Monday, June 1, 2009

Too Good To Be True? It Probably Is!

“Greed is good”, as Gordon Gekko exclaimed in the 1987 movie “Wall Street”. It looks like quite a few people agreed with that statement as the revelations about the Ponzi scheme run by Bernard Madoff has been unfolding recently, and has caught quite a few South Floridians in it’s web of deceit.

A Ponzi scheme is a swindle in which a quick return on an initial investment is paid out of funds from new investors, which lures the victim or victims into bigger risks, and eventually results in a financial bust and the loss of most all the money invested.

As despicable as Bernard Madoff was in his operation of his financial Ponzi scheme, the people who got caught up in his web of deceit, couldn’t control the greed “ gene”, that is residing in all of us, and it came out to bite these people, in the butt, big time.

The “victims” of this scam were not illiterate school dropouts, who were taken advantage of by a smooth talking charlatan, but were some of the wealthiest “machers” here and around the country, and in foreign countries as well. Fred Wilpon, owner of the N.Y.Mets, Steven Spielberg, famed Hollywood producer, Mort Zuckerman, owner of the N.Y. Daily News and U.S. News and World report, and Sen. Frank Lautenberg (D-N.J.), were some of the famous people taken for a ride on the Madoff scam machine. It is estimated that up to $50 billion has been lost by these and other investors. The final total will probably never be known.

Some people were looking for that proverbial, “pot of gold” at the end of the rainbow, and believed that Bernie Madoff was some sort of a “financial genius” who could produce financial profits more than double the prevailing rate of what banks and other financial institutions were giving their depositors and clients. Greed blinded these people when they should have known that this guy was just another “snake oil” salesman selling a bogus product.

Mahatma Ghandi once said, “There is enough for everyone’s need, but not enough for even one person’s greed”. Getting annual returns of between 12% and 15% was not normal in the realm of today’s business and financial investing – it should have raised a “red flag” if anyone wanted to know how this “guru” knew something nobody else knew? In other words, “If it’s too good to be true, it probably is”, should have been the catchword, heeded by all the dupes, who entrusted this guy with their life savings and their philanthropic trusts.

I don’t wish hardships on anyone, as “there, but for the grace of God, go I”, but when the greed “ gene” takes over, it’s very difficult to act rationally when the dollar signs cover your eyes and warp your judgment. This won’t be the last time somebody will attempt to “screw” his friends and friends of friends in order to live the “good life” on the backs of his naïve victims, but it should be a wake up call, to all investors, to be vigilant in the future for the enticing deals that seems “too good to be true”, because as we’ve seen in this case, “they probably are”.

Written by: Chuck Lehmann

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Anonymous said...

Chuck, I agree with most of what you said, but not all investors were rich people. But even if they were they are still crime victims. A lot of five figure salaried working people invested through Madoff and lost their life savings to fund them in retirement. Now they are worth ZERO.
On march 9, 2009 he reached an agreement with the SEC banning him for life from trading. That's not a joke. The SEC had numerous complainys over the years and came up empty whereas a CPA wannabe in high school could have easily found the fraud. He was chairman of NASDAQ three times. The SEC, which sadly means us, should be made to reimburse everyone every penny they lost. Hopefully, limo liberals like Spielberg and other could be publicly shamed into not taking reimbursments.
Mike M

Mike M said...

This wasn't greed. Madoff chaired NASDAQ 3 times and was one of the most respected and trusted investors on Wall Street. Complaints were made to the SEC by people who believed his returns were just too good to be true. The SEC supposedly investigated this guy and said he was on the level.

Did the SEC not think it odd that his accounting firm was a one man operation working above mom and pop retail stores at a tiny strip mall in Rockland County New York, about 40 miles north of his NYC offices?

People in the SEC were/are corrupt and just as much a criminal as Bernie Madoff and the SEC investigators should be fully prosecuted and jailed and the government should be held responsable for everyones losses and be made to reimbiurse everyone for every last dime shown on their fina statements. What good is a watchdohg group when they are spoon fed enough details that even an eighth grader could add up?

Not to worry though, when the government oversees our health care they won't mess it up at all.