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Was Madoff Jewel Ploy Another Fraud to Save Sons?
Posted Jan 06, 2009 12:58pm EST by Henry Blodget in Investing, Newsmakers, BankingFrom ClusterStock.com, Jan. 6, 2009:
Given Bernie Madoff's skill at hiding a massive Ponzi scheme for decades, plus his reported obsessive-compulsive attention to details, we need to ask the same question that several readers have asked. Was Madoff's mailing of $1 million-worth of jewels and other valuables to his sons, his brother, and some friends just another fraud?
Specifically, was this ploy designed to give Madoff's sons, Mark and Andrew, yet another chance to show prosecutors and the public how quick they are to report their father's wrongdoing, thus bolstering their contention that they knew nothing about the Ponzi scheme?
We are big believers in innocent-until-proven-guilty, and we do think it is possible that Madoff never brought Mark and Andrew (or his niece Shana) in on the Ponzi. That said, we find it hard to believe that Madoff's sons didn't occasionally wonder why Madoff was so secretive about the investment business and why all Madoff Investments trades were made in Europe, instead of at the US broker dealer. We also wonder why they didn't have their personal money managed by Madoff.
And given Madoff's ability to hide the Ponzi for so long, we also wonder whether he has now staged not one but two opportunities for his sons to look innocent and curry favor with the government. Specifically:
- Madoff allegedly "confessed" the scam to his sons, who promptly turned him in.
- Madoff just transferred jewels and other assets to his sons, who promptly turned him in.
Here's Alex Berenson's writeup of the mailed-jewelry news in the NYT:
Last week, Mr. Madoff’s sons, Andrew and Mark, received three packages, containing valuable jewelry and watches, as well as inexpensive items like cuff links and mittens, according to a person briefed on the contents of the packages. Within minutes of receiving the packages, Mr. Madoff’s sons called the law firm of Paul, Weiss, Rifkind, Wharton & Garrison, which is representing them, to tell them about the packages, this person said.
Lawyers for Paul, Weiss then informed prosecutors of the packages and offered to pass them to the government. Prosecutors accepted the offer.
The "within minutes" language is striking. The "person briefed on the contents of the packages" is almost certainly a lawyer or PR rep representing Mark and Andrew who wanted to make sure the NYT knew how quickly they reported the packages to the Feds (a prosecutor would never supply this detail).
If Mark and Andrew are innocent, they would have behaved just this way: They would have called their lawyers in a panic and said "Holy shit, Dad just sent us stolen goods." But if Mark and Andrew were trying to show that they were innocent--or if Madoff was just intentionally giving them another chance to demonstrate innocence--they would have done just the same thing.
So the rapid reaction doesn't really tell us much. And given Madoff's obvious genius at conning people, nothing can be ruled out.
See Also: Clever Madoffs Mail $1 Million Of Jewels To Friends, Family
149 Comments
david - Tuesday January 06, 2009 01:12PM EST
He thinks that he is above the law, thus why change the behavior now? Now, what can be done about the money that has already been passed on to relatives and friends. There is a reason for the behavior behind the madness. This guy does not do things for the hell of it.
__A_YAHOO_USER__ - Tuesday January 06, 2009 01:13PM EST
I do not believed they are innocent. It is impossible they have no knowledge nor idea during the last ten years.....IT IS IMPOSSIBLE TO BELEIVED...YES IT WILL COME........TO.... THE OPEN......ONE OF THIS DAY THE TRUTH.........I WILL WAIT........FOR ME ALL OF THEM ARE SUSPECT......
Yahoo! Finance User - Tuesday January 06, 2009 01:18PM EST
I get a dime an hour raise, so what? Gas goes down a few cents on the gallon, big deal. A billionaire walks in front of a train! PRICELESS!!! LMAO!!!
shirazif - Tuesday January 06, 2009 01:18PM EST
So you send a cool million worth of jewelry to the family members who have ratted you out in the first place? And you do not give them some advance warning that "something" is coming in the mail?
Yahoo! Finance User - Tuesday January 06, 2009 01:26PM EST
If Madoff has "obsessive-compulsive attention to details" then he will surely remember where he hid the 50 billion dollars he stole. So hopefully the poor investors will see some of their money returned to them. A message to the media: don't portray Madoff as a hero, a genius, a celebrity. He makes me puke. He's a scum and so are his kids.
Yahoo! Finance User - Tuesday January 06, 2009 01:29PM EST
Bernie's kids did not rat him out. Bernie confessed to them and they strategized how to keep as many of the family as possible out of jail. When his sons turned Bernie in they were following a script to make it look as if they were shocked by the crime and determined to cooperate with the law. The whole family, everyone who worked, there is guilty.
georgeg - Tuesday January 06, 2009 01:37PM EST
Why is the guy not in Jail... make bail 1 billion.....? We are as corupt as any other country in the world... We make all of Africa look honest.
djdk d - Tuesday January 06, 2009 01:40PM EST
his sons should be in jail. they were in on it too.
GARY - Tuesday January 06, 2009 01:45PM EST
It boggles the mind why they have not jailed this sick bastard!
william - Tuesday January 06, 2009 01:46PM EST
Who cares tax the wealthy corporations who pay nothing and the filty rich time to pay share. :) Love ya mean itr
Yahoo! Finance User - Tuesday January 06, 2009 01:47PM EST
Put all of them away for 50 years. They get a year off for every $1 billion of the $50 billion that they return.
TARPONHAWK - Tuesday January 06, 2009 01:48PM EST
Kids are guilty as sin. This is just one more scheme to screw the public.
Living the Life - Tuesday January 06, 2009 01:48PM EST
Corruption is part of life no matter what country you live in
Yahoo! Finance User - Tuesday January 06, 2009 01:49PM EST
What does it mean, "Within minutes of receiving the packages"? Does that mean they both received the packages at the same time and called their lawyer, together, within minutes? Did they both get them at the same address, or at different addresses? Did they both get them at the same time, or at different times? Did they both call their lawyers together, or separately but at the same time, or did each call within minutes after each received a package (at different times)? Did the New York Times get this information from somebody and just print it as is without seeking clarification, or did it just rephrase it in a way that might get readers interested in following up on this story?
Mike - Tuesday January 06, 2009 01:52PM EST
Madoff is a brilliant con man, but he was allowed to do this by 'look the other way' auditing and regulation. Pathetic greedy people.
Yahoo! Finance User - Tuesday January 06, 2009 01:52PM EST
Wall St = Madoff; they are one in the same. this is not the end of these kinds of scams just one person who fooled the system and made a plan to get off with the least amount of damage. As for the people who invested with him (should I say them) well like the rest of us… lost money. They will claim it on their taxes and be done with it. Whenever times get bad, this is when everything comes out. best of luck to you all!
Mike - Tuesday January 06, 2009 01:53PM EST
If the regulators missed a $50Billion... how many other 'smaller' cons are they missing?
sarfraz - Tuesday January 06, 2009 01:53PM EST
well & good for future scheme i like very much.
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Yahoo! Finance User - Tuesday January 06, 2009 01:11PM EST
Just remember BM is no genius. He'll do jail time.