the madoff affair

So what do you think about Bernard Madoff and how he managed to get away with it for so long?

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The Madoff scandal has generated a number of lawsuits, accusing fund managers of forms of negligence. However, there appeared to be a number of eminent investment organisations which, after due diligence, apparently determined that Madoff's returns could not be legally obtained.

This knowledge seems to have been retained within the organisations that conducted the exercises, and they simply refrained from investing with Madoff. Given that the fraud perpetrated appears to be the biggest on record and has resulted in at least two suicides as well as driving significant numbers of elderly people into penury, some form of public service in sharing the misgivings earlier on could have prevented considerable human misery. In short, why was it that only one person out of the global financial community went to the authorities about Madoff, when many appear to have determined the truth behind his 'success'?

The lawsuits against the fund managers who invested with Madoff accuse them of negligence in that they had a direct obligation to conduct due diligence before investing and should have discovered the fraud or had reasonable suspicions to refrain from investing with him. It is theoretically possible, however, that these funds could have discovered the fraud, but only after investing considerable sums of money first. Under the current legal and regulatory frameworks it would appear that these funds, which enjoyed the closest possible relationship with Madoff, had no incentive to report the fraud as they would immediately have been liable for the kind of legal action they are now subject to, only with a smaller sum of money, which would still be relatively large. If the above was the case, then the best possible course of action for the funds would be to continue supporting the fraud, while at the same time arranging the affairs of their officers in anticipation of the fraud's inevitable collapse.

The funds could have discreetly withdrawn their money from Madoff, but this could have meant that they would probably have been unable to obtain the promised high rates of return legitimately elsewhere to satisfy fund members, plus also they could have brought forward the inevitable before getting their cash. The funds apparently had no action they could take with a mostly positive outcome as soon as their first dollar arrived in Madoff's bank account. There was also the consideration of the huge fees they received for directing the money to Madoff.

Thus it appears that the most financially sophisticated participants and non-participants in the fraud had no incentive to disclose suspicions of a criminal activity, obviously apart from a sense of common decency. Had some other form of incentive been available for disclosure then fewer lives would have been ruined. I would suggest that this situation should somehow be redressed otherwise laissez-faire capitalism, the bedrock of American economic success, may be tarnished for a generation.

Paul Horgan
Crowthorne, Berkshire UK


Thank You Frontline for this great piece of journalism. The size and scale of this thing is incredible. The people involved were obviously all ruled by greed. I think that this problem really went too the heart of why our financial system collapsed. The SEC is tremendously understaffed, underfunded, and lacking competent professionals who know the financial system. This story more than any other shows just how ridiculous it became. The only good thing to come out of this will be a increase in funding and oversight to the SEC, and hopefully greater transparency in the future.

Also i dont know if anyone else watched the interview with Michael Bienes carefully but if you do -- watch his eyes anytime a question is asked about whether he knew or had any involvement in the ponzi scheme madoff was running. Every time, he will try to look at the interviewer and than his eyes quickly dart straight up toward the ceiling. The only time he does this is when questions about his knowing or involvement in the fraud are asked.

He is clearly lying, i believe he knew the entire time. Watch for his eyes to go straight up toward the ceiling thats when he's lying, not when his eyes go to the side, only straight up.

Kurt Stevens
Logan, Utah

FRONTLINE's editors respond:

An hour of the Bienes interview is streamed online on this web site.


Martin Smith and his outstanding staff have brought the public incredible reporting from Afghanistan, Iraq and now Wall Street.

The legacy of these fine investigative reporters will be with us from decades to come.

Thank you Mr. Martin-

LTC, US ArmyAfgh/2003-Iraq/2005

R. H.


Great production, enjoyed the story very much. Suggest Bernie be let out of jail and sent home on his own w/ no protection. Conducted a pool on how long he would last and give the $$$$ to the people he cheated.

If he does goes to prison out-source him to China it would be cheaper. Send his wife, kids, brother and any other family member, who profited illegally from his schemes along to keep him company.

Bo Diddley
Nashville, Tennessee


Hats off and in the air once again to Frontline for another top notch piece of TV journalism focusing on Bernard Madoffs crooked run! Couple of questions not answered were how much of other peoples money did Bernie spend on himself and what's left to give back to investors?I'll be watching for the "Bernie Behind Bars" sequel!Keep rollin Frontline!

