The plot continues to thicken in the saga of Bernard (Bernie) L. Madoff. Earlier today, authorities placed the mastermind behind a $50 billion hedge fund Ponzi scheme under house arrest. Now, instead of late-night Manhattan parties, the once-revered Wall Street legend will be subjected to electronic monitoring and 7 p.m. curfews.
At the center of the Madoff controversy is the Securities and Exchange Commission (SEC) and questions as to why it took so long for the agency to detect Madoff’s misdeeds. As far back as 1999, the SEC apparently had knowledge that all was not right in the house of Madoff. Returns in his fund were consistently and unusually high: 15% to 22%. A decade ago, memos from competitor manager Harry Markopolos and others even went so far as to allege Madoff’s business was nothing more than a “Ponzi scheme.”
In true ‘a-day-late and a-dollar-short fashion,’ Christopher Cox, chairman of the SEC, is now admonishing his agency’s inactions for failing to rein Madoff in when it had the chance. Yesterday, Cox publicly stated that the SEC failed to act on “credible allegations” when it was presented with the information nine years ago.
Madoff’s world came crashing in only when redemption requests, totaling some $7 billion, started to pile up and he was unable to meet investors’ demands for their money.
As it turns out, Madoff’s scam lured every kind of investor imaginable, from the super rich to the ordinary. Pension funds, global financial firms, hedge funds, higher education institutions, charities, the co-owner of the New York Mets, even a Senator bought into Madoff’s hype. Now, they’re collectively $50 billion poorer.
Shortly before his arrest on Dec. 11, Madoff was living life large. As reported Dec. 17 by Bloomberg, the disgraced money manager had recently made his usual stop for a $65 a haircut, a $40 shave, a $50 pedicure and a $22 manicure. If convicted of securities fraud, Madoff could spend the rest of his life in jail, where personal etiquette might not be so glamorous.
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