1 Boring Old Man

The Madoff Case: A Timeline Wall Street Journal March 6, 2009 Dec. 11, 2008 — Mr. Madoff is arrested and charged with criminal securities fraud. A criminal complaint filed against him in Manhattan states that he confessed to his two sons, both employees at his firm, Bernard L. Madoff Investment Securities LLC, that he had been running a "giant Ponzi scheme." Dec. 15 — A federal judge orders the U.S. operations of Mr. Madoff’s firm to be liquidated. Fresh details of victims emerge. The alleged fraud wrecked the investments of thousands of individuals, public pensions, charitable foundations and university endowments. Jan. 8, 2009 — The U.S. attorney’s office in Manhattan revokes Mr. Madoff’s bail after it becomes known that he mailed valuable jewelry, watches and other heirlooms to relatives and friends shortly after his arrest and in apparent violation of a court-ordered asset freeze in a separate but related case. Jan. 9 — Mr. Madoff’s lawyers agree to give federal prosecutors until mid-February to bring an indictment in the criminal case. Jan. 12 — A federal judge rules that Mr. Madoff can remain free. He is placed on 24-hour home detention, and a private security company is hired to monitor the entrances to his Upper East Side apartment. Jan. 21 — A federal judge denies another bid by prosecutors to jail Mr. Madoff. U.S. District Judge Lawrence M. McKenna in Manhattan declines to overturn a magistrate judge’s ruling on Jan. 19 extending bail for Mr. Madoff. Feb. 4 — A list of thousands of people who either were identified as customers in Mr. Madoff’s records or who identified themselves as customers is released as part of his firm’s bankruptcy-court proceedings. Feb. 10 — The SEC and Mr. Madoff reach partial deal that prevents him from working in the financial industry again, but leaves for later a decision on what fine he must pay. The settlement must be approved by a judge. March 2 — Mr. Madoff and his lawyers say his $7 million Manhattan penthouse, plus $62 million in assets, should be kept from investors because they are in the name of his wife, Ruth Madoff, and are not connected to any alleged fraud. March 3 — Mr. Madoff heads to court, agrees to give up the rights to his investment business, company artwork and entertainment tickets. March 6 — Mr. Madoff decides to waive a grand jury indictment and is expected to face new charges by prosecutors within a week. [Review the list of victims]

I still find this case strangely disquieting. His stone face in the photographs is hard to get behind – a mask. Throughout his career, he always walked on the shady side of Wall Street, but nothing I’ve read really explains this man. In this video, he seems to be describing himself.

• "In today’s regulatory environment, it’s virtually impossible to violate the rules."
• "It’s impossible for a violation to go undetected, certainly not for a long period of time."
• "When you look at the level of the infractions, they’re relatively small."

• "You have to understand – Wall Street is one big turf war."
• "The basic concept of Wall Street… It’s a for profit enterprise."
• "Today, the big money that’s made on Wall Street is basically made by taking risks."
• "Everyone said, I might as well risk my own capital and trade…"

• "So there’s always this friction that goes on between the regulating side of the industry and the practitioners…"
• "Okay, where do you draw the line?"
• "They [regulators] tend to look at the industry as if you’re making a profit, there’s something wrong. Intellectually, they know that shouldn’t be."

We all are awed with his lack of empathy for his investors, the charities. We wondered what was going on when he tried to mail valuables to his friends or give bonuses to his employees. We couldn’t believe that he’s claiming that his wife’s ownership of the Manhattan Apartment and a Bank Account of $62,000,000 had nothing to do with his crimes.

Because he wears tasteful suits and is on the Boards of Charities, we have trouble getting our minds around the fact that Bernard Madoff is simply a garden variety crook who cares as little for his victims as the muggers in Central Park. I once encountered a man who had spent years in prison for armed robberies. He was straight at the time, but he said, "My real profession is armed robbery. I’m just out of work right now." He also said, "You people are lucky that people like me are so damned dumb. When I plan a job, it never ever occurs to me that I’ll get caught. I guess I think I’m so smart that I’ll pull it off." I asked about the victims of his crimes. He said, "Oh, I never think about them. It’s about the cops. That’s the game."

I started with penny stocks, then I got into being a market-maker. The competition is tough, so I developed one of the first computerized networks to get the quotes out there. It was what we used to start NASDAQ. It was the only way to compete with the big guys who had seats on the NYSE. But it’s really hard to make any money trading stocks anymore. The overhead eats up the profits. You have to lowball your pricing to get the business. And the regulators… no matter where you turn they want paper like a bunch of bureaucrats. They just don’t get it that this is a for profit business. Every time I found a gimmick to bring in the business, they were standing in my way. So, I’d cut my profits to get the volume I needed, and someone else would jump in doing the same thing, or the regulators would question what I was doing, wanting more, asking questions. It was a nightmare.

I could see that the guys that were making money did it by investing their own capital and managing other people’s money. But those rich investors wanted to pay low fees and have consistent profits. You can’t take the risks you have to take to satisfy them without occasionally taking a massive hit – then they pull out and go somewhere else. Regulators, greedy investors, competition, overhead costs – what’s a fellow to do? The only way I could find to get ahead was to give the investors what they wanted and avoid the regulators. So my Ponzi Scheme was a way to stay competative without risking my client’s money. Anyway, what the clients wanted was a good return on their investment. They didn’t really care about the principle. So I gave them their returns – consistently – and kept very little for myself, relatively speaking. Everybody moves the line a little bit, just like I did. The damned Academics and the Regulators think we ought to do this business and not make a profit. That’s just ridiculous…