Madoff

[RC Vikings]

I bet he had his best night of sleep in fifteen years last night.

[SeattleUte]

I bet he had his best night of sleep in fifteen years last night.

He has no conscience about this. He's always slept just fine.

[landpoke]

He has no conscience about this. He's always slept just fine.

Without a doubt. Not once through this did he ever lose that self-satisfied smirk. The guy's a sociopath.

[SeattleUte]

Without a doubt. Not once through this did he ever lose that self-satisfied smirk. The guy's a sociopath.

This is what happens when cynicism becomes your ruling principle in life. Clearly he had a deep loathing and disrespect for all those wealthy people, mostly fellow Jews, who trusted him with their capital and treated him so well.

[Jeff Lebowski]

I have a question. I seem to recall that the dollar amount for the Madoff scam is $51B. Is that money all gone? How does one person make that much money evaporate? Surely he didn't spend it all on cars and high-priced hookers.

[creekster]

I have a question. I seem to recall that the dollar amount for the Madoff scam is $51B. Is that money all gone? How does one person make that much money evaporate? Surely he didn't spend it all on cars and high-priced hookers.

He had to give a lot of it out to investors who tookwithdrawals, as I understand it.

[beelzebabette]

My hair stylist (she's too expensive for a barber title) asked me yesterday about tax returns for these people that lost money, and I didn't have an answer. I understand those that took money out would have to pay capital gains but, for those without withdrawals, were there never dividends or anything they paid taxes on they can recoup?

I understand it's a pretty dumb question coming from me, but I haven't followed how Madoff claimed to have structured the investments.

[TripletDaddy]

I have a question. I seem to recall that the dollar amount for the Madoff scam is $51B. Is that money all gone? How does one person make that much money evaporate? Surely he didn't spend it all on cars and high-priced hookers.

I think I mentioned a bit about the forensics on this one.

That number being floated was a grand total, not a current balance sheet view. I am sure you know how a Ponzi works, but you are constantly paying out money as well as taking it. At no point did Madoff have $50B liquid in his possession. It was an aggregate running total.

Madoff has some pretty incredible assets, including penthouses, yachts, and part ownership in a couple of castles in Europe.

[PaloAltoCougar]

I have a question. I seem to recall that the dollar amount for the Madoff scam is $51B. Is that money all gone? How does one person make that much money evaporate? Surely he didn't spend it all on cars and high-priced hookers.

I think it's a matter of dollars invested versus subsequent paper profits. By overstating the returns, there were billions of nonexistent dollars on the balance sheet that, once the scam was exposed, simply disappeared. The latest thing I've read refers to "real" losses more in the neighborhood of $15-20 Billion. Not exactly chump change, but still substantially less. As for the missing real dollars, it looks like it went toward some fairly lavish living over many years, plus distributions to those near the top of the pyramid.

What astounds me is that he was able to do this for so long, as a careful audit should have revealed the fraud. But despite many "sophisticated' investors investing billions, no one apparently insisted on a thorough Big Four type audit, relying instead on some solo CPA with an office in a strip mall.

[TripletDaddy]

My hair stylist (she's too expensive for a barber title) asked me yesterday about tax returns for these people that lost money, and I didn't have an answer. I understand those that took money out would have to pay capital gains but, for those without withdrawals, were there never dividends or anything they paid taxes on they can recoup?

I understand it's a pretty dumb question coming from me, but I haven't followed how Madoff claimed to have structured the investments.

The form of distribution was varied. Some payments were in the forms of stock dividends, others were straight ownership in other investment trusts, REITs, etc. So not everything was a capital gain. Some of it was straight off a K1.

I understand those that took money out would have to pay capital gains but, for those without withdrawals, were there never dividends or anything they paid taxes on they can recoup?

Not sure I follow you. what do you mean?

[beelzebabette]

Not sure I follow you. what do you mean?

You answered my question in your first paragraph.

[SeattleUte]

Madoff has some pretty incredible assets, including penthouses, yachts, and part ownership in a couple of castles in Europe.

His net worth is only about a billion dollars.

I guess run of the mill institutional mutual funds weren't sexy enough for his clients. They needed to be able to tell themselves they were getting higher returns on their capital than us working stiffs. For a hell of a long time he gave them what they wanted. Unfortunately, now some of them will have to get jobs.

