Madoff to Jail; Hope He's First of Many
Dan Gillmor is a BoingBoing guest-blogger.
So Bernard Madoff is heading to prison, most likely for the rest of his life. Will it be hard time or a low-security lockup for rich felons? (Photo thumbnail via the Times of London)
Whatever. A bad guy, but only of the many we should hope will end up in jail in the next several years -- especially members of the Wall Street gang that stole billions and tanked the global economy. How much real investigating will be done of their crimes? How much justice will we see?
Madoff confessed his frauds. The bankers said, "We demand hundreds of billions more, some of which we'll keep as bonuses, or we'll guarantee a global depression."
Who's worse?
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Most people plead guilty in order to get something or avoid something (e.g. execution). But it seems like he's getting set to prison for the rest of his life - why'd he plead guilt???
(not that I think he was innocent)
Madoff to Jail; Hope He's First of Many
For the country that has the highest incarceration level, that's an odd thing to say. He's the most recent of more than any other country in the world.
Dan, can you please tell me who 'they' should be investigating? I would like to write my congressman and ask them why 'they' aren't being investigated.
You are. You are worse because you're buying the government cover up of their wrongdoing by blaming the "wall street" gang. Wall street did nothing wrong here. It's the government's inability to keep up with a competitive market that has failed us. On the one side you have "the wall street" gang that is honed by competition. On the other side you have a lazy ineffectual non-competitive government wallowing in it's own filth. Change the government if you'd like not to see this happen again.
JIMBUCK: Probably to guarantee that they wouldn't go after his family.
It's thought that he may be taking a dive to protect others. He claims he was alone in perpetrating this $50,000,000,000+ fraud. He wasn't. Lets hope that his partners who knew what was going on are punished as well.
jimbuck,
I thought I heard on the news the other day that the judge in this case would not accept any kind of a plea deal so he had no choice but to do so.
#2 Jeaguilar
I think you are missing the point. It's true that the U.S. incarcerates more people than any other nation. Unfortunately it's for relatively unimportant and non-violent crimes - many of them drug related crimes. What Maddof was convicted for was not a victimless crime. He has left a trail of ruined lives behind him. He deserves jail as do so many other high living Wall Street burglars.
According to some sources, Madoff declined a plea bargain because he would have been forced to admit to "conspiracy" (and name his co-conspirators).
I'm no financial expert, but I'd bet that losing $50 billion (and keeping it covered up) involves too much work for just one person. There must have been a number of people around Madoff who were either directly complicit, or at least aware that something dubious was going on.
Madoff isn't going to help identify and convict those people. It'll be interesting to see how many of them serve any jail time.
I'm sure Madoff and Conrad Black will become good friends inside.
What Madoff did was illegal. However, the unbelieveable leverage, complex mortgage derivatives, and fractional reserve lending were not only legal, but ENCOURAGED by the government and the fed. Sadly, there's not a lot of actual "crime" to be found there.
I'm not saying it's right, but justice won't be found because much of this was within the boundaries of inadequate, and horribly enforced, laws.
If they did spend millions investigating, they'd come up with dishonest mortgage brokers and home"owners" who lied on their applications. Maybe some small-time low-rung salespeople who didn't follow due dilligence. Hardly the satisfaction people would demand.
There might be a scapegoat or two thrown out there too.
No, the biggest fish will be the Madoffs - the guys running schemes as "investments". They're pretty small-time in comparison to Citi or BoA or the rest.
I wonder if they could make him a deal where, if he were to surrender all his secret holdings and accounts to be distributed among his victims, they might let him out in ten years or something.
Punishing him is not as important as the losses suffered by his victims.
How crazy stupid was this anyway? Why would a filthy rich bass turd risk life in prison to steal money that isn't going to upgrade his lifestyle much anyway?
"I'm no financial expert, but I'd bet that losing $50 billion (and keeping it covered up) involves too much work for just one person."
And I'm no legal expert, but when a judge refuses to accept a plea it is usually because the co-conspirators are already known.
