Madoff was 82 when he died in prison of kidney failure today. This is excerpted from the Wall Street Journal.
The size and duration of his fraud were elusive. Initial reports indicated $65 billion had been wiped out at Bernard L. Madoff Investment Securities. But it soon became clear that the assets Mr. Madoff boasted of managing existed only on paper. He hadn’t invested clients’ money, instead shuffling billions of dollars through his company’s bank account and fabricating statements showing profits year after year. Ultimately, a court-appointed trustee estimated Mr. Madoff took $17 billion of customer money through the scheme.
Mr. Madoff was a brilliant con artist. He exuded respectability and cut an aristocratic figure, with a mane of silver hair. He enticed victims with an air of exclusivity, luring investors to plunk down huge sums by threatening to turn them away. Mr. Madoff let it be known that he wouldn’t be bothered with clients who couldn’t invest enough. He was famously secretive about his methods, adding to the allure—and allowing him to escape detection.
Mr. Madoff cultivated a large, though not solely, Jewish clientele. His wealthy and well-known clients included members of the Wilpon family, the previous owners of the New York Mets; the late Elie Wiesel, the Holocaust survivor and Nobel laureate; banks, hedge funds and charities, and thousands of elderly retirees. Victims crowded into his 2009 sentencing hearing.
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Irving Picard, the court-appointed trustee assigned to recover funds for victims, had collected more than $14 billion, largely through lawsuits and settlements against investors who withdrew more from Mr. Madoff’s firm than they invested and institutions he accused of ignoring red flags because of Mr. Madoff’s healthy profits.
As a result, many victims recouped what they had initially invested with Mr. Madoff. But they didn’t recover the wealth they once thought they’d had because of his lies.
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Later, he would lay some blame on his investors, saying they had enough warning signs to catch on: “Everyone was greedy,” he told New York magazine in a jailhouse interview published in 2011. “I just went along. It’s not an excuse.”
Rejecting pleas by Mr. Madoff’s lawyer for a sentence that might allow him some life after prison, Judge Chin sentenced him to 150 years.
“The message must be sent that Mr. Madoff’s crimes were extraordinarily evil, and that this kind of irresponsible manipulation of the system is not merely a bloodless financial crime that takes place just on paper,” the judge said.
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Ruth Madoff, cut off by her sons for standing by her husband, eventually stopped speaking to him. Mark Madoff hanged himself by a dog leash in 2010 on the second anniversary of the scheme’s revelation. Andrew Madoff died of cancer in 2014.
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Mr. Madoff didn’t go unsuspected. A 2001 Barron’s article focused on the improbability of his returns. Whistleblower Harry Markopolos, who concluded Mr. Madoff’s reported gains were impossible after trying and failing to replicate them, complained to the Securities and Exchange Commission, sparking an inconclusive investigation.
Some bank and hedge-fund employees privately questioned his methods and wondered if he was a fraud. Mr. Madoff, insisting that his trading operation remain a black box, rebuffed requests from these institutional investors to visit his operations or explain them, according to lawsuits filed by Mr. Picard, the trustee. While some didn’t work with him because of these questions, others nevertheless put their questions aside in light of his steady profits.
The SEC’s failure to discover Mr. Madoff’s fraud revealed it, in the minds of many, as an ineffectual guardian of the markets. A nearly 500-page report by the agency’s inspector general in 2009 concluded that substantive, specific complaints and news articles over 16 years should have raised significant questions about whether Mr. Madoff was trading.
Yet during three examinations and two investigations, the agency never gave him “thorough and competent” scrutiny, for instance by independently verifying his trading, the inspector general found.
Only the pressure from the crisis brought Mr. Madoff down, as his fund was overwhelmed with redemption requests when people lost money elsewhere.
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