Why did Bernie Madoff do it?
One writer, Andy Kessler in Forbes, has speculated that he got in over his head. Kessler's view: "Most men don't set out to be crooks, but Madoff became one when his talents proved lacking."
Kessler believes it might have all begun a decade or more ago when Madoff already had a flourishing trading business. But he still felt challenged to do better. So, according to this view, he started a money management business on the side. He had been hardly noticed before but, says Kessler, now, all of a sudden, he moved "to the top of the cocktail party list" in Palm Beach. He was offering as much as 13.72 percent a year on investments. Now he had become a big shot.
That explanation certainly seems to have an element of truth to it. But it underlines what may be the basic moral lesson of this whole unfortunate episode. It was Vince Lombardi, the legendary football coach, who said: "Winning isn't everything. It's the only thing."
To the extent that Wall Street traders, lawyers, doctors, journalists -- or any of us -- follow that philosophy we are looking for trouble. Madoff, who was aptly named, made off with people's money. The government says that Madoff had 4,800 client accounts containing $64.8 billion in customer savings. Prosecutors charged that Madoff had erected an intricate framework to make it appear that a thriving business was being conducted when it was all bogus. Among the people he fleeced were New Jersey Senator Frank Lautenberg, Hall of Fame pitcher Sandy Koufax and a charity foundation run by Nobel Peace Prize laureate Elie Wiesel.
In a voice so soft the judge had to tell him to speak up, Madoff explained the details of the mammoth fraud. He said of his Ponzi scheme: "I believed it would end shortly and I wold be able to extricate mself and my clients. However, this proved difficult and ultimately impossible." He apologized to his family and friends and the thousands who gave him money. "I cannot adequately express how sorry I am for what I have done."
When the judge revoked Madoff's bail, some of the victims seated in the courtroom applauded. That was certainly understandable.
This man behaved shamefully. And it is shameful that no government or private agencies caught up with him until it was too late to save the investors who had lost life savings to his ugly scheme.
Many questions are still unanswered about the whereabouts of the actual money accumulated in this fraud. But the most basic question is: what, if anything, can be done to guard against this happening in the future? The regulatory safeguards failed. Until very late in the game, no government official responded to the scent of possible fraud or corruption.
The real question is: can there be morality on Wall Street or in the business world generally? It's a question that business schools and philosophers should ponder. Are MBA candidates taught to follow an ethical and moral framework in their careers? John Grinnell says the real test of one's capacity for morality and ethics is "first and foremost an issue of self-awareness." To Grinnell "listening to the quiet voice of one's gut'' is the best way to distinguish between right and wrong.
Not a bad way to look at it. But it may not be enough to combat greed and dishonesty.
