. Versión en Español
241208 - We never thought he would do this to us, he was one of our
people – Member of Palm Beach Country Club.
An Introduction to the Mega-Swindle
Wall Street broker
Bernard "Bernie" Madoff, former president of
revered and respected investor confessed to pulling off the biggest
fraud in history, a $50 billion dollar scam. Bernie was known for his
generous philanthropy, especially to Zionist, Jewish and Israeli causes.
A one time life-guard on Long Island in the 1960’s, Bernie launched his
financial career by raising money from colleagues, friends and relatives
among wealthier Jews in the Long Island suburbs, Palm Beach, Florida and
in Manhattan, promising a modest, steady and secure return of between 10
to 12%, covering any withdrawals in typical
fashion by drawing on funds from new investors who literally pleaded for
Bernie to fleece them. Madoff personally managed at least $17 billion
dollars. For almost four decades he built up a clientele, which came to
include some of the biggest banks and investment houses in Scotland,
Spain, England and France; as well as major hedge funds in the United
States. Madoff drew almost all of the funds from high net-worth private
clients who were recruited by brokers working on commission. Bernie’s
clients included many multi-millionaires and billionaires from
Switzerland, Israel and elsewhere, as well as the US’s largest hedge
funds (RMF Division of the Man Group and the Tremont).
Many of the swindled super-rich clients forced their money on Madoff,
who sternly imposed rigorous conditions on potential clients: He
insisted they have recommendations from existing investors, deposit a
substantial amount and guarantee their own solvency. Most considered
themselves lucky to have their funds taken by the highly respected Wall
Street…swindler. Madoff’s standard message was that the fund was closed…but
because they came from the same world (board members of Jewish charities,
pro-Israel fund raising organizations or the ‘right’ country clubs) or
were related to a friend, colleague or existing clients, he would take
Madoff set up advisory councils with distinguished members, contributed
heavily to museums, hospitals and upscale cultural organizations. He was
a prominent member of exclusive country clubs in Palm Beach and Long
Island. His reputation was enhanced by his funds record of never having
a losing year – a big selling point in luring millionaire investors.
Madoff shared with his super-rich clients (Jews and Gentiles) a common
upper class life style, and mix of cultural philanthropy with low key
financial profiteering. Madoff ‘played’ his colleagues with a soft-spoken,
but authoritative, appearance of ‘expertise’, covered by a veneer of
upper class collegiality, deep commitment to Zionism and long-term
Bernie’s mega-fund shared many signs with recent high level scams: The
constant high returns, unmatched by any other broker; a lack of third
party oversight; a backroom accounting firm physically incapable of
auditing the multi-billion dollar operation; a broker-dealer operation
directly under his thumb and the total obfuscation of what he was
actually investing in. The obvious similarity of signs with other
fraudsters were overlooked by the rich and famous, the sophisticated
investors and high paid consultants, the Harvard MBA’s and the entire
army of regulators from the Security and Exchange Commissions (SEC)
because they were totally embedded in the corrupt culture of ‘take the
money and run’ and ‘if you’re making it, don’t ask questions’. The
reputation of the superior wisdom of a seemingly successful Jewish Wall
Streeter fed into the self-delusions of the wealthy and the stereotypes
held by millionaire Gentiles.
The Big Swindle
Madoff’s investment fund only dealt with a limited clientele of multi-millionaire
and billionaires who kept their funds in for the long haul; the
occasional withdrawal were limited in amount and were easily covered by
soliciting new funds from new investors fighting to have access to
Madoff’s money management. The long-term big investors looked toward
passing their investments to their kin or eventual retirement. The
wealthy lawyers, dentists, surgeons, distinguished Ivy league professors
and others who might need to draw from their funds for an occasional
fancy wedding or celebrity-studded bar-mitzvah, could draw from their
funds because Madoff had no problem covering the withdrawal by
attracting funds from rich owners of sweat shop garment factories,
dangerous meat packing outfits and slumlords. Madoff was no Robin Hood,
his philanthropic and charity contributions facilitated access to the
rich and wealthy who served on the boards of the recipient institutions
and proved that he was ‘one of them’ a kind of super-rich ‘intimate’ of
the same elite class. The shock, awe and heart attacks that followed
Madoff’s confession that he was ‘running a Ponzi scheme’ drew as much
anger for the money lost and the fall from the moneyed class as for the
embarrassment of knowing that the world’s biggest exploiters and
smartest swindlers on Wall Street, were completely ‘taken’ by one of
their own. Not only did they suffer big losses but their self-image of
themselves as rich because they are so smart and of ‘superior stock’ was
utterly shattered: They saw themselves as suffering the same fate as all
the schmucks they had previously swindled, exploited and dispossessed in
their climb to the top. There is nothing worse for the ego of a
respectable swindler than to be trumped by a bigger swindler. As a
result, a number of the biggest losers have so far refused to give their
names or the amount they lost, working instead through lawyers fighting
off other losers.
