Unraveling the Madoff mystery

Many victims of the giant Ponzi scheme run by fraudster Bernie Madoff had waited a long time for their day in court. Nine victims stood up to read out statements to Madoff, describing to him the appalling impact his actions had on their lives.

One called him a psychopath, another called him a beast. So what could the fraudster say? How would he explain what happened to his victims, many of whom had lost a life time of savings? How could he justify his big lie: claiming to make investments and instead using money from new investors to pay returns to existing clients and bankroll a lavish lifestyle for his family?

“I cannot offer you an excuse for my behaviour,” Madoff says. “How do you excuse betraying thousands of investors who entrusted me with their life savings? How do you excuse deceiving 200 employees who spent most of their working life with me? How do you excuse lying to a brother and two sons who spent their entire lives helping to build a successful business? How do you excuse lying to a wife who stood by you for 50 years?”

Madoff does however offer an excuse. He describes it as an error of judgement.

“As hard as I tried, the deeper I dug myself in a hole… I could not accept that I had failed.”

It’s not much. But it does provide some insight into the 71-year-old disgraced financier’s thinking. He knew exactly what he was doing and he knew it was wrong. He just could not stop because he could not “fail” and so on he went, encouraging investors into pouring an estimated $US171 billion into the principal account used to perpetrate the scheme.

It is the defense of a sane man and one that guaranteed that the book was thrown at him. At the packed hearing in New York yesterday, Madoff was ordered to serve the statutory maximum sentence in prison of 150 years. The judge described Madoff’s crimes as “extraordinarily evil” and the sentence sends a strong message that any would-be Madoffs will now have the book thrown at them.

“His kind of manipulation of the system is not just a bloodless crime that takes place on paper, but one instead that takes a staggering toll,” US District Judge Denny Chin said.

But while the victims of the scheme are happy with the sentence, they are now calling for further investigations into the role played by regulators, his sons and closest advisers.

But their question as to how could he do it will now probably never be answered to their satisfaction. His wife Ruth Madoff probably sums it up best:

“All those touched by this fraud feel betrayed; disbelieving the nightmare they woke to. I am embarrassed and ashamed,” Ruth Madoff said. “Like everyone else, I feel betrayed and confused. The man who committed this horrible fraud is not the man whom I have known for all these years.”

But then that is the peculiar genius of the conman.

For more on Bernie Madoff’s scam see How Bernard Madoff fooled the world’s banks, investors and high profile rich: A scammer’s guide.