The Madoff Magnum Opus

Overnight the NYT unleashed a monster of a Madoff story, with a 5,397-word scale-tipper on the proprietor of the current title-holder for World's Largest Ponzi Scheme. Not to get all meta or anything, but the piece is not only longer than most Raymond Carver short stories, but it's got eleven – 11!!! – reporters listed as having worked the piece. I am in awe at the NYT's zealous flooding of the Madoff zone after the damage has been done.

Anyway, it's worth a read, so curl up with your laptop and check it here.

Initially, he tapped local money pulled in from country clubs and charity dinners, where investors sought him out to casually plead with him to manage their savings so they could start reaping the steady, solid returns their envied friends were getting.

Then, he and his promoters set sights on Europe, again framing the investments as memberships in a select club. A Swiss hedge fund manager, Michel Dominicé, still remembers the pitch he got a few years ago from a salesman in Geneva. “He told me the fund was closed, that it was something I couldn’t buy,” Mr. Dominicé said. “But he told me he might have a way to get me in. It was weird.”

Mr. Madoff’s agents next cut a cash-gathering swath through the Persian Gulf, then Southeast Asia. Finally, they were hurtling with undignified speed toward China, with invitations to invest that were more desperate, less exclusive. One Beijing businessman who was approached said it seemed the Madoff funds were being pitched “to anyone who would listen.”

Okay, pardon me a short, closing rant. This kind of story, while interesting in a gossipy sort of way, mostly just pisses me off. Sure, it doesn't piss me off as much as the inevitable tick-tick that's coming -- Bernie Madoff's final minutes! The exclusive inside look! -- but it's still a narrative piece only useful for landing a book deal. or making NYT readers feel shocked – shocked I tell you -- in appropriate measure.

As I keep saying, you deserve those revenues and the nice building when you more consistently tell us about these things before they happen, not when you write exhaustive 11-reporter pieces after the fact.

Comments

[Jimmy Lathrop:]

I think the piece is an accurate description of the corporate culture at the Times - that is to say, treading down the same path as the Chicago Tribune, headed to obscurity along with the Telex machine and ticker tape.

2008 Dec 20 09:54 AM

[Jimmy Lathrop:]

Every week it seems that the New Yorker has to publish a piece about an enormously rich financier (Schwartzman, Zell, etc.) in a sort of fetishizing love piece reserved for fan fiction or teenage celebrity magazines. It is this orgiastic onastic sexual fixation with the excess of wealth in a gross worship of Mammon that would make Jay Gatsby blush. The Times and the New Yorker would argue that there is a significant portion of the population who want to hear the transformative stories of the social climbers and overcompensated buffoons and their presence justifies these crummy stories. I would argue that there is a significant portion of the population who want to hear stories about paedophilia, but that does not justify publishing pieces glorifying child abuse, right?

2008 Dec 20 09:59 AM

[herbert hoover:]

Perhaps some of Madoff's investors (not victims - investors) will be showing up later in another NYT story about "New York's Neediest Cases".

2008 Dec 20 10:34 AM

[sozelli:]

Attached is an article I wrote way before the Madoff scandal broke regarding the US tax implications
of risk management transactions of hedge fund managers. The
tax analysis would apply to Madoff and his foreign investors as well.


Selva Ozelli, Esq, CPA

www.hedgeweek.com/down...

2008 Dec 20 11:15 AM

[sr9web:]

I read the NYT article yesterday and found it very informative.

Madoff's "investors" (acolytes really) were drawn in by their desire to self-boast, as in "I've got money with Madoff, other can't get that, ha ha".

According to the Times, Madoff actually sent account statements printed on a dot-matrix printer.

Didn't ANYONE ever think that was odd?

What a bunch of chumps!

2008 Dec 21 01:11 AM

[lorddarley:]

A contrarian view.

Madoff didn't register as an investment advisor until 2006. Anyone investing prior to that date certainly has no right to whine that the government didn't do its job.

Even after 2006, Madoff was not selling Sarbox securities to the public at large. These were limited to "accredited investors." People who got his "insider deals" are belly aching because they weren't protected. Get serious.

When they thought they were making money, these investors were only too happy to keep the general public out of a good thing. To that end, they signed on as "accredited investors", i.e. people who are rich and arrogant enough to warrant that they don't need the protection of government regulation.

The conventional fraud laws will send Madoff to jail. We don't need more laws from the clowns in Congress, which will simply make it more expensive for honest people to do business.

LordDarley






.

2008 Dec 21 10:59 AM

[CoinMiner:]

The article is neither an opus (read in 8 mnutes) nor penetrting, nor illuminating. Rather, it reads as an offshoot of the social pages - trying to drop as many names in the shortest span possible of the 'who's who" rubric of fools that chased greed to deeper and stranger combinations.

Indeed, the eleven 'authors' seemed eager to line up at the trough, needing to see their name associated with the story, in print - perhaps one last time. As mentioned by a previous commentator, and as evidenced by the sheer shallowness in this article passing as investigative journalism, the NYT is nearing the end. A rotting carcass still moving/lumbering through inertia, if not life on its own.

Rather than follow through on its mission, the NYT ends where it should have begin - answering some of the open questions. Instead they sign off as:

"The questions have piled up since then: Could Mr. Madoff have sustained this worldwide fraud for so long by himself? Why didn’t regulators, in Washington and abroad, catch him sooner? And will anything be recovered for investors, some of whom have lost every penny?"


Yes indeed. How did his daughter marry a previous regulator of the firm? How could so many mine the dark depths of greed to chase unrealistic returns (with no BIG SIX oversight), based only upon reference by their 'golf buddy'. How could his sons (the ones running the firm) and his brother not know anything about the lies and deceit? Yeah right.