On the one hand he's a despicable human who knowingly threw other people's money around in a criminal fashion to satisfy his own ego. But on the other hand he's one of the first people I've ever heard of that put fairly wealthy people in the poor house overnight. Not that I like to see people suffer but since the rest of us peasants lost our retirement it'll be nice to see a Trump or a Gates in the cheese line next to me.
Having been swindled into bankruptcy and foreclosure by a small time version of Mr Madoff (crooked technology CEO), I'd like to see a lot more people like this being marched off to jail.
While white collar crime may not seem violent, these people are sociopaths and repeatedly commit acts that destroy people and entire families. I was held up at gunpoint once, and at least I respected the robber for having the courage to do so. The person who ruined me is a coward who robs people via his attorneys.
That's what makes these people so dangerous. They can operate freely within the system for decades, and by the time you figure out you made a mistake getting involved with someone like this, it's too late.
In essence, they didn't say "We'll guarantee", they said "We guarantee". One is a direct action, the other is stating an effect. Whether the statement of effect was made in a blackmailing manner, is something you could argue.
I nominate the head of AIG's London office, Joseph Cassano, where they vaporized $500 billion in credit default swaps insuring junk. He personally took $280 million in 8 years as wages and bonuses.
AIG has used F.U.D. (fear, uncertainty and doubt) to get hundreds of billions of taxpayer money heaped into their coffers with little oversight so far. "We're too big to let us fail!" The total will probably be in the trillions.
The U.S. is printing money round to clock, perhaps to keep the illusion going, "We're rich, look at all those piles money!" Sometime soon this nation's creditors might have second thoughts about buying an more of our debt. In that case our current problems may look rather benign.
@jimbuck: he probably plead guilty because he knew he was guilty, and that he stood no chance of being found not guilty by a jury, and that either way he was going to be sent to jail for the rest of his life, so why put himself through a trial?
As for the question in the entry: who's worse? Well, Madoff defrauded people for, what, $50B? The banks utterly tanked not only the U.S. economy, but the global economy, resulting in losses of dozens of trillions of dollars... that we know about... so far.
madoff plead guilty so that the EXTENT of his crimes would not become public record. what we know about via the mainstream press is only scratching the surface.
I posted a strip this morning along these lines:
http://www.webcomicsnation.com/rstevenson/consumptionfunnies/series.php?view=archive&chapter=37106
When you know you're going to lose , guilty == no trial. You can keep justice from finding your accomplices most likely family members.
MY QUESTION is (polling) , how many people feel that we as a specie is naive, hypocritical, and self-deceiving?
When there was growth, most didn't question the source of growth. Our inspection begin only when there are losses.
I feel the Madoff case is only the simplest example of the bigger economic problems we're facing. The ease of identifying the bad guy (Madoff) in this case may obscure the bigger problem that we are naive, hypocritical, and self-deceiving.
Unfortunately we're still trying to blame Greeespan, bad banks, home owners when most of us willingly and unwilling participated in the system. With the exception of those w/ no 401k , stock, money in banks, didn't buy a house, didn't enjoy the fringe benefit of good economy, etc...., most of us have at least some blood on our hands.
what's the difference between a con man and a thief, the thief takes your money but you give your money to the con man.
I think now that we hitting bottom , we should reflect and resist growth that are not sustainable and investigate any industry with unusual growth - from there you'll find externalities which we may all end up paying down the road.
Alan Greenspan would look good in orange.
I agree with Toolbag - Madoff (and surely his victims should have seen the clue in the name) managed to fleece his disgustingly rich and privileged marks because their sybaritic lives of perpetual entitlement meant that when approached by an apparent peer who offered to turn 'their' money into even more money, at a rate unavailable to the little people, it seemed to them natural and right that such good fortune should come their way and thus the natural caution that ought to be part of the armoury of any investor was not deployed. Idiots. I love to imagine the anguish on their faces (those of them not botoxed within an inch of their lives that is) when they realised what their greed had done to them. Greatest. Ponzi. Evah.
