Fascinating conversation today over lunch today.  It was held under Chatham House Rules, so I cannot reveal the identity of any of the parties or their firms.

However, the conversation steered towards the Madoff affair, and one fellow proffered the thinking behind why Madoff remains out on bail, and could be working towards a plea deal.

A guilty verdict is a slam dunk in a trial. However, that does nothing for the $43 billion in lost assets for the folks who were taken (i.e, investors/confidence marks).  and, it seems that Madoff’s remaining assets, versus what was stolen/lost/embezzled are a mere pittance.

Hence, the possible Madoff deal. One theory floating around is that Madoff will implicate the major banks (HSBC, RBS, Santander, BNP Paribas, Nomura), fund of funds, referrers in his massive fraud. Once he rolls over and sings, alleging they knew (or should have known) it clears the path for a massive litigation frenzy against any and all of the parties involved.

I feel sad fort he people who lost money, but if this theory is remotely accurate, it would be terrible. It would allow a (alleged) horrific con man/thief avoid justice. And, it rewards the people for their own bad judgment in giving Mr. Mathematically-Impossible/No-Fees their money, while seeking to place the blame elsewhere.

Zero responsibility for all involved! Its the American way!

>

Sources:
Credit Suisse Urged Clients to Dump Madoff Funds
Cynthia Cotts, Katherine Burton and Elena Logutenkova
Bloomberg, Jan. 7 2009

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7Ei7.DM8DHc

Signs Seen of Possible Plea Deal for Madoff
DealBook
NYT, January 13, 2009, 7:32 am

http://dealbook.blogs.nytimes.com/2009/01/13/signs-seen-of-possible-plea-deal-for-madoff/

Bank Safdie Dodges Madoff Loss, Predicts More Hedge Fund Rules
Warren Giles
Bloomberg, Jan. 8 ( 2009

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajgACQSZf2pw

Category: Legal, Markets, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

51 Responses to “Why Might a Madoff Plea Deal Take Place?”

  1. Stuart says:

    I would suggest a plausible settlement in any plea bargain would simply promise to make it quick and painless for him if he rats out all those who were an accomplice, to which I am sure there were more than a few that aided and abetted for a profit. It does seem it is almost too deep and pervasive to prosecute and jail all of the corruption. We nary have anyone left on Wall Street or Connecticut.

  2. OkieLawyer says:

    And, it rewards the people for their own bad judgment in giving Mr. Mathematically-Impossible/No-Fees their money, while seeking to place the blame elsewhere.

    I’m not absolutely sure what you mean, but never blame the victim of a crime — that even includes financial crimes / confidence schemes. I realize that it’s hard to think of the marks as blameless (you naturally want to say “they should have known”), but you have to place the full blame on those who intentionally harmed others. Never blame the predator’s prey.

    ~~~

    BR: These were (for the most part) big boys and girls who make some bad decisions. I am not making light of these terrible losses, but these people should have been smarter about this, especially given all the red flags.

    I do not want to blame the victims, but I do wish to recognize that their own greed and ignorance led them to this terrible fate.

  3. Boo-urns says:

    I actually disagree with you on this one. If the funds of funds, et al. were involved, we ought to burn them. So long as Madoff’s own jail time remains something more than a slap on the wrist (plausible, since he’s facing a very long sentence otherwise), let’s get some of these other fokkers in jail and in hock too.

    ~~~
    BR: We do not disagree at all . . .

  4. Mannwich says:

    I’m guessing they will try to quietly make this go away. If any number of those established firms are implicated and proven to be involved, this sucker is going down once and for all. The Feds know that and won’t let those details get out. Most of the perpetrators are going to walk here.

    There is basically close to zero confidence in the markets right now, especially by the retail investor. If this is proven to be a more systematic, wider scheme, they’ll never come back.

  5. da_rubberbandman says:

    “Madoff remains out on bail, and could be working towards a plea deal”

    Any Plea deal will come from the US Attorney office (prosecutor) and they are the ones requesting he be remaned

  6. dead hobo says:

    It sounds like Madoff has a good lawyer AND the government is stupid past the point of having some brains surgically removed.