Lets face it, Madoff is a fall guy. The gent is probably suffering from some malady - sees his time on this orb is short, and is obviosly taking the fall for others. A very TIMELY and CONVENIENT way to write off billions of dollars in defunct SIVs and underwater tranches held on the books of the 'nine banks who must not fail'.

This type of story, and the treatment provided by our 'public guardians' - the regulators and there press - will provide text book examples, literally, documenting the failure of our once proud and innovative nation through hubris, distraction and greed.

2008 Dec 21 11:03 AM

[ACEMAN:]

Scandal? What scandal? This is the means by which American business does its business. The comments about prospecting for business and the sales pitch, well any insurance salesman on main street USA knows the pitch inside and out. And it is old, warmed over pitching at that! In truth, when I worked on Wall Street, the sales pitch was always insinuating "exclusivity" and "missing an opportunity." Even the role playing sessions emphasized joining an exclusive club and if you don't act NOW, you'll miss a rare opportunity to make many times your money while the experts do the heavy lifting. In fact, what was always said at the close was: "this is low-hanging fruit, why don't go get some, OK." Why this worked was always beyond me, but it did and still does. So what does this tell you about the prospects? Greed obviously, but more to the point, they did so because they were referred by a close friend or a well known personality. They were flattered to be in the same company! Who knew they were so easy to dupe. If they had a mother like mine who questioned: "Just because Guy wants to jump off the Tour Eiffel, doesn't mean you have to, too."And if they mentioned the term "due diligence" then we asked who suggested due dilligence and thus we had another prospect to sell and we did! Because we flattered the "due dilligence" guy with telling him he's right, so let me review the investment with you. Usually within five minutes or less after I pitched some of the numbers and the methodology, Mr due Dilligence would raise his right hand and say, "I see you know your stuff...so do you think I can get into this deal, too!" Zappo! I got another one and I'd get a big fat commission and perks plus bonus at the end of the year. And this was not only done in private stock deals, the bigger commissions and perks came from private placement in Real Estate, Oil & Gas and Bonds. In effect, the world of Wall Street. Perhaps the only "world" equivalent is the world of Lewis Carroll.

2008 Dec 21 01:24 PM

[Doug Poretz:]

In a related vein, see Leonard Downie's piece in today's Washington Post -- tinyurl.com/7qpnon (hope I made that link easy, if not it's at washingtonpost.com -- outlook section). He is raising some really intriguing ideas about the state of the news business today in the context of addressing whether Watergate could be uncovered today. I think he is much more complimentary in general about the effectiveness of a new type of blog journalism than you would think someone so associated with traditional media would be. But he suggests the process will be vastly different. I think he makes some important points.

2008 Dec 21 02:36 PM

[pedroperez:]

Is there any "crook of the year" award?

2008 Dec 21 03:38 PM

[Afthought:]

The Madoff global tour resembles Pauson's global trot as Treasury Secretary. Can someone explain the differences between the Paulson Ponzi and the Madoff Ponzi in terms other than politics and scale?

2008 Dec 21 04:44 PM

[alphadominance:]

Firstly, for anybody who would be taken in by the supposed consistent 15-17% returns I have a bridge to sell you. It never fails to astound me how our lottery winner's mentality drives foolishness to every greater heights here in America. The old adage "you can't get something for nothing" is so apt. Here's a clue for you investors: there is no investment class that will perpetually earn consistent positive returns, especially of that magnitude. You are self delusional if you are willing to pile your money into something with no transparency or regulation on the basis of excess alpha. It is in fact too good to be true. Even regulated institutions have problems, as the banking crisis can attest. But flying in the dark by investing in these hedge funds is a risky business, thus the positive returns when an idea hits. Another adage: "caveat emptor." What else needs to be said? For more on the myopic nature of hindsight in the investing arena read this post: alphadominance.com/?p=...

2008 Dec 21 05:45 PM

[kurt walter:]

Madoff needs to spend his jail time in a "Cool Hand Luke" type chain gang for some hard, physical labor. I don't care it he is 70. The crook should of thought about that prior to doing such a terrible thing.

2008 Dec 21 06:59 PM

[jackooo:]

MADOFF IS MY IDOL!!! Greed is good........

2008 Dec 23 02:57 PM

[speculari:]

Madoff is indeed a crook of the first order but, one must agree with Paul as to the dismal state of the NYT's reportorial skills (eleven people!). Based upon another article published in the NYT, I commented to the effect that the "Old Gray Lady" has become nothing more than an "Old Gray Hooker".
As far as the revenue & the nice bulding go - the revenue stream is in decline & the building is mortgaged to the hilt!

2008 Dec 23 03:04 PM

[Reggie:]

There is a much larger scandal simmering around the world. It may never be exposed due to the dull and dim-witted press that has taken over nearly all the media.
Truth is this scandal may never be revealed. But there are hundreds, no thousands of experts, who are aware of this crafy scheme. Those who speak out are tagged as heretics. And, many fearing the wrath of the "smart" crowd stay silent.
This scandal too has it's "trading" aspects which anyone who reviews the rules knows are simply made up to impress not succeed. There are one or two national personalities that have taken on this cause but they too are mocked at every turn.
With a new President in the White House this fakery is about to grow in stature and size spreading it's hogwash into virtually every State and every country around the world.
Had enough? Want to know what this scandal is:
It is simply the wrong-headed, unproved theory of GLOBAL WARMING THAT IS CAUSED BY MAN.

2008 Dec 24 12:46 PM