Madoff, Accomplices, and Complicity

It takes two to tango. How many does it take to sustain a ponzi scheme?

See this tantalizing piece by Diana B. Henriques, for the NY Times: From Prison, Madoff Says Banks ‘Had to Know’ of Fraud

In many ways…Mr. Madoff seemed unchanged. He spoke with great intensity and fluency about his dealings with various banks and hedge funds, pointing to their “willful blindness” and their failure to examine discrepancies between his regulatory filings and other information available to them.

“They had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know….’”

Of course, as Henriques notes, “Mr. Madoff’s claims must be weighed against his tenuous credibility.”

But Madoff’s claims that others, including financial institutions and sophisticated investors, “had to know” something was wrong will ring true to anyone who knows the Enron story in detail. For a wonderful, if exhausting, tour through the Enron scandal, see Bethany McLean and Peter Elkind’s Enron: The Smartest Guys in the Room. As McLean and Elkind make clear, Enron’s shenanigans only went on as long as they did because a lot of people, at a lot of financial institutions (and accounting firms and law firms) spent years and years with their eyebrows raised but kept their mouths shut.

1 comment so far

  1. fibocycle on

    The banks alleged complicity in the Madoff Ponzi scheme would not surprise me. Having been in the investment business for 20 years I have seen a myriad of cases where the ‘powers that be’ turned a blind eye to questionable activities–where the profit derived from such activity was sufficiently enticing as to warrant the ostrich maneuver.
    Unfortunately, this attitude is quite common.

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