost “profit” and that’s just plain daft. If I drop $20 on the street and somebody returns it to me I say thank you very much, I don’t demand $2.40 interest as well.

Posted by Tsavor | Report as abusive
 

In addition to the indifference of many of our elected officials, obstacles faced by Madoff crime victims include the lack of understanding of government complicity in allowing this crime to flourish, and the mistaken belief by many Americans that we are asking for taxpayers to pay for our losses.

Often those writing a response to a news column or a “letters to the editor” section make statements based on a misinterpretation or a deliberate misstatement of facts. Some of the comments to this news article is a clear example of a misreading of news reports, or a self serving willingness to ignore the statements that I made during the sentencing of Bernard Madoff on June 29th. The statement in the letters to the editor “The Madoff investors cannot expect the taxpayers to pay for their bad choices” ignores a point that I made repeatedly to the news media. Madoff investors in my group (Madoff Survivors) do NOT expect and are not asking for a single taxpayer dollar to cover any losses due to Madoff’s fraud. The money I invested with Madoff and the 20 years of supposed gains will never be returned. However, I and other investors paid taxes on 1099’s that Madoff fraudulently produced each year. Those taxes were paid on NOTHING but thin air. Madoff was a thief. He stole all of the money that was entrusted to BMIS. The government taxed those phantom gains as if they actually existed. If Madoff stole our investment dollars, I cannot see any logic in the government also being a thief and keeping those tax dollars. Only a morally bankrupt society would keep tax dollars that were obtained as a result of a criminal activity.

Money managers who took investor money and gave it to Madoff are likely to be sued out of existence because they failed in their fiduciary responsibility to their investors. It was because of their recommendations that so many lost so much. These money managers were obligated to investigate those places where they placed their client’s money. I too had an organization that I relied on to investigate those to whom I gave money for investment. It was called the SEC. Our government is NOT an innocent here. The SEC investigated Madoff seven times over a 15 year period. They found NOTHING. The SEC is now investigating itself to see where they failed investors and that report is due out the end of August. It will be interesting to see if this organization blames itself for anything. If the SEC was a private money manager who failed its clients so miserably then it too would be sued out of existence. What price will the SEC pay for its complicity in allowing BMIS to steal so much money over decades?

Finally, let’s talk about another misstatement in the letter to the editor. “The common thread for all the investors was all about getting phenomenal gains that could not be matched by anyone in the investment world.” There were some Madoff insiders who did get phenomenal gains (e.g. Jeffery Picower who averaged 140% per year with a gain of 950% in 1999) and they are being sued by the Trustee liquidating Madoff’s businesses. Like most BMIS investors who believed they were getting reasonable returns with limited upside opportunities due to an unwillingness to take big downside losses, my average return over 18 years was 10.5%; slightly above the long term stock market return of about 8.5%. Do you consider this “phenomenal?” If so, consider this, the lifetime return of the Fidelity Magellan mutual fund is 16.42%. Since this is so much higher than the average market return, and much higher than those experienced by most BMIS investors, then clearly those investing with Fidelity Magellan would also deserve it if that fund turned out to be a fraud because they got such “phenomenal gains.” What a crazy statement!

I believed in the government institution tasked with investigating organizations like Madoff. Unlike most ponzi schemes that operate in the shadows, Madoff was not hiding below the radar. With seven SEC investigations and one IRS investigation (that allowed Madoff to accept IRA money) it is clear to me that government bears a great deal of responsibility for allowing this fraud to operate for decades and to devour the savings of thousands of investors. Even with SEC complicity in allowing Madoff to steal so much for so long, BMIS investors are not asking for a taxpayer bailout that would return what we lost – but we do feel that the state and federal governments are morally obligated to return the taxes paid on nothing. That is NOT A BAILOUT and it is NOT PASSING THE BILL TO TAXPAYERS. While many investors saw a dramatic drop in their holdings over the past year, they had an opportunity to sell their holdings at any time and they have an opportunity to see gains as the market recovers. Madoff investors have neither opportunity. They did not experience losses due to market declines, their money was stolen from them, and if the market recovers and doubles just remember that doubling zero still yields zero.