@ 13:
That's a pretty poor attitude to take; gloating that formerly wealthy people have been taken down. Not everyone affected was Gates-level rich. Many were simply people who, through luck and hard-work, amassed money. A few million is more than I'll ever see but it certainly doesn't put them on the level as Gates and Trump. And why should they be punished, in any case? They were scammed.
@bobstevenson: excellent work mate.
@20
And a lot of the victims weren't aware that they were investing with Madoff. They trusted their financial advisors and received regular statements. Not everyone was disgustingly rich.
Maybe his stay in prison will be just like Charles Barkley. 3 days and your out. lol
As if this all wasn't shocking enough, this guy is a past Chairman of NASDAQ.
Is it just me or did BoingBoing used to have more interesting & unexpected content, "a directory of wonderful things", and less stupid rants?
For a bunch of people who are pretty keen on freedoms like free speech and freedom of association, don't you think it's a little hypocritical to be in favour of locking people up for doing what their shareholders, and the government, encouraged them to do? Madoff gets what he deserves, and should have been caught long ago, but bankers who accepted large salaries need to have done something illegal to be locked up. If they were within the law, then be angry about the law, and work to change it, but please have enough respect for the rule of law to admit that offending you isn't sufficient reason for jail-time.
The members of his family who worked with him should be prosecuted, too. They were in position to observe both his personal and professional life, and know he wasn't running an honest investment program. This is a matter of ethics and responsibility as a member of the firm, even if they needed to threaten to expose the fraud if he didn't operate honestly. They did not start the scheme, but they cooperated with Madoff and benefited from it, so they should lose the assets they gained and face prison time, too.
@28
Seriously...
#30 I think the idea is that if they were to scratch the surface they may find laws were in fact broken. Everyone thought Enron was wonderful until they were looked at more closely as well.
Doubt it will happen though. This is a plutocracy. Wall Street dictates the policy and when politicians leave office guess where they go to get sweet jobs....
I hate how a guilty plea screws with any effort to get to the bottom of things.
150 years ain't enough time for this guy.
@paulbowen
There are a number of large charities that also invested with Madoff, so it's wrong to assume that only "disgustingly rich and privileged marks" were defrauded.
@anonymous@#4
Wall street did nothing wrong here.
Haha.
On the one side you have "the wall street" gang that is honed by competition.
AHAHAHAHAHAHA. Try "honed by collusion".
Next up, Swiss dodgers.
Geez what is it with your chattering rabble and your attacks on Wall street?
We know and you know all those derivatives are too complex for you to understand, so hand over those tax revenues, already....
@#30 POSTED BY IMPROBABLE22:
Of all of the people mixed up into the financial mess they world find's itself in, he's literally one of the few folks people can pin down as a cause of something and attach personal responsibility.
I'm sure as the days, weeks, months go by and more people get nailed in this mess, they will be in the spotlight and will get their due.
thanks y'all...
@30
personally I like the 'rants'....I learn a lot from all these opinions in the comments. Granted the Madoff scam isn't a wonderful thing, but the fact that we can all say what we want to about it is. And the fact that is name is "Madoff" which on TV they pronounce it 'made-off' which he what he did with everyones dough is kind of wonderful in an odd way. Kind of like my mom's surgeon...'Dr. Dagger'!
Oh yeah...we need another tax cut, too...
Isn't focusing all our ire on this guy distracting us from looking at the systemic problems that allowed him to do what he did? It almost seems like he's the fall guy for a system that we could (but won't) radically rethink.
Anything that is too big to fail is too big to live.
@#42 POSTED BY WOLFIESMA:
Who is ignoring how it happened? Every conversation I've ever had on Madoff brought up government negligence as the main cause for him growing into the bastard he is.
@ improbable22 #30:
In what way is Madoff spending the rest of his life in prison not a wonderful thing?
I hope Obama gives him a going-away present, a copy of Going Postal with the inscription: "I don't believe in angels."
Who the hell buys stock from Grandpa Munster?
