No, Burb is NOT going to bore you with what you already
know - that’ll be easy-peasy, ‘cause few of us out there in Middle America really know much - about our present-day Scrooge, Bernard L. Madoff, and his greedy, gigantic and financially gut-wrenching tactics.
Yeah, he took ka-zillions of $$$ from well-healed Easterners and global movers and shakers, played with their riches like a 3D Monopoly banker and smirked his way to prison while a blue-blooded Frenchmen killed himself after Madoff made him a Pauper instead of one of the Noveaux-Riches Populaires….
“Ho-hum” , we say. “Who cares?” , we ask. “Doesn’t affect me.” , right?
Wrong, we ALL should care, and we ALL eventually will be affected, once the final tally is taken on this history-making scam, a decade from now, that’s what!
So, this is Burb’s take, for the record, on the 1-2-4 punch of Bernie Madoff and his money-not-making investment scheme that was 45 years in the making for him and his crones….Burb knows she’s a late bloomer on this subject but it comes in handy when her imperious arrogance insists on the last layman’s word on the subject…
(For complete details on this debacle, look no further that this Emmy award-winning P.B.S. Frontline programme, “The Madoff Affair”
and for the financial landslide which sent his house of cards crashing to the ground, watch “Inside The Meltdown” below)
1960 was a grand year and the start of a grander decade yet to come.
It heralded in a decade of economic boom, a healthy financial plant reaped from a promising seed after the devastating war years had been replaced with a manufacturing boom never before seen in North America.
And no where was this boom felt more than the 60s bull market on Wall Street, long before NASDAQ, long before the Techno Bubble, long before the mortgage meltdown, long before investors had real concerns over untrustworthy brokers. Yep, the Age of Aquarius seemed to be good for everyone, and great for Bernie Madoff.
He began innocently enough, well, as innocent as any money-broker ever really is, by astutely analyzing the high activity on the trading floor and seeing a niche as yet unfulfilled in the independent broker market. Madoff offered a penny per share to publicly held companies to trade with him over directly trading on the floor and this kickback was enough of an incentive to get his “investment advisory business” on its’ way.
No probs, no rules broken, just a savvy business-minded man on his way to striking it rich on Wall Street…
…there are rules to be followed, aren’t there?
…and there is the S. E. C, isn’t there?
One would think so, wouldn’t one?
And, along with his partnership with Frank Avellino & Michael Bienes (l to r), the trio worked under the radar, within the legal confines of Bernie’s Father-in-law’s investment firm, gathering individual investors and eventually feeder brokerage firms, amassing far greater the number of investors a firm is allowed to amass without being a licensed and registered investment advisor with the U.S. Securities and Exchange Commission.
Oh, and by the way, the magical number limit of investors before a firm and its advisors need to be licensed is 15, and Bernie, through Avellino & Bienes had amassed over 3000 by the early 90s!
“Now, wait a darn tootin’ sec!” , you say… ”Where was the S.E.C. in all this?” , you ask.
Well, yeppers, the S.E.C. had been notified as far back as 1992 of a possible Ponzi scheme involving Bernie Madoff and his crones but even then money seemed to talk with that federal regulatory body as well…
Who wants to rock the get-rich-no-matter-what boat when so many influential people were doing just that with Bernie Madoff, right?
No one, certainly no one at the S.E.C.
From those early 60s, thirty-two years later, Madoff went well beyond the allotted 15 to the highly illegal 3200 investors via several feeder brokerage firms, Madoff, through Avellino & Bienes, offering a 1% kickback if they would swing their clients portfolios to Bernie’s investment advisory firm, with only a couple tiny, weenie rules: 1) do NOT mention Bernie Madoff’s name directly to those clients; and, 2) do NOT include Madoff or his investment firm in their prospectus or any investment marketing material.
Hmmm, and even to this artsy-fartsy writer, those tiny, weenie rules seemed as stinky as a pig sty in the hot summer sun! “Yeah, come invest with me, I’ll promise ya the moon, just don’t ask where you got it, okay?!”
No, nothing stinks here in Stinky Ville!
And many CEOs of several hedge-fund brokerage firms – Rhodes scholars some were –said, “Okee dokee Bernie, whatever you want, just keep the bottom line in the black for me and my investors, will ya!”
And so he did, for over 45 years…
Madoff Securities was NEVER registered with the S.E.C., the firm was NEVER mentioned in any of the brokerage firms’ prospectuses with which Madoff did business, Bernie’s name was rarely if ever mentioned to the individual clients, and even after THREE in-writing warnings from different wall street advisors to the S.E.C. that Madoff may be running a Ponzi scheme, not one penalty nor trading shut-down was ordered on Madoff from the S.E.C., a federal agency with a mission to uphold due-diligence in U.S. financial trading practises.
No one, including the big wigs at the S.E.C. I guess, didn’t want to rock the richest boat in town, as it seemed that only Madoff, above all other investment advisors, had the Midas Touch when it came to guaranteeing a steady rate of return on your principle investment, even when the NYSE and other global markets were in a bear market free-fall.
Let’s not mention here that the accountant agency Bernie used to hold this billion-dollar Titanic together was a family run, one-man accountant firm in a strip mall in upstate New York. And forget that Bernie’s due-diligence officer worked for Madoff from his comfy mansion on the island of Bermuda while the headquarters of Madoff’s firm was in New York City! Like little details were ever important when big, easy, incredible money was to be made, right?