By the way, do you think that this could not happen to you because you make “good choices” while Madoff investors made “bad choices” as was noted in the letter to the editor? Do you really think that the average investor who would have NO ACCESS to the books of a firm like BMIS has a better chance of discovering fraud than the SEC who had TOTAL ACCESS to BMIS books? Do you really think that if the SEC said “there is no evidence of fraud” in their multiple reports that you would be “smart enough” to figure it out all on your own? I believed in the SEC, and I will pay for that for the remainder of my life. Our regulators failed me, and they could fail you. Only I would not blame you for making “bad choices” because I have been there and seen how a wall street insider can manipulate the system and defraud investors right under the nose of the agency that is supposed to catch him.

Just fantasize for a moment that the name Madoff used for his firm was not BMIS, but rather MLIS. BMIS stands for Bernard Madoff Investment securities. Suppose that Madoff used MLIS and those letters stand for Merrill Lynch Investment Securities. Do you think the name really matters?

Posted by mike dee | Report as abusive
 

A response to some of Mike Dee’s points:

- Madoff investors have and are demanding taxpayers pay them for their lost investment *and* for their lost fake profits. Read the Reuters blog post above, which talks about the latest scheme from Mr. Velvel, which is to have the government, meaning the taxpayer, issue bonds that would pay make payments eventually equal to the amounts shown on the fake Madoff statements dated 11/30/08. He wants the taxpayer not only to pay investors their lost money but also to expend $50 billion to pay for completely fake “gains” that Bernard Madoff made up in his head. This is obscene. Numerous other investors have demanded cash payments or TARP money. Check out some of the videos accompanying the Vanity Fair piece on Madoff victims. Don’t deny what your fellow Ponzi investors have said and are saying. You should acknowledge it and denounce it as the disgusting attempted money grab that it is.

- In regard to tax refunds, you are getting that. In fact the IRS actually changed the rules for you to allow for more immediate recapture of prior tax payments. Why Madoff investors should get this special treatment and not the many thousands of Ponzi victims over the decades is beyond me. But that is not enough for you. You want rules that force the Treasury to give you every last dollar of paid tax. Sorry, but that is not how it works for any of us in the real world. There are all kinds of limits on theft deductions. If I erroneously overpay taxes, I have a limited time in which to file an amended return. If I don’t, it is too bad on me, even though the government got a windfall. You should be grateful for the break the IRS has given you, which will allow you to recapture the lion’s share of past taxes paid.

- Finally, stop with the nonsense about the SEC. Yes they screwed up, but they didn’t take a serious look at MAdoff until 2006-7. Prior to that, the interactions they had with him did not constitute a full review or investigation (something which would have had to be approved by the Commissioners themselves). You and most of the Madoff investors didn’t pay a whit of attention to what the SEC thought about Madoff or whether and to what extent they had looked at him. For crying out loud, you didn’t even read your own account statements. Why should anyone believe that you were diligently following and relying upon what the SEC was doing with respect to BM? In any event, you had no right to expect that the SEC was doing your work for you, or that you could rely on them to vouch for your investment decisions. If you did think that, you were mistaken and you should bear the consequences of that error, not me.

Posted by David Simpson | Report as abusive
 

I’m okay with the IRS extensions and whatnot, but expecting taxpayers to cover their poor investment decisions (by increasing the cap for how much money you can get back) is just about the epitome of arrogance.

When I am some day benefitting from some poor yuppie with apparent judgement completely unbefitting of their fortunes, then I’ll consider offering a hand in reimbursement.

Posted by J R | Report as abusive
 

Perhaps on the tax extension O.K but no way should the feds give tax breaks for people who were “robbed”. The American taxpayer is not your investment insurance company. “Tax breaks” do nothing but raise the debt and we do not need anymore of that. The federal government spends more than it makes right off the bat. That alone means they have to go borrow money to function and when they give tax breaks it pulls money that would be there out of the budget and the feds borrow the difference without batting an eye and hurting Americans in many many ways. Madoff was overlooked by the SEC. They had many complaints they chose to ignore and investors stayed with him anyways. Investment is a risk that the investor carries and they had better darned well know what their money is doing at all times. If you do not know what’s happening with your money you should put it to work somewhere else. Nothing is free.