    Banks who accepted money to invest on behalf of others had a fiduciary responsibility to perform due diligence. Since an apparently large number of people already suspected Madoff of being a fraud, the banks could not claim clever concealment on the part of Madoff. Also, given that the auditor was not of suitable stature to have Madoff as a client, according to AICPA guidelines, this was another red flag (an auditor must be capable of performing the audit in fact, not in fantasy). No losses were due to normal market risk, thus the ‘Nobody saw this coming’ defense is non applicable.

    The banks are liable for gross negligence at a minimum, as are any advisers who claimed to be doing anything more complex than mailing off a deposit.

    Any government attorney who accepts this tactic is criminally stupid and should be disbaarred.

  7. Drewbie says:

    Pedant mode on:

    FREQUENTLY ASKED QUESTIONS:

    Q. Should one refer to the Chatham House Rule or the Chatham House Rules?
    A. There is only one Rule.

  8. “Zero responsibility for all involved! Its the American way!”

    Reply: “Zero responsibility” is an euphemism for “we’ll put it on the taxpayers, again.”

    ” I’m not absolutely sure what you mean, but never blame the victim of a crime — that even includes financial crimes / confidence schemes. I realize that it’s hard to think of the marks as blameless (you naturally want to say “they should have known”), but you have to place the full blame on those who intentionally harmed others. Never blame the predator’s prey.”

    Reply: Never say never. Some of the times, so-called “victims” are hardly. If you buy a “Rolex” for ten dollars while visiting New York, thinking you scammed a great deal, well, you shoulda knowed better: If real, it was stolen and you run the risk of having the watch retrieved and returned to its rightful owner; if fake, well, that’s what tourists are for.

    Do you really think all these funds of funds, aggregators, and even direct investors weren’t either directly or indirectly involved, knowing full well that returns are never risk-free, steady as a rock, and above-market?

  9. JohnnyVee says:

    Your sticking up for banks now. Wow. What a turn of events. I suspect Madoff will cop a plea to keep his kids out of the slammer.

  10. bondjel says:

    Why are you blithely assuming that none of those banks, funds of funds, etc. don’t deserve to share some responsbility? Who do you believe is most responsible given what we know now?

  11. DL says:

    “Should have known” can be a very slippery slope.

  12. OkieLawyer says:

    @ The Curmudgeon:

    Do you really think all these funds of funds, aggregators, and even direct investors weren’t either directly or indirectly involved, knowing full well that returns are never risk-free, steady as a rock, and above-market?

    The fund of funds and aggregators were probably complicit (and therefore accomplices) in the crime against the investors (at least based on what Barry’s post is suggesting). I think that the rule of “piercing the corporate veil” ought to be invoked here. It appears that many of the victims were targeted based on what is called “affinity fraud.”

    Even if the direct investors “should have known better,” that does not vitiate the perpetrator of the crime. The criminal intentionally harmed the victims. That is where the blame lies.

  13. dead hobo says:

    I said:

    The banks are liable for gross negligence at a minimum, as are any advisers who claimed to be doing anything more complex than mailing off a deposit.

    amplification
    ——————
    There’s your recovery, regardless of whether Madoff lives or dies or pleads guilty. Anyone who paid for investment advice from a certified professional investment adviser, or anyone who claimed superior knowledge in that field, has good chance of recovery from said investment adviser. Anyone who held themselves out as an expert and accepted cash for Madoff, directly or indirectly, is in a lot of trouble, such as the fund of fund idiots. This would probably qualify as gross negligence for most, and possible fraud for some who might know a little more than what is now public knowledge.

    It’s time to lawyer up if you got taken and trusted someone who claimed to be a professional to make investment decisions on your behalf.

  14. DL says:

    I don’t have a problem with the idea of extracting SOME money from the managers who directed money to Madoff. But the question is, how much? The whole $43B…? That would be hugely excessive, and a travesty.

