Josh Stern

The Madoff Affair: Greed's Victory Over Common Sense

A lot of detail about the Madoff case has yet to come out, but what I've heard doesn't lead me to believe that due diligence is the answer to the problem of fraud avoidance. The answer is diversification of who and what is being trusted with assets, paying particular attention to where and when the honesty of a given receiver of assets is reliably insured. Due diligence is not going to get people both access to the books and the ability to determine that the books are not cooked. Fraud will always be possible, so the correct approach has to involve spreading risk around possible sources of fraud.