Posted by jason | Report as abusive
 

–many of the victims are still wealthy even after being defrauded —–

When you put your money into something expecting to get 20% returns…..a bell should ring !!! You feel something could be shady, but, after all you don’t care as long as the money keeps flowing.

It’s the Jews that kept coming thinking they had a GOLDEN GOOSE.

And now they are crying over spilled milk. Live and learn.

They are crying that they just don’t want their initial investment back, they want ALL THE FAKE ACCOUNT MONEY ON THE BOOKS !!! WHICH WAS PHONE MONEY !!

GREEDY !!

Posted by Bullwinkle | Report as abusive
 

It’s reasonable for investors to try to get as much as they can. They will probably not get much more than what they put in, as most of them probably realize. I think the only time returns might be guaranteed would be for certain deposits and insurance contracts.

I’ve been taking money out of my savings. To me it’s meant to be spent rather than stolen by somebody. I can take a hint! I’m never going to retire anyways. I notice however than when a person takes a lot of money out of his savings, it’s actually a bit painful to spend it. Like my hands were shaking paying $17 for a pair of running shoes, like it’s evil. It’ll take awhile to get over the mental training. I honestly don’t know what to do with the cash. Maybe buy a bag of oranges out of season. I don’t know.

But most of this money I got from other people either by trading stocks or bonds. I’ve just come to accept that I wasn’t a whole lot smarter than others – just kind of lucky. So yeah I’m better off spending it. However, my advice to people who invest is not to trust smart-looking people in nice suits. Go for the losers who wear t-shirts and rarely bathe.

Posted by Don | Report as abusive
 

These people are as presumptuous as the widow of Daniel Pearl who contended she should get money from the 9/11 fund.

Posted by Rick Franks | Report as abusive
 

They got greedy; they got burned. now they want their fictitous profits too? still greedy;now whiners. LET THEM BURN…

Posted by william wade | Report as abusive
 

I can’t fault scam victims for trusting Madoff unless they’d been warned that his returns were too good to be true. Madoff was a member in good standing of a Washington-Wall Street confab of elites that’s developed over decades. He had their stamp of approval and used it to the maximum possible disadvantage of his victims. I don’t see anything wrong (short of covering everyone’s losses outright) of looking at how we can improve the investor safety net. But let’s get real. The Washington-Wall Street connection that supported Bernie Madoff and overlooked his conduct is the ethical equivalent of a sewer line. It is undemocratic. It is dangerous and it needs to be dismantled. When a major Wall Street firm shorts the same mortgage-backed crap it is dumping on unsuspecting pension funds, such conduct strikes me as reprehensible. The losses those pension funds suffered are just as real as those of Madoff’s victims. I hear no outrage from Congress or the SEC, or the White House for that matter. If you do get something going, don’t stop with Madoff.

Posted by Amandus Colver | Report as abusive
 

I don’t understand why it’s so difficult to recover 100% of the monies injected into the Madoff scheme. Unless transactions occurred with suitcases filled with bills, there must be traceable money trails. Just follow them to the end, and that’s where the money will be. Am I missing something?

Posted by Brad | Report as abusive
 

Why should anyone get their money back? They shouldn’t, fraud is one of the risks you take when you invest all your money with someone. That might be cruel to say but that’s life. There are already government programs in place to help people out if they have lost everything. They can get on the welfare programs or collect social security just like the rest of us would have to if it were us that made poor choices. How many times do you have to hear “if it sounds too good to be true it probably is” before you become suspicious?