    I sure hope that not one dime of taxpayer money winds up in the pockets of a Madoff victim.

  15. Transor Z says:

    First, the Madoff matter is too big for Lev Dassin, the interim U.S. Attorney for SDNY, to be calling the shots w/o significant input from Washington. This is being managed/”followed very closely” by AG Mukasey’s office and is going to become the new administration’s responsibility a week from today.

    Any plea deal resolved in the next 7 days should be a bit suspect, IMHO.

  16. leftback says:

    I am pretty sure that Bernie would not still be domiciled at 133 E 64th unless someone figured they were pretty close to getting him to sing with regard to the location of the stash and/or the involvement of some other parties in the FoF business. One family in particular should probably visit their place in Mustique one last time, before they find that their new place is in Danbury. We could wish for Ossining but you know they will all go to Danbury.

    They could always drag him up to Rikers for a few nights of correctional initiation… that might jog his memory.

  17. auden5 says:

    I never thought about Madoff actually getting off by snitching. How naive of me. I was only concerned about a bailout:

    http://willworkforjustice.blogspot.com/2008/12/madoff-and-sipc.html

  18. VoiceFromTheWilderness says:

    It burns me up to, I got irritated just reading your post.

    And yet… the reality is that most of those who are truly responsible, most of those who have been breaking the spirit of the law, and knowingly engaging in fraudulent activities will evade punishment. Just as they did with Enron. The reality is that only socially weak, and physically weak, individuals are ever really punished, and often for the transgressions of others. The consequence is that the only meaningful way to work with situations like this is not to let them happen in the first place. Of course it is precisely when the majority of people lose site of their own interests, and the truth (this is the first sin, and makes everyone guilty of what has transpired), when the majority of people are willing to listen to lies and call them truth, then the scum rises to the top, and catasptrophe follows along behind. This story is as old as the hills, as is the alliance between rich, upper class interests and ‘poor white trash’ that works to keep the middle class in it’s place (Mabye it’s clear which side of that coin Fixed News’s viewers are on).

    The sad truth is we are fucked. And putting bernie madoff in jail isn’t going to change that. And we aren’t going to get that 48 Billion back. Count on it. And frankly, 48 Billion is nothing compared to the 3-4 trillion and ruined lives around the globe.

    so yeah, they shouldn’t let him off, but no it doesn’t make any difference if they do or if they don’t.

  19. Patrick Neid says:

    He’s going to talk and he’s going to jail….

  20. CaptainNed says:

    With our luck we’ll find that AIG is holding all of the E&O and Liability policies that will fund any legal settlements.

  21. Lars39 says:

    Perhaps as partial restitution, Bernie could help remake the Social Security System….oh wait!

  22. VennData says:

    Watching the publicly-traded financial firms involved with Madoff… alledgedly… dropping more than the market for non-Madoff financials. The market thinks that the only way to recompense people, charities, pensions plans is via a huge Asbetos-like fund. There’s a lot of clout behind this avenue.

    People who have been hurt by Madoff should not focus on retribution. This Kudlow-instigated “send him to Guantanamo” appeals to their baser emotions, GOP-like. But the best thing for the victims (and potential victims of further beyond-SIPC frauds) is to get the legal machine running to get money back to the victims.

  23. AGG says:

    I’m extremely suspicious of Madoff’s motives in the airing of his scam. My hypothesis is that he lined up all his “ducks” before going public. Sure, he would have preffered to avoid blame but, once that became inevitable, he certainly didn’t freeze like a deer in the head lights. The fact that his head capo has Mukasey’s son for a lawyer says quite a lot. This guy has gone way past that invisible line where too many important people will keep him from harm. It’s brazen conduct but that’s acceptable and even demanded among the moneyed elite these days. Just think of the laughs these vulgar pigs get at their cocktail parties. These are NOT sick people. They are just rationaly insensitive. Compassion is a dirty word for them. The “solution” posed in the Manchurian Candidate is the way this will be handled if it becomes too embarrasing. And Madoff knows this so he blows his own whistle during a time of much bigger news stories and people getting laid off and watching less news during the Christmas season. Who knows? Maybe they’ll forget him along with Bush after January 20th.

