Bernie Madoff:
How Did One Man Fool So Many People?
What Did the World Learn?
Jackie Phillips
Sociology, Post University
SOC324 Deviant Behavior
Unit 5 Assignment: News Article Reflection
Professor Joshelle Jackson
Due Date: 11:59 pm EST, Sunday of Unit 5
Bernie Madoff:
How Did One Man Fool So Many People?
What Did the World Learn?
Find one news story on organized and white-collar crime and write a two-page reflection on it, including the following:
A summary of the news story
Bernie Madoff ran an investment company that swindled people out of over $50 billion dollars in over 20 years. He was arrested in 2008 and given a life sentence for over 150 years. He died in 2008 in prison from cancer.
“Madoff was effectively given a life sentence – 150 years – and his brother, Peter, who also worked for Bernard L. Madoff Investment Securities LLC, received a prison sentence of 10 years. Madoff was also ordered to pay nearly $200 billion in restitution, but that order from the court was essentially meaningless, as Madoff’s assets at that time couldn’t begin to cover the amount.” (CFI Teams, 2024)
Clear identification of the deviant behavior and its effect on society
Madoff steered his multi-billion dollar corporation to defraud investors from all over the world from the United States to the Persan Gulf.
“Buttressed by elaborate account statements and a deep reservoir of trust from his investors and regulators, Mr. Madoff steered his fraud scheme safely through a severe recession in the early 1990s, a global financial crisis in 1998 and the anxious aftermath of the terrorist attacks in September 2001. But the financial meltdown that began in the mortgage market in mid-2007 and reached a climax with the failure of Lehman Brothers in September 2008 was his undoing.” (Henriques, D., 2021)
An explanation of the cause of the behavior
The reasons for Madoff’s behavior and ultimate crimes are numerous. He had other businesses that failed, and he was also head of the NADASQ Stock Exchange and he may have wanted to show that he was capable of being a great manager. Bernie Madoff's motives for creating his Ponzi scheme were complex and included a mix of factors, such as:
Ego: Madoff may have wanted to be seen as a member of the elite Wall Street crowd.
Selfishness: Madoff may have believed he could keep the scheme going for as long as he lived.
Concern for others: Madoff may have wanted to protect his sons from the fraud.
Failed legitimate business: Madoff may have used the Ponzi scheme to prop up his legitimate business, which was starting to fail.
Two interventions (or responses) to this type of deviant behavior
The Inspector General, David Kotz reviewed many of the reports about what was trying to be done at the time that the complaints were being filed about Madoff. He found that there were many errors and discrepancies in the investigations.
“In Kotz’s subsequent Sept. 29, 2009 report, “Program Improvements Needed Within the SEC’s Division of Enforcement,” (see sidebar after story) he wrote that “Enforcement staff assigned to investigate Madoff were inexperienced and the investigation suffered from a lack of supervision, which had consequences for the investigation.”” (Carozza, D., 2010)
The SEC published a list of improvements they tell the public they are making after the Madoff Ponzi scheme, but according to the watchdog groups, these changes have not been made to prevent another disaster like the one Bernie Madoff was able to pull off.
“Barbara Roper, investor protection director for the Consumer Federation of America, said, "There are a lot of lessons that should have been learned from the Madoff Ponzi scheme, some of which may have been learned better than others." (White, M., 2021)
Conclusion
The biggest difference in white collar crime compared to regular street crime is the massive, multi-department, multi-state and multi-country effort and organization needed to investigate and document everything that is going on. These investigations can take years to investigate and prosecute, which obviously affects the eventual outcome. With all the correct groups and departments and agencies involved, these crimes can be found and prosecuted and eventually found guilty.
References
Carozza, D., 2010, Fraud Magazine, SEC Watchdog Monitors Agency’s Progress after Madoff Case, https://www.fraud-magazine.com/article.aspx?id=4294967550
CFI Teams, 2024, Corporate Finance Institute, Bernie Madoff, https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/bernie-madoff/#:~:text=Things%20fell%20apart%20in%202008,a%20couple%20of%20hundred%20million
Henriques, D., 2021, New York Times, Bernard Madoff, Architect of the Largest Ponzi Scheme in History is Dead at 82, https://www.nytimes.com/2021/04/14/business/bernie-madoff-dead.html
White, M., 2021, NBC News, Madoff Exploited Weak Oversight, but did regulators learn their lesson?”, https://www.nbcnews.com/business/business-news/madoff-exploited-weak-oversight-did-regulators-learn-their-lesson-n1264094
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