One thing everyone agrees about Bernard Madoff is that he talked a good talk. Much too good, it turns out.
Madoff, arrested on Thursday on charges of presiding over possibly the biggest fraud in Wall Street history, had for decades been above suspicion.
Even now, as investigators try to understand how the 70-year-old Madoff lost as much as US$50 billion in international investors’ money, his firm’s Web site remains bizarrely serene.
“The owner’s name is on the door,” reads the site, praising Madoff’s personal touch, a philosophy of accountability that “harks back to an earlier era in the financial world.”
“Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing and high ethical standards that has always been the firm’s hallmark,” the site says.
That is the sales pitch that helped make the man friends called Bernie, a modern American success story, rise from his job as a Long Island beach lifeguard to chairman of the NASDAQ stock market and pillar of the ultra-wealthy country club set.
People trusted Madoff and he kept them happy with astonishingly consistent returns on the money they trusted him to invest — about 1 percent a month, without a hitch.
Indeed, Madoff was a genuinely talented money man.
He is credited with helping to revolutionize the shift in trading from telephones to computers, making deals within seconds rather than minutes, and ushering in an era of ever greater stakes and profits.
But Madoff’s scam in the end was not about creating wealth as much as creating the impression of wealth.
Clients didn’t realize that the returns they liked so much were in fact cannibalized from other clients’ principal.
And as long as no one asked for their principal back, the secret remained unexposed.
Over the decades Madoff managed to dupe everyone from giant foreign banks to private clients in the US, many of them stemming from the tight-knit Jewish community in the Long Island suburbs and Florida.
A columnist for the Wall Street Journal says Madoff lured his victims with a “mysterious allure and sense of exclusivity.”
Initially Madoff would rely on a macher, the Yiddish term for a big shot, who would go to the country club and “brag, ‘I’ve got my money invested with Madoff and he’s doing really well,’” the Journal wrote.
When his listener expressed interest, the macher would reply, “You can’t get in unless you’re invited ... but I can probably get you in.”
Another reason not to suspect Madoff was that in appearance he was the model of decency.
He reportedly played golf at exclusive clubs like Old Oaks outside New York and Palm Beach Country Club in Florida. He also reportedly owned three homes and a yacht in the Bahamas.
But by the standards of Wall Street wheeler-dealers, he was not a flash spender, and was well known for his largesse to Jewish and pro-Israeli charities.