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.

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.

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!!!!

As well amen to DS