How He Madoff With the Money: Thoughts Around the Hanukkah Table

Curves Ahead

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I am in the United States for the first time in several years and as expected, the hot topic of conversation is Bernie Madoff. Theories abound but few answers seem apparent. Here are some of the questions that I’ve heard around the Hanukkah table. I’m interested to hear your thoughts.

  • How did this happen? Why was no one monitoring? Isn’t the whole point of overhead organizations to prevent something like this from occurring ?
  • How could so many organizations run by smart people fall for this scheme? (One person said that foundations had to “beg Madoff to take them on”)
  • Did Madoff make any money out of this himself? What was the goal of the whole operation?
  • Who knew? What did they know? When did they know it? Could Madoff possibly have pulled this off alone?
  • How long had this been doing on?
  • Is Madoff a sociopath?
  • How will this affect the Jewish world? Israel?
  • How will the Jewish world recover? How long will it take?
  • Was Madoff anti-semitic? How could he rip out the knees of people and foundations he personally supported? Not only did Madoff’s own family foundation suffer major losses, but so did the foundations of those he knew personally, as well as at least one foundation that he was connected to by marriage
  • How much of a loss will the government suffer from the Madoff scheme? Economists estimate that the government will lose millions from adjusted back taxes and future income drops, but exact figures are unknown. Foundations who claimed income on their taxes according to Madoff’s investments can now adjust it according to real income earned and regain some of their money. Also, as foundations and philanthropists will have less income, they will be taxed less, costing the federal government more
  • What is an appropriate punishment for Madoff?
  • Why doesn’t Madoff’s punishment (free movement during the day, house arrest) reflect the severity of his crime?

— Read more on Birthright and Charles Ponzi himself —

On Birthright

Many people were concerned about the effect on Birthright-Israel, with an emphasis on Sheldon Adelson’s donations, even though Adelson was more affected by the economic crisis than by Madoff. Boston Jews, from what I’ve heard, seem to have the impression that Birthright is going under because the first foundation to announce that it was closing due to the Madoff scandal was the Lappin Foundation, located in Boston, which funded local Birthright trips. (Adelson is also a Boston boy.) I am not sure if this disproportionate sense of concern about Birthright is felt across the U.S. as much as it is in the Northeast. What are your impressions?

On Charles Ponzi

Did you know that Charles Ponzi was from Boston? Someone told the story that Charles Ponzi used to stand on a soapbox on the Boston Commons advertising his investments. The storyteller’s father had invested $100 one week and made $110 by the next. Fortunately for him, that one-time investment was the end of his business with Ponzi.

Direct Effects

Let’s use the people present as a microcosm for the Jewish world. Sitting around the Hanukkah table were approximately 12 people who were well educated, committed Jews. Among them, they personally knew the philanthropists and staff of four organizations that had been slammed by Madoff. Does that ring true for your experience and the people you know as well?

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13 Responses to How He Madoff With the Money: Thoughts Around the Hanukkah Table

  1. Ian says:

    It goes back to the garden of Eden and the apple from the tree of knowledge. He did it because he could, because the snake told him it was alright. He did it because nobody suspected that he would betray his religion and his friends. He proved that where money exists there are no friends and no religion. Money is the snake that says its alright because money opens door, makes everything possible. Money makes one feel like God, without the joy of creation. It is the joy of consumption. On the eighth day Madoff looked upon the earth he inherited and created and saw that it wasn’t enough, it could never be enough because no work was involved. Madoff saw that God could create the world without effort, without work because it was perfect and Madoff could be no less perfect and had to prove it. Madoff didn’t notice that he had horns and a hoofed feet and a pointed tail. He thought this could be corrected through fine tailoring.

  2. Maya Norton says:

    That’s a very dramatic interpretation. I agree with you that handling excess amounts of money can create a G-D complex, but I have to guess it goes a little deeper and wider than that. I guess we’ll be hearing more as things progress.

  3. Ian says:

    Money is the root of all evil, it is said. The two objects that can be laundered and cleaned up are dirty laundry and money. The person who these belong to get cleaned up as well. Money buys respect. That is why Madoff’s fall from grace is so great, not for what he did but for failing at it. Since money became an end in itself, more real and meaningful than religion, politics, friendship, love and even hate, winning is everything. At one time inventions were the source of riches, now winning the lotto has replaced it. Las Vegas gambling and betting on everything, from sports to politics, we have de-evolved into a primitive form of behavior, depending on luck. We are in search of meaning, of a God that exists, and we seek to prove it through winning, through hitting the lucky number. Corporate greed is still not seen as injurious, even with the loss to pension funds and stockholders, not to mention tax-payers bailouts, corporate executives are still getting obscenely huge pay packages and bonuses. And we ask ourselves why and how can this be, and the answer is easy, because they can, because they have decided their lives are worth more than those of the population of small nations. At one time, anyone could become rich. Now its only those who know how to exploit the system, the parasites. We see how unemployment is rampant, home foreclosures immense in number, stores and businesses closing, and our President-elect oblivious to it all in the dark at his beach front Hawaiian retreat. Comparisons to Bush are beginning to be made and I have said they are mirror-images of each other.
    So, if you want to know what’s wrong with Madoff, ask yourself, what is the meaning of philanthropy, why do people rise to the occasion to help others. If it is out of a sense of guilt, it is the wrong reason. If it to rise to live on the better side of angels, it is the right reason. Why do you work in philanthropy? Madoff did what he did for exactly the opposite reasons.

