Madoff: The Man who Stole $65 billion by Erin Arvedlund
Madoff: The Man who Stole $65 billion by Erin Arvedlund
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By Matt Fortune. |  |
Monday, 14, Sep 2009 05:40
Published by Penguin Non-Fiction, out now, paperback, 299 pp, £9.99.
In a nutshell...
Where's the cash, Bernie?
What's it all about?
In the depths of the banking crisis last year, a new financial scandal broke. Respected Wall Street trader Bernard Madoff was arrested after calmly confessing to running the world's biggest Ponzi scheme.
Creating an almost mythical status for himself as a financial genius, he took money from investors all over the world to invest, but in reality the cash was simply going into a bank account, with money from new investors going to pay off older clients.
Victims included Hollywood celebrities such as Kevin Bacon and Steven Spielberg, banks, and the super-wealthy, but many ordinary families in the US also lost their life savings in the scam.
By admitting all his crimes and refusing to blame anyone else, Madoff was sentenced to 150 years in prison in June, and did not face a trial.
But without a trial, many questions have been left unanswered. How did he fool so many people, for so long? Why didn't the US authorities realise earlier he was operating a massive fraud right under their noses?
And the question asked most frequently by his victims: where's the money gone?
This is an in-depth investigation that attempts to answer these questions, detailing a fascinating history of the boom years on Wall Street before the bust.
Who's it by?
Erin Arvedlund is an investigative journalist, who has worked for Barron's, the Wall Street Journal, and The New York Times.
Her article in 2001 for Barron's, Don't Ask, Don't Tell, questioned Madoff's incredible returns - almost a decade before he was finally exposed for his scam.
Sadly for the thousands of investors involved, the US authorities ignored the warning.
This is Erin Arvedlund's first book.
As an example...
"Madoff's method of operation was to have individual investors open a brokerage account - which wasn't really a brokerage account since it wasn't the broker-dealer side of the business - so he held custody of their cash.
"Then instead of putting their money into a hedge fund, Madoff simply took the money, used some of it for himself, and paid off old investors with the newer investor's money - a classic Ponzi scheme."
Likelihood of it becoming a Hollywood blockbuster
The story certainly has many of the elements of a Hollywood drama - the rise and inglorious fall of Madoff would make a good biopic. It would need probably end up being quite different from its detailed and factual source, however.
What the others say
"There will be a better book on Madoff, even if the full story may never emerge. But Arvedlund's account, tantalising and entertaining, will do for the time being." - John Kay, Financial Times.
So is it any good?
The book poses several important questions about the affair and puts the scandal in a context that does go some way to explaining how he got away with it for so long. As for where the money is, it turns out most of it never really existed - the legendary profits Madoff was making were all made up.
What is worrying is how many people actually knew something was up - many other hedge funds, high profile investors and banks would not touch Madoff with a barge pole - yet no one appeared willing to do anything.
Most troubling is the role of the US regulator, the Securities and Exchange Commission (SEC). The SEC actually received a report from an independent fraud investigator detailing every red flag that proved Madoff was running a Ponzi scheme years before the scandal broke - and it was dismissed out of hand.
By employing lawyers who wanted to work for the firms they were supposed to be scrutinising, the SEC had no incentive to go after Madoff, Arvedlund suggests. Even more shockingly, a senior executive was married into the Madoff family.
The book is at its best in exposing the excesses and poor regulation of a financial industry with far too many dark corners for people like Madoff to hide, and how apparently sophisticated, intelligent people can be blinded by greed.
It does jump around a bit and could have benefited from a more coherent structure, but there is enough momentum to keep the reader's attention through to the end.
Also, in delving into the world of trades and financial alchemy, the book occasionally gets bogged down in the kind of detail many would struggle to understand, but on the most part this can be read by anyone with an interest in the scandal and the workings of Wall Street in general.
Although the book focuses on a single financial scandal, it ends up being a warning of a failed regulatory system and the shocking ease in which a con artist can operate in finance - leaving you hoping that this time, Erin Arvedlund does not go ignored.
8/10
Sarah Routledge