The Bernard Maddoff scandal didn't shock me. Ponzi schemes go way back, and they'll be with us forever. Regarding the dynamics of this particular case, J.K. Galbraith nailed it when he wrote, years ago, of the tendency to confuse good manners and good tailoring with integrity and intelligence (thanks, Economist). Maddoff made hay with his reputation, but I've known people - been people - with reputation for certain expertise, and noticed that there are no rigorous sanctioning bodies for such things. The reputation-making system can be played (see this Slog entry where I speculate that I could have invented every restaurant in my first book and garnered the same good reviews). In fact, the foundational credo of Chowhound is that one mustn't trust so-called authorities, who are so often naked emperors. Better to go out and do one's own diligence. A skeptical, intrepid attitude helps a person avoid Ponzi schemes as well as bad pizza.
My take was that Maddoff was, at some point, a guy too proud to admit that his vaunted fund was sinking, and who went Ponzi to keep up appearances. This is how many Ponzi schemes come to be, when managers scramble to hide apparent losses under new money as a temporary measure until luck improves and tides turn. It can't work - it never works - but desperate people and shnooks sometimes try. I figured Maddoff had gotten sucked in, and figured he could keep the wheels turning forever...as he nearly did. It wasn't villainous greed or a heart full of larceny so much as an egotistical need to save face and remain The Great Maddoff: big shot, at any expense. I guess the baleful tone of Maddoff's reported confession led me to this interpretation.
But this shocked me. Apparently, when it was all over, and his friends knew they'd lost their life savings and dozens of charities (some of whose boards Maddoff sat on) had gone bust, he was desperately scribbling out $173 million in checks to family members. If the guy had a mustache, he'd have twirled it.
actually, the unsent checks are a symptom of madoffs madness. even if he had sent them out and even if they were cashed the law would require the recipients to return the money.
ReplyDeletethere's a concept in the law called 'fraudulent conveyance' - the judge can look back two years from the date of bankruptcy and demand the return of any payments that he deems over generous or an attempt to defraud the creditors.
so it wouldn't have worked and he surely knew it. but the fact that he wrote them out - i agree with you, he wanted to remain a big shot to the end.
Stupid, and greedy, my latest on Bernie Madoff: http://sirenschronicles.com/2009/01/09/crooks-liars/
ReplyDeleteJoshi,
ReplyDeleteHard to call a guy "mad" when he bilked the best and the brightest for decades undetected. And of course, they'd have had to give the money back (if they'd not split the country or blown it all on hookers 'n blow). But my issue is with his impulse. He wasn't a desperate shnook unwilling to lose face. His instincts were those of a crook, pure and simple.
Interesting item in the January 12 edition of Newsweek, it is quite possible the bankruptcy court that will be the receiver in the Madoff case will go after any Madoff investors who were smart enough to pull their principal and "earnings" out before the Ponzi scheme was revealed, (either immediately before, of a long time before) and make them return it all, including the principal that originally came out of their own pockets.
ReplyDelete