It’s doubtful that the devotees of Reaganomics and the trickle-down theory ever envisioned that they would be the ones trickling downto the middle class rather than the just leftovers from their lavish spending.
However, that is what may be happening to wealthy clients ofBernie Madoff, founder of Bernard L. Madoff Investment Securities and victimsof the biggest fraud in U.Shistory and quite possibly the world.
The scope and audacity of the scam is staggering with lossesof upwards of $50 billion. However, when the final tally is taken into accountnot only of personal loss, but banks and charities around the world losing alltheir assets, it will most likely be even higher.
Madoff’s client list reads like a society page roll call ofthe rich and famous. Not just rich, but lavishly rich from Manhattan toHollywood, and the wealthy enclaves of Palm Springs and the Hamptons. Onelong-time investor, who has lost virtually everything, knew Madoff from sharinga helicopter ride to work every day with him from Long Island toManhattan.
Yes, a helicopter ride.
The investment firm of Fairfield Greenwich Group, owned byWalter M. Noel, might be the biggest monetary loser in the scandal with anestimated $7.5 billion evaporating overnight. Over the years Noel invested hisclient’s funds in Madoff’s company. Noel reaped the benefits with an estate in Connecticut – featured inVanity Fair, as well a cover story in Town and Country about their homes inPalm Beach, Southampton, Park Avenue and a retreat in Mustique. Now, however,his extraordinary wealth may be in jeopardy. Not only his client’s money butalso a large portion of his own was invested exclusively in Madoff’s firm.Gosh, he might have to sell one of his 5 homes!
Wait. Let me try to muster up a little sympathy.
Some families have three generations of investors spanningover 30 years. So how did one man dupe so many people for so long? Possiblybecause they allowed themselves to be.
Bernie Madoff, a former chairman of the Nasdaq Stock Market,was a venerated name on Wall Street. His firm was on East 64th St.in Manhattan. He was a member ofgolf clubs in the Hamptons, Westchester County and Boca Raton. He had threehomes as well as a yacht in the Bahamas. He donated generously to charity.
The amount of supposed wealth Madoff’s firm generated was sostaggering that people went to extraordinary lengths to be allowed to invest.Greed got in the way of common sense. Investors trusted Bernie Madoff becausethey wanted to.
And then there was the mystique. The cachet of being in theinner circle. Madoff would pickand choose who was allowed to invest in his firm, making it even more desirableto be a “member” of his elite club. It was a badge of financial honor to be aMadoff investor, so if any of them had some suspicions they chose to look theother way.
There were warning signs, however, that all was not wellwithin the walls of Oz. According to the Wall Street Journal, Mr. Madoff’sfunds consistently posted high gains even during periods of market stress whenother funds lost ground. He wasvague about his investment strategy, and he had a very small, obscureaccounting firm auditing his books.
Some investment advisors decided to see what was behind thebig curtain with due diligence and saw too many red flags.
Jake Walthour, head of advisory services for the duediligence firm Aksia LLC said, “In most hedge funds, you have many partners indeals, but he was doing everything in a self-contained way.” After examiningMadoff’s operation he decided something was wrong.
After routine due diligence a Paris investment bank putBernard L. Madoff Investment Securities on its internal blacklist, forbiddingits investment bank from doing business with him and strongly discouragingwealthy clients from his investments.
Suzanne Murphy, a hedge fund consultant examined Madoff’sbusiness two years ago before deciding not to invest in it. “He was still doingit the way you did it in the 1960s, with a paper ticket,” she said. (AP)