As well amen to DS

 

As wrong as his scheme was an how guilty he is Bernie Madoff, in the scheme of things, he is a small time operator… a piker… he bilked a mere $50-65 billion…
in insuring the credit default swaps, fully knowing and aware that should the time come that it had to pay off; and knowing that there was never the capital to do so… the thieves at A.I.G stole enabled the “theft” of how many trillions dollars??? The “Bernie the schmuck” got caught up in a down market and took the fall for Wall Street and A.I.G…

 

Well, I am sorry, but their losses are to be expected in the game of high stakes investment. The whole industry is based upon “fleecing someone,” and moving the credit of one individual to another. Most of those who are now hollering are Jews. Nothing was said by them as they throught they were going to the bank with Bernie; and he was [allegedly] turning 40% and greater returns. There was no thought for who was losing the rewards Bernie was to have provided for them. What is saddest is how deep this scam runs. Bernie was a regular in the Jewish sector – being that he is a Jew; he was the big guy, and all the Jews looked up to him, even though he was a parasite. These people were so greedy that they even took out second mortgages on their homes, and turned that money over to “Bernie,” thinking that the Jewish code of ethics, among Jews, would protect them; but were they ever wrong; Bernie took them to the woodshed; proving that they are not God’s Chosen People, for he was commanded – according to the law of Moses – not to take usury from his brother, and he beat the brakes off of them.

And to top it all off, here is this other Jew, the Big Dog of the ADL, Abraham H. Foxman [National Director], stating in an article [MADOFF, MONEY, AND JEWS] that first appeared in the Palm Beach Post 2-06-09, and which was subsequently placed on the ADL jewish blog, only one month before Bernie was sentenced to 150 years, that Bernie was basically a great man. He said: “MADOFF, A PILLAR OF THE FINANCIAL WORLD AND A PROMINENT PHILANTHOPIST INCLUDING TO MANY JEWISH INSTITUTIONS AND CHARITIES”. What the hell was this guy smoking? Bernie Madoff..”A PILLAR OF THE FINANCIAL WORLD AND A PROMINENT PHILANTHROPIST”? Bernie Madoff was always a con-artist, like many Jews who were taught as children to rob and steal the nations of earth blind. To hear them tell it, they are the victims, not the people who they’ve plundered.

In 2007 the income of the average American, which was under $34,000.00 a year, rose by a modest 5%, while the cost of living rose by 4.1%. In actuality the average American was better off than the year before by 0.9%. And if you allow for inflation, the median income of the average American household has changed slightly over the past 17 years, increasing by a modest 7%. Now, let’s comparatively examine Joe Average American to Lloyd Blankfein [you guessed right - a Jew] CEO of GOLDMAN SACHS. In 2007 Lloyd Blankfein received $68.5 million dollars in compensation [salary, stock awards, and bonuses], an amazing increase of 25% over the previous year, and a whopping 2000% more than the average family in America brought in. And if that doesn’t blow your mind; during this same period GOLDMAN SACHS net revenues topped $46 billion dollars, far exceeding the entire Gross Domestic Product [GDP] of more than 100 nations worldwide, including Angola, Bolivia, Croatia, Ecuador, Guatemala, Tunisia, and Syria. In 2007 GOLDMAN SACHS total assets passed the $1 Trillion dollar mark.

No, I am sorry, but I do not feel any empathy for those who thought to rob another, but got caught up in the scam. Maybe, they would be better off in the future, if they were like every other American, and went out and got a ral job, and quit trying to rob everyone with an ink pen!

CONTACT YOUR CONGRESSMAN AND TELL THEM TO PASS RON PAUL’S H.R. 1207 FEDERAL RESERVE TRANSPARENCY ACT; THE FED HAS NEVER BEEN AUDITED..GOLDMAN SACH’S HAS STOCK IN THE FED, AND ALL HELL WOULD BREAK LOOSE IF AN AUDIT EVER OCCURS! And they KNOW it!!!!