I don't know "who's worse", but I think a great case can be made for Stanley O'Neal, formerly of Merrill Lynch. He pushed that company to create and sell more and more CDOs, then when they wouldn't sell, he bought them for the company. When the guys came to warn him about how much risk he was taking, he fired them. The company reports billions in losses, but he takes his $150 million plus, and skips merrily away. There are many similar stories out there. Just wondering when the famous "THEY" will round this guy up and jail him.
I just think the whole stock market sucks. Buying stocks from companies you play no more role than watching the price go up and down. The value of stock is based on *projections* of growth? A company can make a profit, yet fall short of some arbitrary projection, and bam- the value of the company will go down overnight. It's crazy.
I don't think the stock market should play such a central role in the economy. For one thing, the stock market just fuels that acquisition/merger madness. You end up with bigger and bigger multinationals when we could be spending and saving our money locally. I'm beginning to think it is a little unethical to be involved in the stock market at all. Madoff is a wart for sure, but he's just a wart on the hog the whole economy is riding... What we need is a new economy based on local commerce and not the stupid stock market.
I wonder if Madoff's family members will continue to use stolen money to fly in private jets, luxuriate in vacation homes they own in exotic resorts, and sail in their yachts?
This collapse wasn't caused by crime. Banks took out full-page ads and gave speeches and issued press releases to advertise their plans to collectively offer trillions in loans to people who couldn't afford them. Why would they have been ashamed? At the time, it was the virtuous thing to do. They were putting people in homes!
Never mind that it also put those borrowers deep into debt they could never repay. But who cares about them?
The banks wanted to avoid charges of racism so they could get mergers approved under the CRA (hence becoming too big to fail). Loan originators wanted their fees. The junk would be sold to the greater fool in the form of mortgage backed securities. And the government was promising to backstop the rest through Fannie and Freddie. The administration could brag about rising rates of home ownership under its sage and enlightened guidance.
Everybody got what they wanted. Until they banged their toe on the fact that incomes have stagnated for decades. Even if you give them loans big enough, borrowers can't actually afford houses at a double-digit multiplier of their income. Debt isn't wealth.
I read today about some former mayor of a New Jersey town saying something like Madoff was probably the most brilliant conman in history. I couldn't help feeling that if I'd been conned out of a lot of money I'd like to think that but actually the facts don't support that analysis. I don't understand how anyone, let alone supposedly sophisticated financial institutions, would invest money with a firm that
a) Traded with an in-house desk
b) Valued their own positions
c) used auditors that no-one had heard of
d) Had stellar "returns" but didn't advertise the fact.
e) Took no fees other than the in-house brokerage
Wake up and smell the fish.
Life in prison's not long enough.
In K.W. Jeter's book Noir, the dead are reanimated & forced to work as slave labor to pay off there debts. How long do you think he'd have to work at McDonald's to pay back 50 Billion + interest?
Toolbag, there's no moral lesson in who Madoff ruined. He'd have done the same to them if they were saints, or serial killers, or Martians.
...
By the way, I have one brag point on this story: I predicted early on that he'd turn out to have never invested any of the money entrusted to him.
"Whatever. A bad guy, but only of the many we should hope will end up in jail in the next several years -- especially members of the Wall Street gang that stole billions and tanked the global economy."
Silly words, Gillmor. And sloppy thinking.
Sure, there were a ton of irresponsible bankers pushing (and then unloading in packaged loan instruments) highly dubious mortgages; certainly insufficient regulation of exotic debt instruments a la Madoff.
But at the very center of our economic near-depression, there are many causes: Fannie Mae & Freddie Mac pushed by Washington into improvident loans, greedy house-flippers, deceitful home-buyers, the easy money policy of Alan Greenspan's Fed, etc.
As #42 Wolfiesma previously said, focusing all our anger on Madoff is distracting you & me from rooting out the systemic problems of our global economy.
@#53 POSTED BY TERESA NIELSEN HAYDEN
That's one point most people seem to miss. This wasn't a case of someone cooking the books to make a bad investment seem better. This was a case of wholesale robbery. Which is why Madoff should rot in hell for what he did the broad damage his behavior.