The Positive Side of Madoff’s Mega-Swindle (The Inadvertent Hand of
While it is understandable that the super-rich and wealthy, who have
lost a large portion of their retirement and investment funds are
unanimous in their condemnation and cries of betrayal of trust, and the
editorials of all the prestigious newspapers and weeklies have joined
the chorus of moral critics, there is much to praise in Madoff’s deeds,
even if such praise was not at the heart of his fraudulent endeavor.
It is worthwhile to list the inadvertent positive outcomes of Madoff’s
mega-swindle. First of all the swindle of $50 plus billion dollars may
make a big dent on US Zionist funding of illegal Israeli colonial
settlements in the Occupied Territories, lessen funding for AIPAC’s
purchase of Congressional influence and financing of propaganda
campaigns in favor of a pre-emptive US military attack against Iran.
Most investors will have to lower or eliminate their purchase of Israel
bonds, which subsidize the Jewish State’s military budget.
Second, the swindle has further discredited the highly speculative hedge
funds already reeling from massive withdrawals because of deep losses.
Madoff’s funds were one of the last ‘respected’ operations still drawing
new investors, but with the latest revelations it may accelerate their
demise. The dismissed promoters may finally have to perform an honest,
productive day’s work.
Third, Madoff’s long-term, large-scale fraud was not detected by the
Securities and Exchange Commission (SEC) despite its claims of at least
two investigations. As a result, there is a total loss of credibility.
More generally, the SEC’s failure demonstrates the incapacity of
capitalist government regulatory agencies to detect mega frauds. This
failure raises the question of whether alternatives to investing in Wall
Street are better suited to protect savings and pension funds.
Fourth, Madoff’s long-term association with NASDAQ, including his
chairmanship, while he was defrauding his clients of billions, strongly
suggests that the members and leaders of this stock exchange are
incapable of recognizing a crook, and are prone to overlook felonious
behavior of ‘one of their own’. In other words, the investing public can
no longer look to holders of high posts in NASDAQ as a sign of probity.
After Madoff, it may signal time to look for a king-size mattress for
safe keeping of what remains of a family’s wealth.
The fifth point is that the investment advisors from top banks in Europe,
Asia and the US managing billions of funds did not carry out the most
elementary due diligence of Madoff’s operation. Apart from severe bank
losses, tens of thousands of influential, affluent and super-rich lost
their entire accumulated wealth. The result is total loss of confidence
in the leading banks and financial instruments as well as the general
discrediting of ‘expert knowledge’. The result is a weakening of the
financial stranglehold over investor behavior and the demise of an
important sector of the parasitic ‘rentier’ class, which gains without
producing any useful commodities or providing needed services.
The sixth point is that since most of the money stolen by Madoff came
from the upper classes around the world, his behavior has reduced
inequalities – he is the ‘greatest leveler’ since the introduction of
the progressive income tax. By ruining billionaires and bankrupting
millionaires, Madoff has lessened their capacity to use their wealth to
influence politicians in their favor – thus increasing the potential
political influence of the less affluent sectors of class society…and
inadvertently strengthening democracy against the financial oligarchs.
A seventh point can be made that by swindling life-long friends, self-same
ethno-religious investors, narrow ethnically defined country club
members and close family members, Madoff demonstrates that finance
capital shows no respect for any of the pieties of everyday life: Great
and small, holy and profane, all are subordinated to the rule of
Eighth, among the many ruined investors in New York and New England,
there are a number of mega slumlords (real estate moguls), sweatshop
owners (fancy name-brand clothes and toy manufacturers) and others who
barely paid the minimum wage to their women and immigrant laborers,
evicted poor tenants and swindled employees out of their pensions before
moving their operations to China. In other words, Madoff’s swindle was a
kind of secular ‘divine’ retribution for past and present crimes against
labor and the poor. Needless to say, this ‘unconscious Robin Hood’ did
not redistribute the money fleeced from the employers to their workers,
he reinvested part of it in charities which enhanced his philanthropic
image and to payout to some of his early investors so sustain the
overall Ponzi scam.
Point number nine is that Madoff struck a severe blow against anti-Semites
who claim that there is a ‘close-knit Jewish conspiracy to defraud the
Gentiles’, laying that canard to rest once and for all. Among Bernard
Madoff’s principle victims were his closest Jewish friends and
colleagues, people who shared Seder meals and frequented the same
upscale temples in Long Island and Palm Beach.
Bernie was discriminating in accepting clients, but it was on the basis
of their wealth and not their national origin, race, religion or sexual
preference. He was very ecumenical and a strong backer of globalization.