  24. AGG says:

    Oh, and by the way, Didn’t Mukasey (the AG) have a “feinting spell” a few days before the Madoff thing went public? Yeah, it was probably just a coincidence.

  25. AGG says:

    VoiceFromTheWilderness,
    All true but there is a pendulum to these things. I think it is swinging away from brazen, murdering, in-your-face fascist Cheney behavior to a more nuanced type of power politics.

  26. BG says:

    As I have stated here before, there is big money involved and I think Madoff should be in fear of his life. Somebody will get this guy especially now if they think he is preparing to rat everyone out. People get killed for a lot, lot less on a daily basis.

  27. going broke says:

    BR: “I do not want to blame the victims, but I do wish to recognize that their own greed and ignorance led them to this terrible fate.”

    I think you’re 49% wrong. Many invested on the advice of friends. I wouldn’t call wanting good returns greed. Now if the one investing knew how Madoff was running this scam then it would be greed. On the ignorance side… not everyone has the time to do their own DD on their investments, that’s why they seek investing professionals. Also, many people just don’t understand how markets/investing works. People that are labeled/licensed investing professionals can’t invest properly. So someone that made millions making widgets because that’s their specialty should know how to invest? Sometimes when driving down the investing road, trees are blocking the caution signs.

    Back to the story, IMO he should be sent to prison to rot, let his buddies that are involved bunk with him. The Feds might already know how deep this goes and who’s involved. Maybe they’re just buying time to cover up some of the mess.

  28. KidDynamite says:

    the first rule of Chatham House Rules is “Never talk about Chatham House Rules”

  29. MaxLdaMan says:

    You hit it. The American Way. Apparently there was concern in the Jewish community lest Madoff be considered “typically Jewish”, but I’ve always looked on him as being typically American – crooked, and a psychopathic liar. Sorry folks, but that’s the way the world sees it.

  30. Marc399 says:

    Yes, I agree with OkieLawyer. Never blame the victim of a crime for the crime. You can say they had poor judgment or were too greedy but this is not the same as consciously committing a crime.

    Your post implying that these “folks”, who should have known better, are now getting their comeuppance is insensitive.

    While it’s possible that some of them knew they were buying into a ponzi scheme and hoped to profit before it fell apart, what about those who were actually defrauded? However if say, Credit Suisse knew something was wrong and didn’t say anything, then they are accomplices and should be reamed.

    I get the feeling that you, Barry, are enjoying the fact that a crime was committed but because a bunch of “rich idiots” got taken, it’s ok. That sucks.

  31. Al Bergette says:

    This Madoff scam is the same scenario as the illicit drug trade in the USA.

    There is no way the amount illegal drugs that enter this country get in this country without powerful people in high places letting it happen.

    So too, there is no way Madoff could have done what he did without powerful people in high places letting that happen.

  32. Steve Barry says:

    BG is onto something. Madoff will spend the rest of his life in jail if he is smart. Outside the joint, he is a dead man. He would also be thrown out of his penthouse, as the publicity will drive his neighbors nuts.

    He must be trying to keep his sons, brother or wife out of jail.

  33. kaisten says:

    The feeder funds and participating banks are absolutely dirty in the Madoff fraud.

    Under normal terms a fund of funds would get a very small percentage of the 2 and 20 fee when placing money with a hedge fund. Madoff was paying the fund of funds the entire 2 and 20.

    Ethics and due diligence went out the window for greed. Why take a small percentage of the 2 and 20 when you can take it all. Fund of funds were bringing in 10x the normal fee’s with Madoof. Pigs get slaughtered.. these pigs should not get away with this. (yes some fund of funds only charged clients 1.75% and 10%.. how generous of them)

  34. DL says:

    If the “fund of fund” managers are forced to pay any money at all, that will be the death knell for that business (“funds of funds”) for many years to come.

