It usually is.
Take Bernie Madoff. Financier to the stars, the rich, the cream of America’s (and the world’s) elite. A genius player of the money markets, a former chairman of the NASDAQ, a Wall Street legend. What better pedigree could you choose? And who better to invest with? The perfect high-rolling individual with whom to invest your millions. Or so it seemed. An investment return that defied the markets. And yet, in the end, no more than a Ponzi scheme.
Despite the intelligence of many of his clients, it was the oldest trick in the book. There was no capital, merely the payment of money to investors using other investors’ money. A paper profit but a puff of smoke. A house of cards. Arguably the biggest private fraud in history – $50bn – and perpetrated by an individual with an aura of invincibility that allowed him to convince those willing to make a seemingly staggering return to part with their life savings. There was the rarefied air of the Palm Beach Country Club, home to most of his investors, who he personally chose. There was no application to this exclusive group, you were invited by Madoff, adding to the air of elitism.
But the sad fact was many of these were older, couples, many charities that saw his philanthropy and followed it for the benefit of their charitable purposes. Big banks suffered as well – investors at BNP Paribas, Banco Santander, and HSBC were among the heaviest hit. Amazingly, the SEC investigated Madoff’s organisation eight times in the last sixteen years, and, incredibly, found no evidence. Similarly, a rival firm, determined to replicate his amazing results, concluded they were impossible, and in 2005, a report to the SEC still resulted in no findings. In the end, the credit crunch was what took the rug from under his manicured feet. Wishing to withdraw 7bn, Madoff couldn’t cover the cash. The end was nigh.
This week he pleaded guilty to 11 charges of fraud, and may face up to 150 years in jail. He’ll most likely die there. But while he admits his role, and remorse, only he will know why he did it. It is, in a time where greed is laid bare to us all, a staggering conceit, and one that probably says as much about personal greed (and, at the same time, the willingness for people to accept anything in order to make money) as any. Gordon Gecko would be proud.