Time Marches On: Madoff’s Swindle, Five Years Later

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Scott Patterson
ACFE Senior Media Relations Specialist

In 2008, we were still looking back on the massive accounting frauds at Enron and WorldCom when, almost overnight, Bernie Madoff became a household name. News broke that an enormous Ponzi scheme had unraveled, a scheme orchestrated by Madoff that was rumored to have cost investors tens of billions of dollars.

In case you let the five-year anniversary of Bernie Madoff’s fall from grace sneak up on you this year, chances are that, by now, you’ve noticed at least some of the press coverage surrounding this milestone.

Today, we know the dollar amount lost is close to $18 billion, as estimated by Madoff trustee Irving Picard. About half of that amount has been recovered, though the process of providing burned investors with a portion of their money is a slow, complicated one.

You can read about one those victims, Morton Chalek, whose $2.3 million account with Madoff ended up being nothing more than “fiction,” MSN Money reports. Chalek is 90 years old, and wonders if he will see any of the money before he dies. The Wall Street Journal provides an even more intense look at some of Madoff’s victims in “Madoff Victims Recount the Long Road Back” (please note, however, that the article requires a subscription).

Among the tales in the WSJ piece: A man whose wife died in January after they lost the bulk of their retirement nest egg in the fraud. The sudden loss of financial security left her “wrecked,” according to her husband, her whole mindset having changed since that fateful day. 

Another interesting article comes from CNNMoney: “Five things you didn’t know about Bernie Madoff’s Epic Scam.” Here’s one of them that surprised me (spoiler alert): No one is really sure when Madoff’s scheme began. Madoff has claimed it started in the late 80s, and then later claimed it didn’t begin until the 90s. According to this piece, it is believed to have taken shape many years earlier.

For those who would like to read the comments of a fraudster (arguably) in some degree of denial, those stories are out there, too. Madoff has granted a few prison interviews to eager journalists, including recently. Here are the main points I gleaned from those interviews: he believes his victims should have known better, he says the banks knew what he was up to, and his prison experience is “laid back.” Not exactly the degree of contrition I would be looking for had I lost my retirement fund to his fraud.

I’d rather instead focus on the words of Harry Markopolos, CFE, the whistleblower who, for years, saw straight through Madoff’s smoke and mirrors. Named CFE of the Year in 2009, Markopolos still travels the country speaking about his experience chasing Madoff. Accepting an award last month in Erie, Penn., Markopolos said: "I didn't do it by myself, I assure you that.  I had a lot of help and it (the award) is really for those people … We didn't do it for any kind of glory or any kind of awards.  We just did it to stop Bernie Madoff.”

Markopolos has referred to his helpers as “the bloodhounds,” a tight group of investigators who worked hard (and lost a lot of sleep) trying to expose Madoff. Five years later, it occurs to me that while the world doesn’t need any more Bernie Madoffs, we could sure use a lot more bloodhounds. 

Affinity Fraud: Lower than Low

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Cora Bullock

Fraud Magazine Assistant Editor

I had a mild experience with a Bernie Madoff-type of sociopath right after college when I moved into an apartment with a girl that was a friend of a friend. She was the life of the party; people flocked to her like moths to a flame. When she chose to be friends with you, you felt honored. But it was all a deceiving façade.

She claimed to be going to school (which she wasn't). She was aghast when I told her that my credit card company sent me past-due notices for bills I had never received. A mutual friend, upon hearing my lament, sat in silence on the other end of the phone and then said, "Check the drawer of her nightstand." Sure enough, there sat my credit card bills full of charges from my card that I had never made. I went to restaurants and businesses around Austin and found copies of the credit card receipts, with a signature that was quite obviously not mine, some during vacations when I was out of town. I confronted her, and she denied, denied, denied, until I waved the receipts in her face. Then she broke down, swearing she'd pay me back. And I believed her because I wanted to.

The final straw came a few months later when I walked into our house and thought we'd been robbed - all of our stuff was missing. Turns out our landlord had taken some furniture, all of the electronics and sporting goods - all of which happened to be mine - as collateral for unpaid rent. Guess who wasn't paying rent?

I eventually got all of my stuff back by involving her parents, but she never reimbursed me for the credit card charges (no more than $600). I consider myself lucky.

Of all the frauds perpetrated in this world, the most heinous is affinity fraud. I envision these people carefully searching and screening their future victims. Once they find the ideal candidates, they set about manipulating them, building rapport, only to take them for all they've got. It makes my blood boil.

I edited the Fraud Magazine March/April 2013 article, "Affinity is only skin deep: Insidious fraud of familiarity." The opening story is outrageous. Seng Tan got in good with the Cambodian community through the shared pain of the Pol Pot regime, during which thousands disappeared and died. These people had lived in terror and escaped with nothing but their lives to the U.S. They met this woman, who " knelt in their temple to pray, and they cried and laughed together over their shared experiences." And what did Tan and her husband do? Robbed them of every precious penny of their life savings, to the tune of $30 million, to live in luxury and comfort. What? Are you kidding me? They are sociopaths and completely disgust me.

The latest video on Fraud-Magazine.com is of Kevin Forrester, a fresh-faced, charming man who stole from his own grandmother. What kind of person steals from their grandmother? Though he was convicted and served time, he's still trying to burnish this lowest of low behavior.