Posted by Nomolos Saeno | Report as abusive
 

People have got to realize that this is a sterling example of cooking the books to make it seem like there is money being made with there investments or he would be out of business. Basically he is a good con artist, a swindler, a robber, an extortionist, a thief. What he did was make people believe there was..when there wasn’t.. I would like to ask this man if he learned this in college? I would like to ask Bernie Ebbers the same question maybe Scott Sulivan of worldcom..Did you lowlifes learn how to lie in school do you not have a conscience? Do you even know how much trouble you are in and I don’t mean here in this life your judgement hasn’t happened yet but when it does I will be there laughing at you silly ass as it gets it reward from the Almighty…

Posted by p | Report as abusive
 

Bernie Madoff is the “new Lee Harvey Oswald”. He is the “patsy” who has been made the “sacrificial lamb” by the “monsters” who “own him & control him” so as he “divert” attention from the “monsters themselves”. Bernie Madoff pulled this scam off by himself, just as much as Lee Harvey Oswald shot JFK. Just wait until the “other shoe drops”, and it will. And if Bernie “opens his mouth” he’ll pass away “from a heart attack”..! AND, all of it “is hidden right before us, in “bright day light”, but, now its different, “many, many people know” and the “monsters” have a real problem.
Imagine the audacity, so many SEC Investigations, and “they found nothing” (were they all legally blind??..Newbies maybe???…kids learning??..Can anyone of them offer “any excuse” why Harry Markopolis was so ignored by the SEC “itself” for so long??..Harry picked Bernie apart like a phoney $3 dollar bill..Is Harry so smart?? or, is the SEC “selectively blind”??
Just imagine the audacity of these monsters trying to convince us that the World Trade No # 7, “collapsed on its own, a FULL 30 minutes BEFORE it was actually brought down”, with BBC & CNN & Co., announcing that WT No # 7, had collapsed, while the building stood “up and they were “encouring the building…”hurry up, collapse”..!!! Imagine a solid 50+ storey building collapsing “without any reason”, while “newbie control demolition students attending school to learn the trade”, telling anyone who will listen that such 50+ storey building takes months, and months, and months, to “bore, and pierce the girders, and set up explosives, and “ensure” that the building is brought down “in an orderly manner right on its foundation.
And now, we are presented with this “patsy” yelling “I did it, I did it, I stole $65 billion all on my own, I am guilty, I am going to jail, no one helped me, I did it on my own..!!! (right..!!..and if anyone believes this, you will also believe that Lee Harvey Oswald shot JFK from 100 metres away, and his gun “gave out the “customary” puff of smoke right “before JFK’s face as it was going off “infront of JFK’s face, from 100 metres away..!!!!)..

Posted by ARISTOTELIS ELLINAS | Report as abusive
 

Help me out here.

A ponzi scheme is when investor “a” gives a broker, say, a dollar. The broker tells the investor that he’s making 20% that year, and sends him a statement at the end of the year stating that that person has $1.20. During the year, however, the broker actually took investor the dollar investor “a” had and spent it, so in reality there is no money. But, luckily, Mr. broker is smart enough to get investors “b,c,d,e” and so on to give him their dollars as well. The amount of the fund builds up, but it’s not real, it’s a scam, right? The broker takes some more of the money out, but keeps sending out statements with earnings on them and their original “principle”. Now, from what I understand about ponzi schemes, as long as you have more money coming in than going out, you’re fine. But eventually – the house of cards comes tumbling down.

If I’m correct here.
1. This is a ponzi scheme, there was no money as stated by the “statements” the investors got. The money is gone, stolen, or given to other investors along the way. So, if there is nothing, how can anyone recover anything. (Well, besides what the government insures a “failure” for.) But it seems to me this was not a failure, but just outright fraud.
2. The investors are entitled to seek out where the money went and attempt to recover it. Would this include people who perhaps benefited from an illegal scheme? I think the courts and lawyers will have to fight that out.
3. I do believe the investors are entitled to IRS tax refunds for all the years they participated.

Would I feel differently about this if it was me? Probably. But I still don’t see how recovery can be made on a scheme where the thing didn’t exist, except in the mind of a madman.

No matter what the arguments are, and I know I’ll get blasted a lot for these views, I still don’t see how something can be recovered from nothing. The money is gone.