@#49 POSTED BY MARK FRAUENFELDER
I'd love to see someone who they deal with for goods and services say "You're money is no good here..."
That's seriously that's the least people dealing with these scumbags could ever hope for.
remember also that all the senior people in his industry KNEW he was doing something wrong. For years.
Many have noted that nice people (even charities!) have also lost money. The implication is that we shouldn't judge too harshly because this sort of thing can happen to anyone.
It can happen to anyone who believes that you should be able to make money simply by having money.
That is the underlying problem. We as a society have decided that when you put together a large enough pile of money, it automatically grows as a consequence of the natural laws of the universe. Until we break ourselves of that illusion, it will continue to make our lives crappier than they should be.
Anonymous @ 22
With the exception of those w/ no 401k , stock, money in banks, didn't buy a house, didn't enjoy the fringe benefit of good economy, etc...., most of us have at least some blood on our hands.
check, check, check, check, and check.
And you are right, people are naive.
But when you try to tell people they're fooling themselves, they tend to get downright nasty.
"They" might just be anyone or everyone at the SEC who twiddled their thumbs while a pile of evidence that yelled 'Madoff cannot feasibly be making this work, it's dodgy' sat on their desk.
I think the system is rotten from top to bottom, and will continue on that way. The only hope being why things are down that enough gets ripped out and replaced by something slightly less rotten.
Of course, when it all turns around the people that shouldn't will clamp their ears shut, close their eyes and we'll all be happy because at least things ahve turned around.
So i'm a) utterly cynical and pessimistic about the financial systems and the people that run and control them and / or b) optimistic that things will get better, in a relatively short amount of time considering the amount of damage done. But only better in the sense that the status quo picks up what it can from where it left off.
The question remains: Where did that $50 billion GO?
Wall Street did plenty of things wrong, but theres a big difference between what Madoff did and acting recklessly in a strong economy. Like seriously. Madoff just stole money. To use words like 'stole' when referring to bankers on Wall St is really irresponsible.
The financial industry, with Wall St at its heart, basically were 100% orgasmic over the strong economy and the perceived strength of the housing market. As long as things stayed strong, then all these sub-prime mortgages were not a problem at all.
There were SO many people who were also acting with greed. Although the banks would love to give loans for housing, everyone who took the money and couldnt afford were equally responsible. Everyone who invested in housing because they could not see it going down.
Although the collapse of housing started the crisis, it was the insanely complex securitisation instruments that led to the failure of so many banks. But while the economy was strong, they were monsters of an instrument. Problem was nobody really had control over them.
Banks didnt steal money, they just acted recklessly (and were paid off for years) because of a strong economy, wild incentives (provided by everyone), and crazy instruments.
Seriously, anyone here blaming government regulation is a mid misguided. How many actual industry players did not see any of this crisis coming, or the collapse of housing? These guys are on the frontier, with the resources and the inside knowledge. In a free market, these guys are running the show.
So how can we expect the government and its regulation to have preempted everything, when they are the ones with lesser knowledge, and underpaid workers.
Any change in regulation won't change those two facts.
MDH #58:
"But when you try to tell people they're fooling themselves, they tend to get downright nasty"
Exactly. This is how bubbles work. Everyone believed their house was going to go up forever. I've been getting into arguments with people over this since at least 2005, they'd get angry and point to recent experience.
Believing that this has been done to us by a bunch of criminal bankers is naiive. Bad things don't have to have a human face, and running an economic system which keeps us out of poverty and doesn't run off the rails is a very serious challenge. Of course I'm happy that Maddoff gets his due, and would be happy for others (who broke laws) to join him, but this is a sideshow.
@#62 POSTED BY EVAWES:
If you can't see deregulation as the major cause of things like that happening, then there's no explaining it.
@#63 POSTED BY IMPROBABLE22
Not really. In NYC the worst group of owners affected by the housing bubble were African-American homeowners. And here's the deal. "Redlining" and plain-old racism kept many homeowners/landowners in predominantly African-American neighborhoods out of the housing game.
