Bernie Madoff – The Man Who Had No Shame

 

Charles Ponzi 1882-1949

Charles Ponzi, who originated the Ponzi scheme stepped off a boat, as an Italian immigrant with $2.50 in his pocket in 1903. He moved to Canada in 1907 and was arrested, for writing himself a $423.58 check, from a checkbook he had found. He didn’t want his mother to know he was in prison, so wrote her telling her he was a special assistant to the warden.

Without going into the details, Ponzi’s investors lost $20 billion in 1920 dollars, but $225 million in 2011 dollars. This is just a little background, on how Ponzi schemes started about 60 or 70 years, before Bernie Madoff set new records for bilking investors out of their money.

Bernie Madoff took Ponzi scheme to a whole new level.

Bernie Madoff was born in Queens, New York on April 29, 1938. His Bernard L. Madoff Investment Securities company was started in 1960. He was influenced by his father Ralph Madoff, who had been a plumber/stock broker and Bernie decided to enter the investment securities business.

Bernie Madoff in high school

It was only a matter of time, before Madoff saw that he could make huge sums of money, by investing funds of his investors in his own account. He promised investors high interest rates, in return for their investments. Once a Ponzi scheme starts there has to be a steady stream of new investors, so the money of the new investors can be used, to make regular payments to the early investors.

Investors thought Madoff was reliable, since he was one of the first brokers, to join Nasdaq and even became a Nasdaq official. Madoff was secretive, about his “investment” and using the word investment in the loosest sense of the word. His 17th floor office in the Lipstick Building had signs telling people Do Not Enter and Do Not Clean. He knew the papers in that office could end his Ponzi scheme. His own secretary for 8 years didn’t even know he was running an investment firm.

SEC Warned About Madoff

Harry Markopolos a hedge fund manager got his hands on some of Madoff’s paperwork and it only took him four hours, to figure out that Madoff’s investments were a fraud. Another red flag for Markopolos was that Madoff’s investments were only down 3 months in a 87 month span, while Standard and Poor’s results showed 28 months of being down in that same 87 month span.

Harry Markopolos warned SEC about Madoff 8 years before arrest.

Markopolos filed an eight page complaint about Madoff in 2000 with the Securities and Exchange Commission. The SEC ostensibly, because of work overload declined to investigate the complaint, which left Madoff with no roadblocks in his way, so he continued to bilk his investors.

I can imagine the way Markopolos felt after the SEC decided not to pursue an investigation. It was in effect giving Madoff a license, to steal for another 8 years, as corporations and individual investors poured millions more into Madoff’s pockets.

Bernie Madoff’s Penthouse apartment bought by Al Kahn (left inset photo) of Time Warner

While Madoff’s investors were watching their investments grow on paper at least he was living, in a $7.4 million penthouse which was very much real. The apartment gave Madoff time to ponder, on how he was bilking thousands of investors out of their life savings, and didn’t even know it was happening. The worst thing is that Madoff didn’t really care. His only concern was that his financial chicanery would be exposed.

Zsa Zsa Gabor lost $10 million after investing with Madoff.

This is a 162 page list of the Madoff clients in PDF format. It only lists the names and not the amount they lost in the Ponzi scheme.

http://online.wsj.com/public/resources/documents/madoffclientlist020409.pdf

Madoff’s world came crashing down at 8:30 AM on December 11,2008, when he was arrested. He was indicted on March 10,2009, and was sentenced to 150 years in prison on July 29,2009. He will be released on November 14, 2139, if he doesn’t have any bad behavior while in prison. He will be approximately 200 years old, when he is released in 2139.

Aftermath

Madoff is imprisoned in a federal prison in Butner, North Carolina.

Bernie Madoff’s new home at federal prison in Butner, North Carolina featuring 3 hots and a cot

He says he is being well treated in prison in this Wikpedia entry:

In his letter to his daughter-in-law, Madoff said that he was being treated in prison like a “Mafia don“.

They call me either Uncle Bernie or Mr. Madoff. I can’t walk anywhere without someone shouting their greetings and encouragement, to keep my spirit up. It’s really quite sweet, how concerned everyone is about my well-being, including the staff … It’s much safer here than walking the streets of New York.

However this entry tells an entire different story of his life in prison:

Madoff’s projected release date is November 14, 2139.[115][114] The release date, described as “academic” in Madoff’s case because he would have to live to the age of 201, reflects a reduction for good behavior.[116] On October 13, 2009, it was reported that Madoff experienced his first prison yard fight with another senior citizen inmate.[117] When he began his sentence, Madoff’s stress levels were so severe that he broke out in hives and other skin maladies soon after.[118]

On December 18, 2009, Madoff was moved to Duke University Medical Center in Durham, North Carolina, and was treated for several facial injuries. A former inmate later claimed that the injuries were received during an alleged altercation with another inmate.[119] Other news reports described Madoff’s injuries as more serious and including “facial fractures, broken ribs, and a collapsed lung”.[118][120] The Federal Bureau of Prisons said Madoff signed an affidavit on December 24, 2009, which indicated that he had not been assaulted and that he had been admitted to the hospital for hypertension.[121]

Ironically, his son Mark was found dead in his apartment on December 11, 2010, which was second anniversary of Bernie Madoff being arrested. Coroner ruled it was death by hanging. His other son Andrew died of lymphoma on September 3, 2014. 

Ruth Madoff taking out garbage since Bernie is predisposed

His wife Ruth was ordered to give up $85 million in assets, which left her $2.5 million. 

However, I can’t feel sorry for her knowing, that so many Madoff clients literally lost everything. A lot of wealthy people thinking they were becoming more wealthy, as they looked at the phony financial statements sent by Madoff ended up having to pay any money they received in the Ponzi scheme, above their original investment. The saddest stories were those of investors, who had invested their life savings only to lose everything. 

It was astounding that so many charitable organizations invested with Madoff and lost everything. 

One investor took his life after losing $1.5 billion, by investing in Madoff:

A more extreme loss is the loss of life. Thierry de la Villehuchet, the French aristocrat who refused to believe Casey or Markopolos’ theory that Bernie operated a Ponzi scheme, lost $1.5 billion. This included his personal fortune along with substantial funds from European royalty and aristocrats. On December 22, 2008, unable to pay his 28 employees or office rent, Villehuchet committed suicide in his downtown Manhattan office.

Madoff is not doing well healthwise, with him telling CNBC, that he now has kidney cancer and had a heart attack in December of 2013. 

Sadly, Madoff’s Ponzi scheme will not be the last one. I am sure right now somebody is bilking investors out of their money, but their day will come like all the others, when investors demanded their investments back and the money is long gone.

This article below gives many more details, of how Madoff cheated so many investors, in his elaborate Ponzi scheme:

http://dcollins.faculty.edgewood.edu/pdfdocuments/Madoff%20Case.pdf

Conclusion; Mr. Madoff have you no shame? How could you function as a human being all those years, while knowing that you were using the life savings of your investors, to pad your own bank account, to buy yachts, mansions, $7.4 million apartments and too many other luxuries to list them all?

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