  35. usphoenix says:

    @mannwich – yes, I see all kinds of motives for making this disappear, quickly. Quiet settlements sealed from public view. Not like anyone’s going to get much info on who pays what and why.

    If this opens up for public display Wall Street takes another one in the shorts. Very, very bad.

    But on the other hand, with roughly $50B in play, the hounds of attorneyville must be straining at the leash and already getting their teeth whitened. Can there be a single lawyer not interested in joining the fray? And I suppose some of the victims may not be the “take prisoners” types.

    And yes, I agree, Madoff did some prep work with his counsel before spilling.

    It will be fascinating to see how the forces play out. I would not be surprised to see federal efforts to quash it also. Oh sure, lots of sturm und drang for the media, but under the table deals. Somehow I don’t see justice playing out as the key issue.

  36. emailcraigs says:

    Lets face it folks….our entire financial system is a joke. Its can’t sustain itself, its can’t fix itself, and it doesn’t provide an ounce of proper self-regulation. Its basically like a large strainer and the holes have been meticulously planned to let through the best parts only to specific players; leaving the dregs for those who have no say in making the illicit spasms which pass for regulatory rules or oversight. What will become of a nation that has lost its ability to use common sense? Only the Romans know.

  37. formershrink says:

    Your theory has a problem: it confuses civil liability with criminal liability. The US Atty prosecuting Madoff (the criminal case) has no involvement with any possible civil cases, nor motivation to make a deal wherein Madoff helps investors pursue civil suits against financial institutions. Not to be too dismissive, but your unnamed source seems to know little about law.

  38. AGORACOM says:

    A Madoff plea bargain + lack of any Wall Street punishment to date for the credit crisis could have massive repercussions throughout the country.

    First, there is a real risk that people will simply say Fuck Wall Street and refuse to play anymore.

    Second, it may create an environment that encourages a significantly greater number of people to ignore the rules of commerce and the economy. Ordinary people raging against the machine. Chaos.

    Third, if you’re Black or Hispanic American with friends/relatives serving long sentences for significantly lesser crimes, how long does it take for you to rage against the man?

    #1 isn’t very far off.

    #2 has a way to go but not as far as people think. As people lose jobs and homes while auto/bank execs get bailed out, they’ll start acting accordingly.

    #3 How long did it take for the LA riots to break out? How long did it take for violence in Athens to spread throughout Greece and Europe?

    There potentially is a #4 –> The masses have become so stupid they’re just happy to have their reality TV. I wouldn’t count on that lasting for too long, especially if cable service gets cut.

    The Wall Street White Boys club better wake up fast. I’m a white boy with a good job and a house in good standing .. but starting to get pissed. I can’t imagine what most of America is feeling like and will feel like if Madoff pleas out.

    Regards,
    George

  39. bogwad_seigneur says:

    @Agoracom
    Gotta…just gotta engage here.
    Your assertions;

    1. there is a real risk that people will simply say Fuck Wall Street and refuse to play anymore

    Can you imagine – realistically – that investors large OR small will elect such a course of action? I seriously doubt it! Perhaps there will be temporary disillusionment – to a point that exists now, – we know there’s money sitting on the sidelines, maybe more of the same will take place, or what’s sidelined now might remain so for longer than would otherwise be the case. Apart from that? Naaah, I respectfully disagree. Human nature dictates otherwise. Sad or not, that’s just the way it is….

    2. [.....] it may create an environment that encourages a significantly greater number of people to ignore the rules of commerce and the economy. Ordinary people raging against the machine. Chaos

    Not being snide or sarcastic in any way, but how exactly do you see that unfolding in practice? I tried mentally modeling that and just couldn’t get to the endpoint you did.

    3. [......]if you’re Black or Hispanic American with friends/relatives serving long sentences for significantly lesser crimes, how long does it take for you to rage against the man?

