Is the business world still feeling the impact of Madoff?
Bernie Madoff is the man associated with what has been labelled the biggest Ponzi scheme fraud in history and for which he received a life sentence. The effects are still being felt; such was the scale of the fraud.
For the uninitiated, it must be explained who Bernie Madoff is. A former stockbroker, investment adviser, financier and a non-executive chairman of NASDAQ, he admitted to running a huge investor scam, one that is believed to be the biggest in US history, through his company Bernard L. Madoff Investment Securities (BMIS). Following his arrest in December 2008, it was alleged that Madoff had stolen around $50 billion dollars of investors’ money. The figure for his firm’s losses was even higher, with prosecutors estimating $65 billion.
As for the world of business, the effects of the Madoff Ponzi fraud were profound. The SEC – the Securities and Exchange Commission – was shown to be at the very least ineffective. The SEC claimed that the rush by investors to get their money out of BMIS was sparked by the economic crash, but it has been shown that the body had been alerted to suspicious activity at Madoff’s company but did not act until he had been turned in. All of this has led to a loss of public confidence in the SEC.
In the aftermath, other Ponzi schemes were exposed and it has made investors much more cautious where and with whom they place their money. The upshot has been that investors are now much more likely to put their money in bank accounts that offer lower returns but much less risk.
Madoff’s family and acquaintances and his victims were also seriously affected by the crime. The effect on his family was devastating. It was his sons who reported their father’s fraud to the authorities after he had confessed to them. His son Mark took his own life two years after his father’s arrest, while Madoff’s brother Peter, the firm’s Senior Managing Director and Chief Compliance Officer, received a 10-year jail sentence.
The scandal also had a serious effect on the life of Catherine Hooper, a retail consultant for the fashion industry, who was the fiancé of Madoff’s son, Andrew. Hooper realized she could not escape the fallout and resigned from her main client. The taint remained with her and Andrew, and four years later, the press reported that no one was even prepared to rent them an apartment. With the support of Andrew, she eventually set up her own enterprise, but suffered personal tragedy when he died of lymphoma in 2014.
As for the victims of the Madoff Ponzi scandal, their names were listed on 162 pages filed with the Manhattan US Bankruptcy Court. They included investment firms, banks from a range of countries, as well as top celebrities and wealthy individuals; one who was listed as losing a massive $200 million. Others lost retirement funds, with some victims claiming they will never get over being robbed of their fortunes.
Madoff sent shockwaves through the world of business and the effects are being felt to this day. The only positive is that those with wealth are now far more cautious where they invest their money, and an inefficient regulatory system has been overhauled.