I just posted something about Madoff and Ponzi schemes six days ago and then this morning I awoke to the news that Madoff had died at the age of 82.
He spent the last 11 years in prison for operating a multi-decade $64 billion Ponzi scheme. His original sentence was for 150 years.
The New York Times obit offers a solid recounting of Madoff and how his scheme worked and why it went on so long.
I covered this scandal and others when they were breaking in 2008 and 2009. It seemed that every week, the SEC and FBI were announcing a new one and it got so bad that we wouldn’t even write an article if the scam was less than a couple million.
Now these scandals and frauds are the fault of those that perpetrate them, but the sheer size of these scams and the numbers affected tells me that we really need to make some changes and not with law enforcement, but in how we value honesty and hard work and just being human beings.
Over the convening decades, we’ve come to embrace this idea that if someone has a lot of money they must not only deserve the money but must command our respect. That the money is a clear sign of their goodness. It’s almost religious. Hell, it is religious for some, who believe that God in some way has rewarded these people, so therefore they’re entitled to their wealth, no matter how they got it. Well, it’s this kind of thinking that helps these con artists do what they do, which is take money from everyone.
Madoff was a prime example of this. While he was eventually caught and punished, it was only after decades in which he was rewarded for ripping off people. He and his family lived a wealthy lifestyle. They belonged to the private clubs, got to serve on boards of nonprofits and were looked upon as experts and authorities. You think this guy ever got told to wait for a call back to see a doctor? You think he got jerked around by his cell or cable provider? You think if he needed a caterer for a party he’d have to change the date because that caterer was booked for another event?
In the end, Madoff spent his last years in prison and lost everything but his notoriety. And I’m not here to celebrate his death, but it would be nice if we actually learned something from his story.
You see, this problem is deeper than Wall Street. I’ve heard people in lots of walks of life brag about cheating people out of money, or pushing them to buy something they didn’t need and their friends and family sitting around them at a table in a restaurant laugh about it, only because it’s not them.
And that’s the real lesson from Madoff. The first people who were fleeced in his scam were friends and family. And that’s almost always the way it goes. So think about what you’re laughing at when someone tells you a story about how they got someone to buy a useless warranty, or some service contract they’ll never use, or even got them to sell a family heirloom to them at thousands less than it was worth.
Because, you’re next.