    Sheesh, I’d wanna be real careful about going down that road, but let’s indulge ourselves ever so briefly……

    The group you appear to be referring to generally rage against the man when the POElice overreact and get stupid with the weaponry and authority they take onto the streets every day. LA is perhaps the textbook example of that in action. yes it was quick, but because of weeks of planning by some distinctly unsavory elements. Even that was something of an excuse for “planned chaos” (85%) real civic anger (5%) and already-fatally-criminalized groups taking abvantage of a temporary breakdown in law and order to perpetrate further criminal behavior (10%). No number is real or verified, but I’m sure the point is made even if the stats are a tad off (and not much more than a tad I’d guess).

    Issues like this are too far removed from the ‘hood to justify organizing a march etc etc. I could see NYU students getting all riled up about it, and perhaps enthusing their Berkeley colleagues to get out, enjoy some sunshine and wave placards for an afternoon or two (oh and maybe occupy a chancellor’s office here or there) but not much beyond that.

    Concerning the riots in Greece; Sorry to disillusion you, but they haven’t spread in any mutable form much beyond downtown Athens, apart from a few sympathy skirmishes in Copenhagen & Berlin – both quickly brought under control and extinguished…..and oddly enough Helsinki (although the latter was a true token gathering of about 50 who happened to start their shenanigans right after a local TV magazine piece was finished filming in a rather upscale suburb – what a coincidence!)

    ALL of the above said however, while I disagree with the specific paths of reasoning you walked, nevertheless I see your point to some degree. It is maddening, and likely to be even more so if he “walks” or gets a minuscule sentence in return for rolling over, but the “outrage of the streets” might be more limited to Daily News columnists than mobs rampaging down lower Broadway……that I can’t see.

    Regards from the Bog…..

  40. Jdamon33 says:

    I do foresee a large number of people on main street avoiding wall street for a period of time. However, what will end up happening is that the global markets will take off at some point in the future (could take until 2010 or 2011) and at that point it will suck most “investors” back in (probably at the high again).

    That being said, I think the Govt. has no choice but to fix the retirement issue in the US. 401(k)’s are completely inadequate to fund anyone’s retirement with market returns that are flat to negative for decades at a time. I think BHO will implement a nationalized retirement plan to be used to supplement 401(k)’s and social security.

    o/t, but I still talk to my buy and hold friends and they appear more convinced than ever that buy and hold is the only way to go…… What am I missing???

  41. Concerned American says:

    People won’t come back to this market quickly. Most people have never trusted the markets for their investing, but the results couldn’t be ignored. I don’t think most of those people that have gotten out will be back in any time soon.

    Why would they? Does anyone think Madoff is the last person to be caught? Could anyone honestly advise their retired mother to put all or most of her money in this roulette wheel? At least in roulette there can be a big payoff if you get lucky.

  42. Marcus Aurelius says:

    Mannwich Says:

    There is basically close to zero confidence in the markets right now, especially by the retail investor. If this is proven to be a more systematic, wider scheme, they’ll never come back.
    ________

    There is basically close to zero confidence in our courts and law enforcement agencies right now, especially by those who believe in the fair and impartial administration and execution of our laws.

  43. Greg0658 says:

    this concept didn’t make it to Squawkbox this morning … and the fact the penthouse may be a safehouse protection

  44. Transor Z says:

    @ Marcus Aurelius:

    “In the courtroom of honor, the judge pounded his gavel
    To show that all’s equal and that the courts are on the level
    And that the strings in the books ain’t pulled and persuaded
    And that even the nobles get properly handled
    Once that the cops have chased after and caught ‘em
    And that the ladder of law has no top and no bottom. . .”

    -The Lonesome Death of Hattie Carroll, Bob Dylan (1963)

    Cynicism about law enforcement and administration of justice is something new???

