Bernard Lawrence Madoff (born 1938) is the creator of the largest pyramid in American history.
You can rob in broad daylight, absolutely openly. There are many tools for this - a personal computer, an officially registered company, etc. But the main weapons of the "day thieves" were and remain their own brains and knowledge of human psychology. 2009 - Bernard Madoff, one of the most famous businessmen in the United States and also the builder of the largest financial pyramid in American history, was convicted in America. Madoff faces 150 years in prison. So the United States takes revenge on a person who did not live up to its hopes.
The message that Bernard Madoff is a fraudster, the founder of a financial pyramid, which during the time it existed has attracted a huge amount - $ 50 billion, shocked the United States. It's as if it suddenly turned out that a certain beloved singer was singing all the time to the soundtrack in someone else's voice. Or if it were discovered that a well-known scientist, academician, laureate of Lenin and State prizes constantly shamelessly reprinted the works of his students under his own name, without even bothering to change a word in them.
Since the mid-60s of the last century, Madoff's name has been synonymous with scrupulous honesty and nobility, innovation and, of course, success. This is what helped him to deceive his clients for decades. The irony lies in the fact that he deservedly received the reputation of an honest, noble innovator. And to create a large-scale scheme to deceive everyone - from his own children to the US government - Madoff was forced by the exorbitant faith of others in his abilities and, of course, pride.
Good school boy
Bernard Lawrence Madoff was born on April 29, 1938 into a simple family in Laurelton, Queens, New York, where the Jewish middle class preferred to settle at the time. His parents - Ralph and Sylvia Madoff - were in business. Now no one knows how. Bernard himself did not talk about his parents, and he has practically no childhood friends. Although, one of his classmates once noticed that Ralph Madoff was "something like a broker", and now Fortune magazine reported that a brokerage firm Gibraltar Securities was registered on Sylvia Madoff, the address of which coincided with the address, where the Madoffs lived. The American Securities and Exchange Commission closed the office due to reporting problems.
However, Bernard himself did not take any part in the affairs of the parent company. He studied. Fortunately, the public school - Far Rockaway High School - was extremely good. Among its graduates are three Nobel Prize winners (in medicine and physics), half a dozen more world-famous scientists, several famous athletes, a congressman, prominent journalists and, finally, two world-famous businessmen - Karl Aiken and, of course, Bernard Madoff.
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He studied, as can be seen from the documents of the school archives, very well. 1956 - after leaving school, he entered the University of Alabama, and then transferred to one of the private New York universities, where he received a diploma in political science. Bernard tried to continue his education at Brooklyn Law School, but dropped out after a year. He wanted to work and earn money.
Innovator
Madoff opened his own business in 1960. In his company, in which his wife Ruth also worked, as they say, he invested all his savings - $ 5,000, which he saved while working as a lifeguard on the beach and installing irrigation equipment in gardens of more successful (at the time) New Yorkers. Madoff was one of hundreds, if not thousands, of brokers who traded in so-called penny stocks - stocks of small or newly formed companies that were worth less than $ 5 and were traded on the OTC market instead of on the exchange.
The business was not very profitable, but it allowed the Madoffs to live pretty decently. As his then acquaintances recall now, his father-in-law, an accountant, supplied the financier with new clients. Over time, the clientele expanded, and it became increasingly difficult for Madoff to work almost alone.
Madoff came up with the idea of using computer technology to distribute quotes, receive orders, and so on. In fact, it was a challenge to the New York Stock Exchange. What he came up with soon turned into a computerized over-the-counter marketplace for securities, created with the participation and support of the National Association of Stock Dealers (NASD) and called NASDAQ. Madoff was not only one of the most active members of the association, but in fact the father of NASDAQ and at one time a major player on this marketplace.
The NASDAQ site has become a real gold mine for Madoff. It did not just compete with the New York Stock Exchange, it competed with extraordinary success.
“While Bernard has become the real king and god of NASDAQ, there are many promising high-tech companies in the US. For a number of reasons, they could not enter the stock market, they did not meet the requirements for listing on the New York Stock Exchange at that time.
But these companies successfully traded in the over-the-counter market, says New York expert Ron Gilman. - Risks in the over-the-counter market were much higher, but the risk was offset by the opportunity to earn relatively quickly. This attracted gamblers to the market. As a result, it happened quite naturally that the shares of the most high-tech companies were traded on the NASDAQ. Suffice it to name three: Microsoft, Dell, Apple. Whatever happens now, for decades they have all been associated with success, rapid growth and novelty."
Proud swindler
NASDAQ, of which Madoff has been for many years, helped him become not only a billionaire, but also a true legend of Wall Street. Bernard's investment companies have never lacked clients. Everything he touched seemed to turn to gold. His influence in the business world was almost absolute. He served on the board of directors of the Securities Industry Association of America, the premier professional association for fund managers. Thanks to this, Bernard had almost unlimited access to the top officials of the state. “In Washington, he was not just his own, he was welcome,” says one expert. - If Bernard said that he could not do something, it should be understood that no one can do it.
Actually, the financier himself now claims (he honestly told about this in his testimony at the trial), this feeling of omnipotence ruined him. The idea to create a financial pyramid came to him after in the early 1990s several investors, frightened by the confusion reigning then on the market, turned to him with a simple and understandable request to accept their funds and increase them. After all, of course, if Bernard could not do this, no one could do this. The investors were not individual, but institutional. Madoff did not name them, but it is likely that they are about large banks or financial corporations.