  4. Ian says:

    Maybe philanthropy has something to do with it. If Madoff was seen as a trustee of charities and charitable institutions, then it would be easier to entrust him to handle one’s money wisely. It gives one the blue ribbon stamp of approval, a kind of laundering of funds in a moral sense. It based the decision on projecting onto the hedge fund manager the qualities of the patrons of his service. This gave the investor the peace of mind necessary to devote one’s time to other pursuits, a kind of placing one’s future plans in a lock box and returning to one’s preoccupations and routine. Giving money to good causes is seen as a balance to the cost of doing business, the dirty side of the exchange. So one learns to make a cost-benefit analysis. One pays the financial manager to do good work for good causes and that reflects the purpose and goals of the investor itself. It becomes a mirror image, so the financial manager becomes one’s alter ego, a reflection of oneself. If the balance is skewed, if the good cause is done for the wrong reasons, then the bad side, the business side is obscured and loses its transparency. Regulation brings a third party into the exchange, hopefully to return the transparency, to remove the intimate and personal nature of the relationship. It restores, theoretically, the balance and promotes the transaction to one of public policy, public significance, it validates the transaction. Lately, philanthropy has gotten more private.
    An article in the J.Post describes how the Jewish federation groups in America didn’t trust Madoff and have gone unscathed while private foundations have suffered huge losses. It has to do with the intimate personal relationship of a con man and his victim and possibly uncertainty over the meaning of the charitable donation. It represents the unholy nature of the rise of the super-rich and the loss of value that huge sums accrue.
    As long as the economy deceptively continued to expand, Madoff’s handling of charitable foundation’s money was unimportant, while the growing economy would solve all of societies problems without the need of philanthropy, as we saw with welfare reformed to workfare. Philanthropy became irrelevant in the climate of great economic expansion, to the extent that one could receive a free trip to visit one’s culture like the birthrite program. Post-modernism became institutionalized, so one’s dreams and fantasies became elements of everyday life, disneyland no longer represented a fantasy park, but became a reality. Madoff became a bureaucrat, a small peg in a large hole of a deception larger than any one person and proving once again there is strength in numbers. Individuals, even rich one’s can become victims of larger movements of historical trends and go bust overnight. Con men are the great equalizers, the true democrats, reducing everyone to the same level. They find the common ground, the lowest-common denominator because they don’t trust people. Madoff became a swindler because he felt he was being swindled by others. He was only getting even.

  5. henry says:

    madoff is a sociopath-typical one.He happened to be Jewish-he could have been anything else.End of that story.However ,the real issue is the corruption and ineptitude of the official regulators.

    • Maya Norton says:

      Dear Henry,

      I agree with you in general, but I think many people are completely confounded by the fact that Madoff was Jewish yet he did the greatest harm to his own people. How could that be? What sociopathic behaviors, to use your language, informed his decision making?

      Thanks for commenting.

      ~ Maya

  6. Ian says:

    Madoff has become demonized by the American media in that he is being characterized as the symbol of the evils of the financial markets in destroying 45% of the country’s economy. But, those who lost money with him are part of the story in that they willingly participated in an apparent fraud. But Jews are standing out for their apparent corruptive public behavior, the latest the lawyer who supplied Anne Nicole Smith with drugs that killed her.
    What is apparent is that Jews are expected to hold to a higher standard of behavior and not just reflect what is wrong with society. If we can’t learn this lesson and try to make the world a better place we have no right to think of ourselves as the Chosen People. Time to get it right, people. It’s about time.

    • Maya Norton says:

      Hi Ian,

      I totally disagree. Madoff hasn’t been demonized or cast as a symbol: he is one.

      “Willingly participated”? You’ve got to be kidding. Some of the most generous and forward thinking Jewish charitable organizations had their knees knocked out from underneath them. The Jewish community will suffer more than any other from Madoff’s actions.

      For once, this has nothing to do with our being held to a higher standard or a different set of behaviors.

      With all due respect, please keep comments relevant to the posting and connect off-topic ideas to the subject at hand, Ian. Sorry to say this is your last warning.

      ~ Maya

  7. Ian says:

    Maya, a NY Times story expressed exactly my opinion that they “willingly participated” in the fraud. If this isn’t too “off-topic” I’ll be happy to link the story here.
    And you never commented on the Jerusalem Post story that explained why Jewish Federations didn’t get caught up in the fraud, while private foundations did.

  8. The style of writing is quite familiar . Have you written guest posts for other blogs?

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