Now here I am slipping into cyncism. It's a dangerous habit. I can almost see why he had such low regard for his clients.

[TripletDaddy]

His net worth is only about a billion dollars.

I guess run of the mill institutional mutual funds weren't sexy enough for his clients. They needed to be able to tell themselves they were getting higher returns on their capital than us working stiffs. For a hell of a long time he gave them what they wanted. Unfortunately, now some of them will have to get jobs.

Now here I am slipping into cyncism. It's a dangerous habit. I can almost see why he had such low regard for his clients.

Come on, now. As a partner in a law firm, are you satisfied with your unit value or are you always looking for ways to increase? in this economy, has the unit value decreased? And if someone came along and said, "hey, we can increase revenues by 40% per year," would you be interested in that? Esp if it could be done every year for more than 15 years?

Heck, if someone could give me 40% returns on my 401K every year for 15 years, I would start believing, too. Everybody would.

These returns were real for over a decade. People had reason to believe.

The dropped ball here is with the SEC, not the investors. These investors are not claiming sophistication. I brought up this point before, but how many of us have asked for a full audit for all our stocks, mutuals, bonds, etc? Nobody does on that on the investor side. It is simply assumed that a guy as high-profile as Madoff was is on the level.

[SeattleUte]

Come on, now. As a partner in a law firm, are you satisfied with your unit value or are you always looking for ways to increase? in this economy, has the unit value decreased? And if someone came along and said, "hey, we can increase revenues by 40% per year," would you be interested in that? Esp if it could be done every year for more than 15 years?

Heck, if someone could give me 40% returns on my 401K every year for 15 years, I would start believing, too. Everybody would.

These returns were real for over a decade. People had reason to believe.

The dropped ball here is with the SEC, not the investors. These investors are not claiming sophistication. I brought up this point before, but how many of us have asked for a full audit for all our stocks, mutuals, bonds, etc? Nobody does on that on the investor side. It is simply assumed that a guy as high-profile as Madoff was is on the level.

If somebody says they can get you 40% a yeear you'd better be prepared to possibly lose it all or you're a fool. I don't feel too sorry for any of Madoff's victims I've heard about. This article perfectly expresses my view:

“These were people with a fair amount of money, and most of them sought no professional advice,” said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. Mr. Hedges said: “It’s like trying to do your own dentistry. It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances.”

And that’s the point. People did abdicate responsibility — and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it.

. . .

Even Mr. Wiesel thought the government should help the victims — or at least the charitable institutions among them. “The government should come and say, ‘We bailed out so many others, we can bail you out, and when you will do better, you can give us back the money,’ ” he said at the Portfolio event.

But why? What happened to the victims of Bernard Madoff is terrible. But every day in this country, people lose money due to financial fraud or negligence. Innocent investors who bought stock in Enron lost millions when that company turned out to be a fraud; nobody made them whole. Half a dozen Ponzi schemes have been discovered since Mr. Madoff was arrested in December. People lose it all because they start a company that turns out to be misguided, or because they do something that is risky, hoping to hit the jackpot. Taxpayers don’t bail them out, and they shouldn’t start now. Did the S.E.C. foul up? You bet. But that doesn’t mean the investors themselves are off the hook. Investors blaming the S.E.C. for their decision to give every last penny to Bernie Madoff is like a child blaming his mother for letting him start a fight while she wasn’t looking.

http://www.nytimes.com/2009/03/14/bu.../14nocera.html

They're infantile, like the people who complain about economic consequences of supporting Proposition 8. Only much worse. They were simply greedy rich, and as the article says, if there's any arena where the government ought to make personal accountability a cardinal rule, it's personal finance.

People lose money on investments all the time. It's a critical element of our success as a nation. I don't think any of these victims should get one thin dime from taxpayers. Let them sue their trustees, advisors, directors, etc., if they had any.

Moreover, this is like a parable of everything. Something else Ellie Weisel said: “I remember that it was a myth that he created around him,” Mr. Wiesel said, “that everything was so special, so unique, that it had to be secret. It was like a mystical mythology that nobody could understand.” All in all, it's the oldest of stories.

[SteelBlue]

I've noticed that since yesterday the $51 billion figure has become $65 billion. Makes me wonder if we even know the full extent of it yet.