There was nothing ethnocentric about Madoff: He defrauded the Anglo-Chinese
bank HSBC of $1 billion dollars and several billions from the Dutch arm
of the Belgian bank Fortes. $1.4 billion was from the Royal Bank of
Scotland, the French bank BNP Paribas, the Spanish bank, Banco
Santander, the Japanese Nomura; not to mention hedge funds in London and
the US, which have admitted holdings in Bernard Madoff Investment
Securities. Indeed Bernie was emblematic of the modern up-to-date,
politically correct, multicultural, international…swindler. The ease
with which the super rich of Europe forked their fortunes over caused
one Madrid-based business consultant to observe that, “picking off
Spain’s wealthiest was like clubbing seals…” (Financial Times, December
18, 2008 p.16)
The tenth point is that Madoff’s swindle will likely promote greater
self-criticism and a more distrustful attitude toward other potential
confidence people posing as reliable financial know-it-alls. Among self-critical
Jews, they are less likely to confide in brokers simply because they are
zealous backers of Israel and generous contributors to Zionist fund
drives. That is no longer an adequate guarantee of ethical behavior and
a certificate of good conduct. In fact it may raise suspicion of brokers
who are excessively ardent boosters of Israel and promise consistent
high returns to local Zionist affiliates – asking themselves whether
this business about ‘what is good for the …’ is really a cover for
The final and 11th point is the demise of Madoff’s enterprise and his
wealthy liberal Jewish victims will adversely affect contributions to
the 52 Major Jewish American Organizations, numerous foundations in
Boston, Los Angeles, New York and elsewhere, as well as the Clinton/Schumer
militarist wing of the Democratic Party (Madoff bankrolled both of them
as well as other unconditional Congressional supporters of Israel). This
may open Congress to greater debate on Middle East policy without the
usual high volume attacks.
Madoff’s swindle and fraudulent behavior is not the result of a personal
moral failure. It is the product of a systemic imperative and the
economic culture, which informs the highest circles of our class
structure. The paper economy, hedge funds and all the ‘sophisticated
financial instruments’ are all ‘Ponzi schemes’ – they are not based on
producing and selling goods and services. They are financial bets on
future financial paper growth based on securing future buyers to pay off
earlier cash ins.
The ‘failure’ of the SEC is totally predictable and systemic: The
regulators are selected from the regulatees, are beholden to them and
defer to their judgments, claims and audit sheets. They are structured
to ‘miss the signs’ and to avoid ‘over-regulating’ their financial
superiors. Madoff operated in a milieu of a Wall Street where everything
goes, where impunity for mega-bailouts for mega swindlers is the norm.
As an individual swindler, he out-defrauded some of his bigger
institutional competitors on the Street. The whole system of rewards and
prestige goes to those best able to juggle the books, to cover the paper
trails and who have willing victims begging to get fleeced. What a
mensch, this Madoff!
In a few days, one individual, Bernard Madoff, has struck a bigger blow
against global financial capital, Wall Street and the US Zionist
Lobby/Israel-First Agenda than the entire US and European left combined
over the past half century! He has been more successful in reducing vast
wealth disparities in New York than all the white, black, Christian and
Jewish, reform and mainline Democratic and Republican governors and
Mayors over the past two centuries.
Some right-wing conspiracy theorists are claiming that Bernie is a
secret Islamic-Palestinian agent (from Hamas) who set out to
deliberately undermine the financial base of the Jewish State of Israel
and its most powerful, affluent and generous US backers and foundations.
Others claim that he is a closet Marxist whose swindles were carefully
designed to discredit Wall Street and to funnel billions into
clandestine radical organizations – after all…does anyone know where the
lost billions have gone? Unlike the leftist pundits, bloggers and
protest marchers, whose earnest and public activities have had no effect
on the rich and powerful, Madoff has aimed his blows where it hurts the
most: Their mega-bank accounts, their confidence in the capitalist
system, their self-esteem and, yes, even their cardiac well-being.
Does that mean we on the left should form a Bernie Madoff Defense
Committee and call for a bailout in line with Paulson’s bailout of his
Citibank cronies? Should we proclaim “Equal bailout for equal swindlers!”?
Should we advocate his flight (or his right of return) to Israel to
avoid a trial? It might not fly with his many Jewish victims to make the
case for an Israeli retirement for Bernie.
There is no reason to mount the barricades for Bernard Madoff. It’s
enough to recognize that he has inadvertently rendered an historic
service to popular justice by undermining some of the financial props of
a class-ridden injustice system.
Was it out of sheer admiration or because of some covert linkages with
Madoff that our current Attorney General Michael Mukasey is removing
himself from the investigation? Others of equal importance and influence
are most certainly tied in the Madoff Affair, and not just the ‘victims’.
We are facing a serious case of matters of State … No one can believe
that a single person could by himself pull off a scam of this size and
duration. Nor can any serious investigator believe that $50 billion
dollars has simply ‘disappeared’ or been squirreled into personal
James Petras, a former Professor of
Sociology at Binghamton University, New York, owns a 50-year membership
in the class struggle, is an adviser to the landless and jobless in
Brazil and Argentina, and is co-author of Globalization Unmasked (Zed
Books). Petras’ most recent book is Zionism, Militarism and the Decline
of US Power (Clarity Press, 2008). He can be reached at: firstname.lastname@example.org.
Read other articles by James, or visit James's website.
This article was posted on Saturday, December 20th, 2008 at 9:00am and
is filed under Corruption, Finance, Justice, Zionism. ShareThis