Stuart Edmondson
Encinitas, Ca


I am bernard madoff's biggest fan..not only do i think he should get no jail time but that he should be allowed to keep the money..he didn't swindle working stiffs like me...nor poor people..nor desperate people out of their last two or three grand..nor poor uneducated religious people as slimeball evangelist ministers do..

his victims were well-heeled people who wanted even more..wealthy palm beach types who wouldn't be caught dead in the same building with someone like me..or finance experts who were revealed to be greedy and dumb..and now i should feel bad for these people? feelings can be summed in three words-"well done bernie"

david arcuri
norwich, ct


as an accountant, i would like to have seen more reporting on therequirements of madoff's firm with regard to filing form 1099-int (for interest), 1099-div (for dividends) and 1099-b (for proceeds from sales of securities)with the irs.

in addition to losing their investments, did the clients also have to report all that interest and dividend income and long and short-term capital gains for all those years. income reported that they apparently never earned. talk about a double whammy. wow!

bill grant
south boston, ma


Thanks for the story.

Madoff is a very chilling person. I wish he had been caught sooner.

Tom McBride
Amherst, MA


Bravo. However, the hour program simply cannot do justice to this story. The astounding response and finger pointing only underscore that the broadcast was merely the frosting and to digest the layer cake one MUST read the full interviews and Markopolos' extraordinary letter. A remarkable job of reporting.

Nick Lipkowski
Hyattsville, MD

FRONTLINE's editors respond:

Read the interviews cited by this viewer.


I saw "Madoff" the other night, when it was originally aired. Whoa! I am a high school math teacher who teaches AP Statistics to very sharp juniors and seniors. We are now watching the broadcast in our classroom as a huge learning exercise. We are looking at it with financial lenses, ethics lenses and of course, statistics lenses. I hope my students learn the following: "if it looks too good to be true, it is." I also hope as future mangers and leaders what "due diligence" is and how important ethically it is. I am convinced: if the feeder funds to Madoff had done their due diligence Madoff would still have stolen the money but, not to the tune of $9 BILLION. Thank you, Frontline, for a great broadcast.

Joanne Fitzpatrick
Reading, MA


I have been a compliance officer in regulated broker dealers for decades. I have had considerable experience with regulators (NASD, SEC etc). I do not accept the SEC explanation that they were understaffed.

After the tech bubble burst, there was a distinct shift from regulation to "gotcha". The "gotcha" approach gave the regulators a way to quantify the number of violations they detected. However, as the number of reported incidents increased and fine revenue increased, there was no explanation as to whether the act was a clerical oversight or fraud. They were aggregated together and reported as increased regulation.

I know of an incident in which regulators were asked for feedback on a pending transaction where the firm was taking an aggressive stance. They were told the transaction would be canceled if they thought it was excessive. The regulators' response was that it is not their obligation to answer. The gentleman who gave the SEC the roadmap in the Madoff scheme is one of thousands of people trying keep the financial industry a responsible industry. He is also one of thousands of people that the regulators have turned their back on.

If the proposed increased regulation will only result in more violations and fines for failures to jump through clerical hoops, there is no point to it. Until the regulators design their audits to detect harm, fraud and depraved indifference, this type of scheme will recur.

Stamford, CT


What's the difference between Madoff and the rest of us? None. People would rather spend 200 dollars for an Ipod more than cheaper MP3 player that does the same thing. We are as greedy as the rest of those people who invested in him or Madoff who scammed everyone to live a life at a higher standard. We live in a society that encourages beautiful front cover, not contents. And guess what some people are doing now -- buy cheap stocks to make quick profits! Nothing will change for as long as social value is evaluated by wealth. Congraulation to everyone!



I hope Frontline follows up on "The Madoff Affair" with another documentary regarding this fraudulent scheme -- but the next documentary should uncover the exact nature and extent of the complicity at the SEC. Were, for example, individuals at SEC corrupted by Madoff? The SEC investigation that found no wrongdoing is especially mindblowing. There IS more to this story, and what remains to be uncovered (assuming it CAN be uncovered) could be even more disturbing than what we know right now. So, please, take your time to thoroughly investigate the SEC's complicity.

Steve Kane
Portland, OR

FRONTLINE's editors respond:

FRONTLINE's interview with The New York TImes' reporter Diana Henriques offers some interesting context on some factors that help explain the SEC's failures in the Madoff case. Read this last part of the Henriques interview.


As a friend of Dianne and Michael Bienes I would like to point out that they were victims too. The real villains in this sorry tale are not only Mr Madoff but also his family - if anyone should be investigated beyond those already implicated it is Mrs Ruth Madoff and her sons.

A friend of Michael and Dianne Bienes n/a
London, United Kingdom


Wow, how could people in the U.S. invest with someone who didn't allow access to their account on the Internet? If that's not the most obvious warning sign in today's 21st Century world then I don't know what is.

Eric Haynes
Springfield, Missouri


posted may 12, 2009

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