JUST PLAIN TALK: Bernie Madoff is dead, good

Buz Livingston
Buz Livingston

Bette Davis and Joan Crawford carried a decades-long feud. They didn't call it "shade" back then, but when told of Crawford's death, Davis threw out, "You should never say bad things about the dead, only good ... Joan Crawford is dead, good." Instead, with Madoff, it would have been better if he had lived much longer but still in prison.  

Running a Ponzi scheme for decades takes uncanny guile and cunning. Instead of promising outlandish returns, Madoff's schtick was different, no down years, just steady returns. He realized negative returns spooked investors and built his business plan accordingly. 

Like all sociopaths, he justified his behavior. In a Fox Business interview, his big mistake was "allowing myself to be trapped by the greed of others." After all, Madoff argued, the financial services industry is "corrupt and stacked against the investor." In his mind, he did little wrong. To rationalize their actions, grifters develop an artificial sense of reality.

Warning signs were flashing red, but people ignored them. Madoff used his power and prestige as NASDAQ chairman to thwart investigations and hide his crimes. His reputation and air of exclusivity intimidated financial regulators. Harry Markopolos repeatedly warned the Securities and Exchange Commission. Financial journalists at Barrons also cast doubt on Madoff's integrity. As a rebuttal to Madoff's claim about the financial services industry, many brokerages and clearinghouses refused Madoff's entreaties. Like my friend, the late Alan Reed, said, "something didn't add up."  

While the attorneys cleaning up Madoff's scam have profited handsomely, legal fees approach $1 billion, almost $14 billion has been returned to investors. The latest distribution made last February gave each customer roughly 70% of their claim. Some have had their entire investment returned. Funds came from the sale of Madoff's assets and clawbacks from investors who received more than their original stake. Restitution also came from the Securities Investor Protection Corporation (SIPC), a federally mandated, industry-funded, non-profit group to protect investor assets. Richard Nixon signed the SIPC into law in 1970 but it wouldn’t get 60 votes in today’s Senate. 

Future con artists will have to struggle to beat Madoff's record, but contrary to reports, he didn't steal $65 billion. After sifting through the records, Madoff received around $20 billion. The $65 billion number came from phony statements he generated. It was Monopoly money, a figment of Bernie's imagination.   

Some argue Madoff was a conman from his start on Wall Street. Like all crooks, he can't keep his story straight. In one interview, his thefts began in 1987, but later gave a different date. Here's the deal, an investor gets the market return, plus or minus the risk they take and after fees. And it's difficult, exceedingly so, to beat the market consistently over time. If something sounds too good to be true, avoid it. There's no free lunch, and that's what Bernie promised.

You can't always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by 2050 West County Highway 30A, M1 Suite 230.