Reuters Money
Madoff madness is our own
Bernie Madoff’s failings are not the mark of some isolated monster, although his crimes are heinous. He is so much like every one of us that failing to recognize this fact will imperil us at every financial turn.
This is one of many revelations in Diana Henriques’s stunning new book The Wizard of Lies: Bernie Madoff and the Death of Trust.
The man who bilked $65 billion from friends, family, institutional investors and charities knew what he was doing. As far as we know, he wasn’t incapacitated from bipolar disorder, substance abuse, schizophrenia or some gargantuan chip on his shoulder to prey upon the wealthy. He stole and lied consistently to all and told Henriques he was fully aware of his mammoth deceit every step of the way.
Madoff was not a man conspiring in a bunker. He went to countless high-society parties, gave to charities and was admired by most who encountered him. Yet when he finally admitted his fraud, it was a surprise that ruined individuals and charitable foundations. His own son, trying to escape the shadow of his father’s foul deeds, committed suicide.
The scale of his crime can’t be overstated. As the serial falsifier of whole portfolios, Madoff claimed to manage twice as much money as Goldman Sachs, Henriques states.
“He was faking everything,” Henriques writes, “from customer account statements to regulatory filings, on a scale that dwarfed every other Ponzi scheme in history.”
Next to the mavens of the 2008 meltdown, Madoff may be the Stalin of Ponzi villains (there are always other scamsters out there). Yet any attempts to personify him as a three-headed hydra will miss the main point of Henriques’s masterful narrative. Here’s the clincher, which Henriques saves for page 345:
Top investment scams gone wild
It’s not hard to find the hottest investment scams. Just read the business headlines. What’s making money?
The who’s who of scamsters are not household names like Bernie Madoff. They are guys working the Internet, selling the next “green technology” or smoothly working Ponzi schemes in church groups. They might even be your neighbor.
I just got an email from someone I didn’t know in England who claims he was beaten and stranded. And all he needed was about $10,000 to get back home! Coincidentally, I also met a fellow with the same story on the streets of Baltimore, although he was asking for considerably less.
These frauds are often hard to identify because our skeptical reasoning is often clouded by trust and greed (on our part), which the perpetrators count on when they work their wiles.
I had a chance to catch up with some state securities cops recently. They are spotting some compelling pitches that are trapping investors all over the country.
Forex Trading. This is short for foreign exchange and currency, which is roughly 50 times the size of the stock market. Schemes involving market-beating software and techniques abound. The biggest banks and institutions trade every day. You think you can beat them?
Exchange-Traded Funds. While ETFs are perfectly legitimate listed pools of money, the idea that you can use them to make a killing on gold, foreign stocks or a single industry is ludicrous. Nobody has a product that can best the market consistently.
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To claim that we are all like Madoff, a greedy sociopath, is a stretch, but the fact is that we are all potentially Madoff enablers.
“You can’t cheat an honest man.”