Bernie Madoff went from a career high as one of the country’s most successful hedge fund managers and former president of the National Association of Securities Dealers Automated Quotations (NASDAQ) to a low that includes a sentence of 150 years in prison for perpetrating the country’s largest ($50 billion) Ponzi scheme. What should have been a warning to many (unprecedented double-digit investment gains year in and year out) instead seemed to draw the elite of investors, including charities and celebrities.
According to Forbes magazine, “The arrest of the 70-year old Madoff, widely considered to have the magic touch as an investor, is another serious black eye for the hedge fund industry and all non-transparent investment vehicles.” Worse, according to Forbes is that “If Madoff hadn’t faced $7 billion in redemptions, this Ponzi scheme might not have been discovered.”
It was Madoff’s son who reported his securities fraud. As a result of pleading guilty to 11 felony counts, in 2009, Madoff was sentenced to 150 years in prison. However, many of the investors who lost everything by investing with (and funding the lavish lifestyle of) the Madoff family still believe it was not enough punishment. For many, including charitable organizations, the losses are unrecoverable.
Apple doesn’t fall far from the tree?
Born Bernard Lawrence Madoff in 1938 in Queens, New York, he was the child of parents who themselves became notoriously involved in finance-gone-wrong. Ralph and Sylvia Madoff were married during the height of the Great Depression and struggled financially for many years. In the 1950s, they entered the world of finance. His mother was listed as a broker-dealer and their house was listed as the office’s address.
According to Biography.com, “The SEC (Securities and Exchange Commission) forced the closure of the business for failing to report their financial condition. The couple’s house also had a tax lien valued at more than $13,000, which went unpaid from 1956 to 1965. Many suggest that the company and the loans were all a front for Ralph’s backhanded dealings.”
School and career
For his part, Bernie was more interested in the swim team and being a lifeguard as a young boy. His swim coach hired him as a lifeguard at the Silver Point Beach Club on Long Island. He went off to college, first in Alabama and then transferred to Hofstra. He married his high school sweetheart, Ruth, who landed a stock market job after graduating from Queens College.
Using money from his summer life guarding job, Bernie and Ruth opened Bernard L. Madoff Investment Securities LLC. With help from Ruth’s father, a retired CPA, they developed an impressive client list and prospered. According to Biography.com, by the 1980s, “his firm handled up to 5 percent of the trading on the New York Stock Exchange.”
Rise to fame and the ultimate fall from grace
As the Madoff family business grew and prospered, his company integrated computer stock quotes, eventually developing the basis for NASDAQ, for which he served as the president of its board of directors.
At the private firm, more family members began joining, including Bernie’s brother Peter, and sons Andrew and Mark. His niece and nephew, Shana and Roger, also became Madoff employees. When, in 2008, Madoff told his sons he planned to hand out early million-dollar bonuses, they balked and questioned where the money would come from.
Madoff admitted to the Ponzi scheme, eventually revealing that he had lost some $50 billion of investors’ money. Among the charges leveled by the government at Madoff were money laundering, perjury and filing false statements with the SEC, the regulating body for financial companies.
In the end, Bernard Madoff, like his parents before him, perpetrated a fraud on investors. Unlike them, he did it on a scale never before seen in US history.