  45. Mannwich says:

    One tidbit of anecdotal evidence that the retail investor hasn’t stopped pulling his/her investments out for a while (and maybe for good) – an older gentleman (about 60-62, I think) who runs the little gym I go told me after watching his only source of retirement (plus social security) go from $110K or so to $61K has finally decided to pull everything out. The thing is – he and I had several conversations about this and saw this coming back in ’07 and he still didn’t pull anything out until now. Not sure why. Maybe he didn’t really trust his instincts like many of us didn’t (I didn’t totally trust mine but I do now). There are more of these folks out there. Trust me. More carnage is coming in the markets and it’s laughable to think that Wall Street is counting on the retail investor (as per the WSJ yesterday) to help them stabilize and grow their business in the coming years. Good luck with that.

  46. the0ther says:

    “We nary have anyone left on Wall Street or Connecticut.”

    AWESOME!!!

    Both of those places were fucking disgusting anyway.

  47. howard0339 says:

    I used to raise money for Tudor Jones and John Henry. They were huge and astonishingly successful with returns that outpaced the market. All investors were sophisticated and ALL of us relied in part on government rules and regs being enforced and followed as a prime protection against fraud. Having said this, all these funds are nearly imp0ssible to evaluate on a trade by trade basis due to the monster volume they do. A block trade of ten million shares cannot be executed at a single price, the shares are broken up into much smaller amounts of shares being traded. Determining a price is next to impossible. The trader will randomly assign price to the accounts. I also find it next to impossible to believe that any actual bank deliberately put money into the hands of a trader who didn’t check out. This guy was head of NASAQ, he was a power on other exchanges, he gave lectures on markets to sophisticated people. What’s not to trust? Only the CFTC or SEC has the clout to examine accounts trade by trade and we assume that after ten years or so the government has gone over the books with a fine tooth comb. In Madoff’s case a significant red flag was posted in “Managed Accounts Reports,” back in 2000. MAR is a virtually inknown publication read only by equity raisers like me. Nobody else would possibly know. I agree that the investors bear some responsibility but only in the sense a person wandering in the ghetto looking for a cheap whore gets in the way of a bullet being fired. My experience of ten years tells me that 1: the rich don’t know their asses from a hole in the head when it comes to investing, and 2: they have a herd mentality; meaning that if a friend invests then it follows that it must be good. Combine this with the totally ignorant inherited money (look at the New York Times under the Trust Fund baby), organizations like charities and university endowment funds being involved (I used to pitch the fact that the Harvard Endowment Fund was invested) and the thing looks like gold. Combine this with the always trustworthy bond rating firms and you have something that seems to check out.

    I honestly feel that the government bears the most responsibility in this swindle because they didn’t do the job we depend on them to do.

  48. philipat says:

    Point of information, Mr Chairman. As confirmed on the Chatham House website, there is only one rule, so a meeting is conducted under the Chatham House rule.

  49. bcasey says:

    Coming late to this thread, but I want to suggest that the judge may have something gained or to gain here. I heard his arguments about house arrest, and monitoring Madoff’s mail packages, and I think what the hey! Who ever heard of such a thing? Who is going to pay to inspect every piece of mail? Also who thinks that the only way something can go in or out of a residence is by mail? Madoff is obviously devious, and he or his wife already shipped out a bunch of jewels, who’s to say the maid, or the butler or the maintenance man or even his innocent looking neice or somesuch would not deliver something for the right price? So I look at the judge with quite a jaundiced eye, he can’t be serious when he asserts these things. So I think he has to have received something either recently or in the past from Madoff, that is the only way his bias can be put in perspective.

  50. Moss says:

    Funds-of-Funds sounds a lot like the securitization scheme. No real ownership, no skin in the game, thus no real responsibility, thus no real accountability. Are we sure the lawyers did not think this whole thing up. This free market stuff really did take off. WOW who would thunk!

  51. Lee85710 says:

    Madoff won’t make a deal for anything meaningful. He’ll skip off to Israel like other Jewish con artists and fugitives have. Israel gives scum like him a place to hide, and they refuse to extradite.