Alas, there may be no good defense against a charismatic flimflam.
Just ask the 40 or so Tampa Bay area residents — among the thousands across Florida, the country and Europe, at least — who lost small and big fortunes, even life savings, by gladly giving their money to Bernard Madoff to invest over the past several decades.
Now Madoff — whose Manhattan firm worked, of all the irony, in the "Lipstick Building" — is crowned the $50 billion Ponzi King. In Palm Beach, ground zero in Florida for his deceptions, he's called Hurricane Bernie. Now he looks headed to jail, but not before leaving a wake of financial devastation that puts him at the top of Hall of Shame investment charlatans.
New Port Richey widow Shirley Solomon, 77, lost $100,000 with Madoff, and her brother was wiped out. "He was a very nice man," Solomon told this paper's reporters last week about Madoff. "Now, every time I see him on TV, I want to shoot him."
Take a number. Many Madoff investors now want to string him up. But when most gave him their money, they felt lucky he was even willing to accept their sums. He was that smooth, that seemingly unattainable, that exclusive.
A lot of people familiar with Madoff try to describe his magic. The best description is visceral, offered by Michael S. Meade, chief executive of the brokerage Lampost Financial Group, in a comment to the Washington Post.
"This guy had pheromones for middle-age, well-to-do people," Meade said. "They were attracted to the guy and just threw all caution to the wind if given the opportunity to invest with him."
Royal families in Europe even helped funnel funds to Madoff. How do you fight such sex appeal?
Frustrated whistle-blower Harry Markopolos tried to warn all of us by warning federal regulators. In fact, he tried for nine years to raise the alarm. He testified before a panel of the House Financial Services Committee last week, submitting 375 pages of testimony and supporting documents chronicling his mostly fruitless effort since 2000 to set off alarms at the Securities and Exchange Commission.
It's quite a read. I'll simplify.
Markopolos is a chartered financial analyst and certified fraud examiner, two titles of expertise that still did little to sway the SEC. His doubts over Madoff arose because Madoff's returns were too consistent over many years of volatile markets. He analyzed Madoff mathematically, but found it hard to translate his findings to regulators. He was repeatedly stalled by the SEC.
With a complex investment pitch, Madoff relied on the egos of his clients not to ask too much. (And don't forget his pheromones.)
Said Markopolos of Madoff: "He knew most wouldn't understand it and would be embarrassed to admit their ignorance, so he would have less questions to answer. With Ponzi schemes, you never ever want the victims to understand how the sausage is made, nor do you want them asking too many questions."
By the end of 2008, a year in which struggling stock markets moved Markopolos to shelve his whistle-blower quest, Madoff's scam fizzled. He confessed his business was "one big lie" and took $50 billion by tapping new investors to pay off the old ones.
I know I'm late saying this. But thanks, Harry.
Robert Trigaux can be reached at firstname.lastname@example.org.