The Madoff Affair: Were His Sons Actually Responsible?

Okay, this is a bit controversial, I’m sure, but let’s look at the facts:

1. There was a huge amount of paper generated in support of these schemes. This is an inordinate amount of work for a 70+ year old man to do. It requires technical know-how and all sorts of scale.
2. Mr. Madoff confessed to his two sons.
3. We all know about Madoff’s statements regarding regulators, and how fraud would be detected.
4. This odd addition of Mr. Madoff’s niece marrying an S.E.C. agent into the facts, included in the S.E.C.’s own mea culpa.

Now, stop thinking like a rational person watching an elderly man confess. Mr. Madoff, if he was so deceitful this entire time, shouldn’t be taken at face value when it comes to his confession.

Think like this is a Law and Order episode. This is the first 5 minutes of the episode and the police have gotten a confession. Well, that means only one thing: the suspect will change to whomever the confession takes the heat off of. In this case, his sons. Is it more likely that his sons were running a scheme, with confidants, and tearfully confessed to their father? I don’t know. What I do know, however, is that a devoted father would probably protect his sons blindly.

Couple this plausible scenario with the aforementioned ridiculous amount of work it takes to gimmick up the confirms and whatnot that were used to support the returns claimed by the firm, and those documents were extensive (see link above), and you seem to have a more reasonable explanation. Is it surprising the S.E.C. isn’t finding any evidence the children were involved? Uhhhh… they missed the entire thing to begin with, so no.

Comments

[MisterPhi:]

Know what? When they went after the "complex" orchestrations behind the Parmalat collapse/fraud what investigators discovered was disarmingly simple. Forged documents, that's all.
And you don't need tons of 'em either. You just need them to be good enough to withstand the first scrutiny, and then time and the convinction of the other person / firms does the rest.
Same with the Kerviel guy @ SocGen. He produced all the documents that were needed to keep the compliance / audit off his back. His only problem was that the trades were way too big and could not possibly evade attention for too long. Yet another case of one lonely man winning vs. a very bureaucratic system that doesn't have enough time to really examine every single piece of evidence down to the very last penstroke.
Food for thought.

2008 Dec 18 08:19 AM

[freefall51:]

The theory sound reaonably to me. The old guy will do lot less jailtime than his two sons together. And what loving father would not stand up for his mischievous offsprings.

2008 Dec 18 08:54 AM

[robinjoe:]

It isn't that the gov't didn't have the time, they didn't have the drive. Gov't guys are lazy..end of story. That there might be family connection could be a contributor as well. But mostly, my experience with gov't employees is that they are riding the clock until retirement. There are a few exceptions, but they are exceptions, not rules.

So proposing that we make gov't employees czars over automobile manufacturing is a farce.

I'm watching the entire US economy unravel like a cheap sweater...interesting!

2008 Dec 18 09:23 AM

[Bill Herbert:]

In my view, it would have been impossible for Bernie Madoff to pull this off by himself.

There can be little doubt that at least several other people were involved - likely his direct family members, and maybe the one non-family guy - an accountant or systems guy, I believe - mentioned so far in press reports.

I suspect that the entire crew of family members working for Bernie are involved to some degree - they may not have realized how BIG the fraud was, but stealing $25MM gets you the same charge as stealing $15 billion, or whatever. And while I have some sympathy for the entirely innocent victims who 'lost their life savings' with this utter scumbag, I have no sympathy for the fund-of-funds jokers who rake off fees, treat themselves and clients to $200 lunches, then act "shocked" to discover that they, in turn, have been ripped off. Next time, do some DD, you A-holes!

The whole corrupt industry stinks in so many ways, and has so many duplicitous, lying fraudsters working in it, that it is hardly a surprise that some massive frauds will be uncovered as the market tanks.

Lock these bastards up and throw away the keys - if Bernie's sons are in on it, then they should die in prison, just like I hope Bernie will.

2008 Dec 18 10:13 AM

[sr9web:]

Don't be foolish. All you need is a few deceitful speadsheets in Excel to track this. The old man did it. It's wrong, even shameful of you to speculate and imagine about the sons.

2008 Dec 18 10:58 AM

[Itsonlymoney:]

Follow the money and all will be revealed. Madoff and Co. are classic sociopaths in that they had no problem cheating "widows and orphans" along with the usual high net worth individuals. If you believe he acted alone I know some fishermen in Somalia looking for investors.

2008 Dec 18 12:11 PM

[Thomas J. G...:]

robinjoe: the sec had this one handed to them on a silver platter and they missed it. Markopolos was begging them take the case. How hard can it be? You go in and say "I don't need to know how you do what you do but I want you to prove to me or an independent auditor that you have 50 bill of net assets". That would have unmasked him right there. And today Obama said the Madoff case proves we need more regulation. I don't think Obama can change the dna of a gov't employee and unless he can he can turn us into the soviet union and all it will get us is .... the soviet union.

2008 Dec 18 04:50 PM

[secmaven:]

The Madoff organization produced hundreds of bogus monthly statements that recorded collectively thousands of imaginary transactions with each statements transactions producing just enough net revenue to create the 10% per year consistent return that he promised. At the same time the Madoff organization had one of the most effective PR operations in history going on with face to face meetings all over the world in order to keep enough cash coming in to fund the requested outflow. Now if one 70 year old man can do all of this, even in a 24 hour day, he should be nominated as the successor to Superman. Of course there were other people knowingly involved in this scam. Common sense tells us that much. Who were they? Well, our government employee investigators will tell us that story in due time.

2008 Dec 18 06:53 PM

[Fairway Jack:]

We should dispense with the name Ponzi and forever hence call these schemes a Madoff scheme....and you know what....in 20-30 years they'll make a movie about it. Poor Bernie will be a misunderstood maverick who just made an error of jugdement. Sickening....I say stick 'em in solidary with the 12th hijacker and throw away the key.

2008 Dec 19 11:01 AM