Posted by Gary | Report as abusive
 

To Brad:
Your question was “Why can’t the money just be gotten back?”

One company I used to work for had a CFO who falsified the accounting to show the company was making more in revenue than the company actually was. It was so bad, the company had to declare bankruptcy and all of the stockholders were left with nothing. None of those investors were bailed out and there was not only government oversight, but auditors in who missed it, as well as a CEO and Board Chairman who signed they personally knew the finances were accurate and true. (They’re being sued, by the way) The company had lots of money on paper, but it didn’t really exist, it was a scam – and it was similar in nature to Madoff.

So go along to a PONZI scheme.

OK think about it for a minute. Picture a pyramid, upside down. You are the first investor at the bottom, Number 1. Investor 2,3 at the next level put money in. Next level, 4,5,6 invest. Now there is money there from 1 through 6, right.

Investors 2,3 decide to bail, but there is plenty of money because 1,4,5,6 still have theirs in there – and the fund is growing because people trust the manager.

Now add this. Say the manager sends you a monthly statement showing your balance and your growth. Is that real growth? No, it is totally false. It’s a scheme, a fraud, something completely untrue.

Let’s put some numbers to this, and pretend everyone invested the same -say 1,000.00

When 1 through 6 invest, the “fund” says it has six thousand, and the manager lies and sends out statements to each person saying the fund made 10 percent. The $6,000 is really there, but the $600 in interest is not. Follow?

Now, in the example above 2 investors pull out and they get $1,100 each. According to the manager, the fund still has $4400.00- but does it? No, the fund ACTUALLY has (Ficticious $300 in interest pulled out, plus the principle of $2k from the real balance of $6,000.00 or 6k minus 2.6k = 3.4k. But everyone still “thinks” there is $4400 – the fund is now short $600.

Now, everyone somehow realizes this is a scam. They all rush to get their money, but there is only $3400 to pay them off. See? The money is gone – now change it to billions and the investors are fighting saying that their statement shows $1.1 billion between four investors, but there is only 3.4 billion left in the “fund.”

So, this is the question. How much principle was there actually? This is why I believe Picard is using the calculation he is, that is upsetting a lot of people, but what he’s calculating is based on the reality of the principle investment – rated against what people pulled out.

So, where is the money? Some is in the account, some is in the hands of the investors – having been spent or having been pulled out before the PONZI scheme collapsed. (And I’ll bet these are sweating the most right now.) The other part of the money is vapor, it is falsehood, it is a figment of a person’s imagination. It existed on paper, but no where else.

My personal 401k over the last few years has lost massive value, tens of thousands of dollars. I didn’t lose everything, but I think you create a real slippery slope when you bail out someone – it becomes only fair to bail out everyone. Hey, I want mine, I shouldn’t have lost, the SEC was watching!

As far as the SEC goes. Common sense investing, and just common sense says “don’t put all of your eggs in one basket.” On one level, I feel sorry for many of these folks, but on another level I hear stories about how they felt “elite” and “special” to have been accepted into this PONZI scheme. Since when can you trust a government agency that the people who work for it go on and get seven figure jobs in the very industry they were policing? This guy knew how to work the system, and there will NEVER be protection for that. Since when can you justify the taxpayers to recoup fictitious gains that didn’t exist, that if you’d have read your statement and compared it you might have had a clue. Since when did we become responsible for a group of people who, if doing a little diligence, could have seen that NO ONE wins every single year, year on year.

What should be recovered is what people took over and above what they were entitled to, as well as any fees paid to feeder funds and any other monies or assets of the Madoffs. I think anyone is lucky who gets anything back, but it’ll be the little guy who gets screwed, the big fish will get theirs back.

Posted by Gary | Report as abusive
 

It looks like many of us will never see any of our investments again, there is little consolation for us, isn’t there?
For any one that would like to get some kind of revenge on “Ole Bernie” go to PaybacksAreHell.net there may be a small measure using their “revenge”

Posted by DDC | Report as abusive
 

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