Sunday, December 21, 2008

What Was Madoff Thinking?

While the curious, the inquisitive, the lascivious and the various investigators and detectives of enforcement focus on what Bernard Madoff was doing as he bilked investors out of billions, I have been exercising my novelist’s prerogative by concentrating my speculations on why Bernard Madoff was doing it.

Just in case you were vacationing on planet Mars in the last few weeks, Madoff is the 70-year-old con man who is the mastermind behind the bizarre Ponzi scheme that cost friends, family, clients and charities 50 billion, give or take, in vanished funds. The scheme, named after a former practitioner of the racket pays out alleged dividends not from legitimate earnings but from fresh funds contributed by new “investors.”

By all accounts Madoff was a pleasant looking, low-key, soft-spoken fellow who oozed integrity and modest authority. He was apparently regarded as a financial whiz and a man of great wisdom and compassion by his peers, who inhabited his social realm of country clubs and philanthropies. He was worshiped by an army of sycophants who sought his counsel, market wisdom and especially access to his remarkable investments that returned fabulous steady earnings in good times and bad.

He had earned the trust of numerous fund operators who used his alleged expertise at getting high returns as their calling card to lure huge international players into the Madoff net. A kind of sucker virus took hold and spread across borders.

So what was he thinking as he doled out these lavish returns knowing that he was cheating family, friends, charitable institutions, banks and countries? Did he believe he was helping people by providing returns that actually dwarfed what similar investments were paying? Did he revel in the praise of his peers as he basked in their awe and respect? Did his ego require such constant iteration?

What was his justification? I am tempted to think that he might have actually convinced himself by simple arithmetic that he was doing good deeds. If, for example, one had “invested” a hundred million with Madoff say ten years ago, one would have garnered, at a minimum, a hundred and twenty million return. Who would not think that Madoff was a genius? A charity might be doing somersaults having such wonderful returns to dispense their good deeds.

An elderly couple, who had placed a large sum with Madoff and lived prosperously off the proceeds, might have felt that they had discovered nirvana by this association with the mild mannered super fellow that befriended and supported them. And Madoff might have told himself how wonderful he was to supply these people with such largesse, enjoying the applause and believing, really believing, that he had become a human Santa Claus.

Did he have trouble sleeping nights? Did any ripple of conscience disturb his tranquility as he enjoyed the proceeds of his own entitlement, the numerous lavish homes, the yachts, the jets, the joys of being a generous respected Dad and Grandad, the recipient of kudos and awards for his celebrated contributions to the downtrodden and diseased? Once a lifeguard, he might have easily believed that he was still in the business of guarding lives.

Did the joys of oversized respect and admiration trump any tiny pangs of guilt, as he knowingly screwed his new “investors” by using their money to provide a continual flow of cash to his older investors? Was it not one happy family, his own included?

He was, of course, a man who knew the markets intimately. Perhaps he had reasoned that at some point in time, he would find a way to refund the coffers that he had rifled with his own bloated assets and what must have been optimism gone amuck. Perhaps he had tucked away huge bags of gold coins and artwork, waiting for the moment that he might cash in his horde and repay his funds. Perhaps he had stashed billions in overseas accounts or secret vaults hidden from investigators that he planned one day to retrieve and pour back into his empty money pit?

Touted as a family man, can one believe that he was really outed by his two devoted sons or, as many have speculated, a plot was contrived by the three of them to have good old Dad take the rap for the kids? Every avenue remains open in trying to assess how this man’s devious mind operated. Is it possible that behind the fa├žade lurked other gossipy scandals, mistresses with outsized appetites, mafia dons who found ways to launder money through Madoff and other strange encounters with a shadowy underworld? Who knows?

Think, too, of the so-called “respected” money managers who begged him to take them on, throwing due diligence to the winds in the race for greater and greater returns. And what of the money managers who put all their clients’ funds with Madoff and took their usual commissions while doing not a lick of work to earn them? Never mind the obvious losses, think of the massive amounts of legal fees that will be enjoyed by that profession as everyone sues everyone else. The dominoes will fall for years as the big ego guys who made piles of money try to reclaim their tattered reputations in the law courts, a dubious proposition at best.

Most of all, people are speculating how Madoff was able to concoct such a massive fraud right under the noses of what could only be characterized as the brain dead SEC. If your own ox wasn’t gored, watching this crime unfold can be a form of entertainment. It would not surprise me if Madoff is currently fielding massive publishing and movie deals to satisfy the public curiosity about how he did it. And why? Look at me. Here I am spending time and mental treasure trying to figure out his motives?

Does Madoff feel any remorse? Perhaps this requires more expertise about the criminal mind than I possess? Interpreting the pictures of him being accosted by reporters and cameras as he walks along Madison Avenue, I see a cryptic little smile as if he is laughing at these hordes of busy bodies trying to probe his innermost secrets. From seeing that picture and my own reading of events surrounding Madoff, I’m willing to bet that in his heart of hearts, he feels no remorse or pity for the broken promises and wounded lives his scam has caused. I doubt if he feels anyone’s pain.

On the contrary, he may feel elation at having carried out this cleverly orchestrated scheme that escaped detection for decades and drew in people who considered themselves brilliant winners in the game of life, especially in the amassing of giant fortunes. Was he laughing at their greed and stupidity, celebrating his guile and cunning with his own internal laughter?

As for the ruined lives floating aimlessly in his wake, one cannot help but feel sorry for those who depended on these so-called returns to maintain their lifestyle. If they had any doubts about the origins of their good fortune, the avalanche of fat checks surely tranquilized their doubts. Indeed, if they had the temerity to question the source of their good fortune, Madoff was quick to cut them out of the roster.

To further prove his “integrity” he eagerly refunded principal, the origins of which came from entry-level investors. Wasn’t that a brilliant ploy to advertise his sterling reputation as a man of honor? This man was beyond shame.

As for the super rich who got their various appendages caught in the ringer, I feel no empathy for their bruised parts and crumbled egos. In fact, one has to cheer for their comeuppance and the explosion of their self-righteous worship of the Gods of Greed.

There is, however, a subliminal casualty of this strange affair and that is the earthquake of distrust that Madoff has inspired in these hard times. Without trust, we are all doomed to suffer the arrows of misfortune that people like Madoff take from their quiver to arm their bows. Without trust, the foundation that underpins our lives becomes a vulnerable house of cards.

Unfortunately, the punishment of Madoff will never fit his crime. His cunning lawyers paid for with the fruits of his ill gotten gains will game the system, and Madoff will become a star and advisor to fellow cons in the country club prison circuit devised for white collar criminals during what is sure to be a short penal vacation.

Perhaps it might be worth quoting the parting wisdom of that old rascal Carlo Ponzi, whose dying words characterized how he viewed the experience of his victims and sundry observers.

“Even if they never got anything for it, it was cheap at that price. Without malice aforethought I had given them the best show that was ever staged in their territory since the landing of the Pilgrims! It was easily worth fifteen million bucks to watch me put the thing over."

Was it worth fifty billion? You tell me.


Squirrel said...

As PT Barnum said: There is a sucker born every minute. Madoff was a genius at playing off the arrogance of wealthy suckers.

Lance said...

After the feds orchestrate his perp walk, and he spends a few months at a federal country club, it'll be back to business as usual. Hell,you should be his could spin his story with his lawyers, get some of the predictable court ordered legal expenses and call it good.