Bernie could and would guarantee a minimum 15% to the Mom & Pop investor and as much as 20% to the big-time investor, regardless of how the markets were doing domestically or globally. And what started with a few investors in Queens and the Catskills, soon mushroomed to larger client-based feeder brokers such as,
J. Ezra Merkin, President of the 5th Avenue Synagogue
Stanley Chais of Beverly Hills – Madoff’s Hollywood connection
Bob Jaffe of Boston and Palm Beach
Walter Noel & Jeffrey Tucker (l to r), co-founders of Fairfield-Greenwich Group - Madoff’s Greenwich, Connecticut hedge fund brokerage firm connection, who, before hooking up with Madoff were struggling to stay afloat,
all of who were guaranteed a 1% kickback on the 2% management fee that is usually charged by investment brokers, which for Noel & Tucker whose clients invested in Madoff Securities via the Fairfield Sentry Fund, equated to as much as $100 million dollars per year.
“Free money.” as one broker so eloquently put it…
Madoff and his guaranteed rate of return became known far and wide and this never-lose word-of-mouth eventually went global to Latin America, crossing The Pond to Europe and specifically Geneva, where Madoff, through his feeder broker connections easily acquired the fund management portfolios of some of the most financially influential people of our time…
Andres Piedrahita, marriage-of-convenience Son-in-law to Walter Noel
Thierry Magon de la Villehuchet, co-founder of Access International and Madoff’s Rothschild & U.B.S. connection
Crown Prince Michael of Yugoslavia
Philippe Junot, ex-husband of Princess Caroline of Monaco
and Liliane Bettencourt, daughter of L’Oreal founder Eugene Schueller, listed as Forbes 12th richest person in the world and the world’s richest female.
Although Madoff’s original feeder brokers, Avellino & Bienes, were reported in the early 90s as unlicensed investment brokers to the S.E.C. and as such, had to shut down their firm, pay $350,000 in fines and pay back all of their investors to the tune of $400 million, (which when they went to Madoff for said, he easily and mysteriously found the funds, however eventually short-changing those same investors some $18.5 million dollars), Avellino & Bienes NEVER pointed the finger at Madoff as their principle broker.
And as a result, Madoff was unharmed by the demise of Avellino & Bienes, and his Ponzi scheme kept rolling along, with both Avellino & Bienes personally investing with Madoff long after their brokerage firm was no longer, and getting stinking rich in the process., the S.E.C. hit only a temporary rap on the knuckles of their reputations and only a financial bump in the road.
Ho-hum, must be nice to have friends in high places…Burb wouldn’t know…sigh…
Flash forward 16 years to the mortgage meltdown which started with the independent brokerage firm demise of Bear-Stearns and A.I.G….
All of a sudden, investors with Madoff were desperate to cash-in their funds as the global markets were falling, and that’s where Bernie’s Ponzi scheme and its’ precarious guaranteed interest rate-of-return house of cards started falling apart, as with no new investment capital in a bear market free-fall, Madoff had no way of moving new money to his existing investors to guarantee that percentage rate of return he had always promised.
And on December 11, 2008, Madoff’s financial Titanic listed for the last time and sank into the deep abyss which became The Madoff Affair, its shameful wreckage laid bare for all to see.
As the dust began to settle on the Madoff meltdown and Bernie was sentenced to ultimately die in prison, the damages from this 45 year long financial shell game started to amass, in countless lawsuits and counter law-suits, culminating in the sad and tragic suicide of 65 year old avid sailor and hunter, Thierry de la Villehuchet. Found in his Manhattan office (his company Access International Advisors suffering $1.4 Billion dollar loss through Madoff’s scheme, had all of his personal and most of his family’s money invested with Madoff as well), Villehuchet was found with his feet propped up on his desk, several slashes into his wrists from a box-cutter knife, his bleeding arms laying inside waste-baskets to catch his life’s blood and an empty bottle of sleeping pills nearby. No suicide note was found.
The financial body count continues to rise as well and to date includes such notables as;
Wunderkinder Foundation – the Spielberg Charity – which, although exact losses have not been made public, admitted to having close to 70% of its assets with Madoff
Kevin Bacon & wife Kyra Sedgwick- confirmed investing with Madoff – exact losses not made public
Uma Thurman's fiancé, Arpad Busson
Larry King, and former Miss America
Phyllis George, all of who whom were listed as investors (exact losses not published) in the bankruptcy court proceedings of Madoff holdings.
The tally by those in the know estimate the total dollar damages to meet or exceed $50 Billion, and with so many financial houses now in the red or significantly hurt by this debacle, only time will tell how Mr. & Mrs. Middle America will ultimately be affected.
But mark Burb’s words, we WILL be affected, maybe not today, maybe not tomorrow, but someday, someday real soon. And maybe one day when you go to withdraw money from your bank’s ATM for “pizza night with the family” and you find the withdrawal fee has been changed from $1.50 to $11.50, you can thank Burb for the warning.
Like a tsunami which initially sucks out the ocean and hovers quietly for a time, that wave of destruction WILL come back into shore and hit you when you’re least expecting it. The lives of the Rich & Famous have never really affected you before but maybe the losses they feel now will trickle down to you in ways you have yet to imagine.
When YOUR investor says to you, “Trust me, this fund guarantees a certain rate of return on your initial investment; you can’t go wrong with XYZ!” , sit back in that office chair of yours, take a nice, long, deep breath and consider burning your dollar bills in your fireplace at home instead. The act may not give you any measurable rate of return on those bucks but it may keep you warm when the cold reality hits that you’ve just fallen for the shell game of a lifetime.
Kindling for thought….
(This post is dedicated to A.C., who reminds me all the time to get my nose out of the fantasy world and back into reality now and then…thanks A.C.!)
UPDATE: Today is the one year anniversary of the Madoff meltdown and to date, over 16,000 individual bankruptcy claims have been made on Bernie’s now defunct brokerage firm…and the current total, Burb predicts, is NOT final…