UB professor examines Madoff scandal
By perpetuating the largest financial fraud in American history, the name Bernie Madoff has become synonymous with the term Ponzi scheme. Along with a handful of co-conspirators, Madoff stole an estimated $18 billion from individuals and entities who believed their money was legitimately invested.
"Con Game: Bernie Madoff and his Victims," a new book from Lionel Lewis, professor emeritus of sociology at the University at Buffalo, examines those who lost so much through the sleight of Madoff's hands.
"Well, some of them were devastated," Lewis said.
"People I talked to were tearful. Some are philosophical. Some were really, badly hurt. People became ill because they were elderly, they blame it on the stress. Some got on their feet. And some blame it on the government, blame the SEC."
Marriages were destroyed. Some financed their Madoff investments with second mortgages, only to lose everything.
"A lot of them were older, wealthy, middle class, and eager to take advantage of what looked like a sure thing. They were from privileged backgrounds, privileged areas. Palm Beach. Southern California. Colorado."
While Lewis interviewed many of Madoff's victims, much of his information was taken from court testimony and documents.
He builds a victims' profile that provides valuable lessons. Those who were eager to hand their money to Madoff were not stupid.
"Generally, it's the same in all con games. Con games are successful because they exploit not only greed and dishonesty, but they exploit honesty, vanity, naivete', the desire to get something of value for nothing or for very little."
Before it was exposed, the Madoff scheme convinced its investors they had built $65 billion in gains when, in reality, they had little or nothing. With the help of a court-appointed trustee, some money is being returned, including to some local unions who tried to expand their pension funds values with the help of Madoff's financial wizardry.
Madoff may have enjoyed some legitimate Wall Street success, but Lewis believes the Madoff genius rested with his ability to understand and profit from human nature.
"They were victims of their own sense of entitlement, of their sense of wanting something for nothing," Lewis said.
"Most people, particularly the in the last dozen years, have been getting two, three, four percent a year maximum on their 401k's. They were getting twice, three times the amount. Madoff was successful quarter after quarter after quarter, year in and year out. This, in itself, was a red flag."