Then the bubble comes along. Not only can you own a house, you now have people with years of resentment—and justifiably so—deciding they will trust anyone who comes along and says they are entitled to own property... Despite the basic facts speaking otherwise. Then you have a sales force that preys on this mentality, and there you go. Maybe one or two folks raised a red flag saying, "You know, I'm not too sure if this is a good idea..." but the the euphoria of finally getting some attention logic went out the window.
Saying that bankers/lenders are not criminal for preying on this mentality is about as logical as blaming a rape victim over the clothes she wore when she was attacked.
And to bring this back to Bernie Madoff, I cringe at the amount of fellow Jews who fell for this asshat because he was "one of us" but you know what, he was pushing the buttons. The victims were simply human.
Having regulations and protections in place might not have completely stopped this mess, but I'm sure the damage would have been less.
@#49 mark
Dude. Check out your post about the Japanese grafitti artist. I think you'll find the answer to your question there.
Mr. Gilmore's preface was spot on. Thank you.
(Sorry that I spelled you name incorrectly, Mr. Gillmor.)
@61: People, people. how come no one is talking about how our system seems to have atleast a mild breakdown every ten years or so? What worries me is not that there are people in positions of opportunity who take that opportunity. What worries me is the Madness of Krauts. Our system breaks, the banks hold us hostage and we trip head over heals to give them a blank check!
How is it that we all work for the banks, our laws allow them to simply create money from nothing, loan it to people and collect interest! I have a better idea. Let's institute a slow growth policy. Let's control the flow of money by stating that banks must actually have the money in thier vaults to loan it out. Or lets cut out the middle man...Kiva.org has, why can't we have an online banking system like kiva for the US? People with real money produced by adding real value to the economy loan what they have so that others may produce more real value.
Ok Im done, I'm just so frustrated with our inability to organize. C'mon, we have twitter! Let's start the revolution!
this just in! Madoff innocent!
http://www.theprovince.com/business/fp/Spendthrift+consumers+caused+global+recession+Harper/1382932/story.html
According to TPM, Madoff's Worth Over $823 Million .
Regarding the fate of the 50B that was supposed to be the invested capital, it went 2 places, they paid themselves extraordinary amounts of money and they took new receipts and paid them out as 'profit' to earlier investors. People have been receiving 'profit' on their investments for years thinking that their capital was safe and was yielding high returns. In fact their capital was long gone and only the recruitment of more investors sustained the fiction that there were investment profits. Classic Ponzi scheme. What makes this extremely evil is that it went on for so long, with so much money and so many investors and the Madoff family knew all along that it was a lie. What colossal assholes.
#64 JACK:
Yes, no doubt some of the people selling mortgages were pretty nasty pieces of work.
I suppose what I'm trying to say is that there will always be greedy people, and punishing them after the fact is all very well. But it is very dangerous to take this to the next level and think that you can make sure the next generation won't be greedy, you can't, and worse, if you spend too much energy on moral outrage against the greedy then you risk not doing anything else.
By anything else, I mean setting up better systems to watch for ponzi schemes like Madoff's. And also to watch for instabilities like too many big banks too highly leveraged.
There are similar arguments over violent crime: burning pedophiles alive might be satisfying, but if what we want is less abuse in the long run, this probably isn't the optimal strategy.
As for mortgages taking advantage of the poor, and financially unsophisticated, the best I think we can hope for is clear disclosure laws, demanding some standardised piece of information explaining how this is going to work, what happens if you don't pay, how the interest rate will change next year, etc. A return to very high standards of credit-worthiness for loans doesn't seem like a good idea for the poor, as there are plenty of people who took out subprime mortgages which they could afford, on houses they intended to live in, and would have been worse off without these.
And, if things go wrong, the fact that you can walk away from a house and owe nothing (in the US) is itself a pretty big protection: they can't take your car or your retirement fund. (I'm still surprised that this is the case, it seems a very generous law, and a good one.)