“I understood that these clients, like all professional investors in the market, expected their investments to exceed the market average. And although I never promised any of my clients any specific rate of return, I felt obligated to meet my clients' expectations at any cost,”said Bernard.
The only way to do this in those conditions was deception. The famous investor announced that he had come up with a kind of special investment system based on the analysis and tracking of stock indices, a verified game in different directions - up and down, which makes it possible not only to protect investors' investments from unpredictable changes in quotations, but in any case to increase investments. If anyone else had been in Madoff's place, he would have been called a charlatan. But Madoff's credibility as a visionary, innovator and investor was undeniable, and the businessman was immediately believed.
At the beginning, Bernard believed that his pyramid, Bernard L. Madoff Investment Securities, was a temporary phenomenon: he would wait for the market to calm down, invest the money entrusted to him in real stocks, and everything will go the same way. But as it turned out, the pyramid is an extremely profitable business, and it is almost impossible to get out of it.
He periodically informed his clients and regulators that he was investing in stocks and other exchange-traded instruments, while in reality he simply deposited all the money into an account he opened with Chase Manhattan Bank, and as needed, when it was time to pay "dividends" or when clients decided to withdraw their money, gave it out from the same account.
The account was replenished from the funds of new clients, from which the financier had no end. According to a British newspaper, investors literally lined up to give him money. When, after the arrest of the swindler, the authorities published a list of all the clients of his pyramid, it read like the table of contents of the directory Who's Who in the World of Finance. In addition to many simply very rich people (one of them later said that he entrusted Bernard with $ 11 million, that is, 95% of his entire capital), the list included several dozen large charitable foundations (including, for example, the Steven Spielberg Charitable Foundation) and the world's leading banks.
Denunciation victim
This is not to say that Bernard's activities, too successful against the background of others, did not raise any questions. Once it even came to a scandal. A certain meticulous expert publicly stated that the results of the activities of his foundation announced by Madoff contradict not only common sense, but also the laws of mathematics: "Such results are impossible even theoretically." But nobody listened to him. “The word of a simple expert against the word of a Wall Street legend. Nobody even started to think about which of them to believe,”says one of the experts now.
However, after this incident, Bernard became more careful. He no longer just wrote phony reports. Having opened several accounts, including in Britain, in a branch of one of his firms, the swindler of the century began to transfer money from account to account, depicting business activity.
"Unbelievable, but it is a fact. Absolutely everyone believed him. His own sons, who did not participate in this business, believed him, even his third son, who participated in the activities of Bernard L. Madoff Investment Securities, believed him,”says expert Michael Donnelly. "And it looked like the limit of trust was granted unlimited." He had several thousand clients who gave him funds totaling $ 50 billion.
According to Madoff, from the very beginning of his scam, he knew that the crime would have to be answered. “When I started this scam, I knew that what I was doing was wrong, criminal … Over time, I realized that my arrest and this day were inevitable,” he said in court a few minutes before the judge sent him to jail. However, according to many experts, Madoff's level of trust was so great that he could have continued to build the pyramid for the rest of his life. If not for the outbreak of the financial crisis.
The flight of investors from the stock markets did not pass by Bernard L. Madoff Investment Securities. This was not a sign of mistrust in Madoff, just for a while he ceased to be the greatest. “After the collapse of several investment banks, there was no longer any talk of trust. Investors just wanted to quickly withdraw their money from investment funds,”said Ron Gilman.
In early December 2008, the pressure on Bernard from investors became quite serious, he realized that he would not be able to keep the story secret, and tried to save at least part of his fortune. “Bernard, of course, realized that when the case was solved, the investors would take from him everything that he had left by then,” says one expert. “He did what he thought it was wise to do: he tried to distribute money to his loved ones and thereby take them out of the blow.”
The financier told his sons Mark and Andrew, who worked in other, quite legitimate companies of his, that he intends to pay New Year bonuses of several hundred million dollars ahead of schedule. Suspecting something was wrong, Mark and Andrew came to his father's house and demanded an explanation. He told the truth: while Mark and Andrew were engaged in quite honest and profitable (before the crisis, of course) business, he, Bernard L. Madoff, was building a financial pyramid; the collapse of the pyramid in a crisis is inevitable, and he hopes that he will be able to save at least part of the funds before that time. Then he is ready to declare himself bankrupt.
From Bernard Madoff's residence, his sons went to their lawyer. The conversation was short-lived: the lawyer was instructed to immediately contact the authorities and hand over Bernard Madoff to them.
Bernard was arrested on December 11, 2008. It took several months to prepare the case for trial, to find all the victims of the swindler of the century's pyramid and, in the end, to bring the case to court. All this time, the businessman was under house arrest. Already in the courtroom, having made an official confession, the swindler learned that the house arrest warrant had been canceled.
The court decided that now that the accused has confessed to everything, given the enormous time that threatens him, his advanced age and, of course, the remaining opportunities, he can try to escape from justice in order to spend the rest of his days at large. To the applause of those present, the financier was taken into custody right in the courtroom and after the meeting was taken to the temporary detention center, where he remained all the time until the verdict was passed - no longer as Bernard L. Madoff, but as prisoner No. 61727054.
Madoff pleaded guilty to 11 counts and was sentenced to up to 150 years in prison.
A. Soloviev