He's Madoff with the loot
Toolbox
Published: December 26, 2008
t's a scene, seen often on television news programs, that's almost impossible to understand: Rogue financier Bernard Madoff, who has confessed to pulling off a $50 billion fraud, has a cryptic smile on his face as reporters surround him on a New York City sidewalk.
So devastating are the consequences of Madoff's scheme that earlier this week one of the many big-tme investors who trusted him apparently committed suicide after desperately seeking, but failing, to find a way to recover at least some of the huge losses his clients suffered because of Madoff's outrageous conduct. Did the news of that apparent suicide wipe the smile off Madoff's face? Does he feel any remorse at all?
Many charitable organizations, in this country and overseas, that relied on Madoff's investment firm now are facing total failure. Their good deeds, financed by the proceeds of their investments, may now be beyond their financial reach. The resulting suffering is virtually incalculable. Is Madoff smiling about that, too?
In the meantime, yesterday's New York Times reported that a Syracuse University research project shows that so far in 2008 federal officials have brought the fewest prosecutions for securities fraud since at least 1991. The study, using the Justice Department's own data, shows that there were 133 prosecutions for securities fraud in the first 11 months of this fiscal year. In contrast, there were 437 cases in 2000 and 513 cases in 2002 (the year of the notorious Enron and WorldCom financial scandals).
Similarly, at the Securities and Exchange Commission, investigations that led to Justice Department prosecutions for securities fraud dropped from 69 in 2000 to just 9 in 2007, a decline of 87 percent, the Syracuse study indicated. Perhaps Madoff saw the green light, bright and clear.
The Times reported that legal and financial experts cite a loosening of enforcement measures, staffing reductions at the SEC and a shift of FBI resources from financial investigations to terrorism issues as factors contributing to the decline in prosecutions.
Surely most of us hoped that after the Enron and WorldCom scandals the evil-doers in the rarified world of high finance had been exposed and punished (not that all of them were brought to justice) and that therefore others who might be tempted to take the same low road to illicit wealth would have learned a lesson. It apparently didn't work out that way.
"I think the SEC has completely fallen down on the job," Jacob Zamansky, a Manhattan lawyer who represents investors who have lost money due to fraud, told The Times. "They're more interested in protecting Wall Street than protecting investors. The new administration has to do a complete overhaul of the SEC."
David Burnham, the co-director of the Syracuse study, said that the drop in the number of prosecutions shouldn't surprise anyone, noting that "it's a reflection of a choice that was made right after 9/11 to move investigators into terrorism, and this is the cost of that." He conceded that "maybe it was the correct call" (given the climate at the time), but that "with both the FBI and the SEC, the federal government is really the only place that does white-collar crime on a systematic basis."
It was in that climate of lax federal oversight that the likes of Madoff were able to carry on their greed-driven schemes, and the cost of this official neglect is almost incalculable. The incoming administration must give Wall Street the scrutiny it needs if the public is to be adequately protected.
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