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Ben Stein How Not to Ruin Your Life

Ben Stein, How Not to Ruin Your Life

Madoff: Many Questions Remain

by Ben Stein

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Posted on Tuesday, June 30, 2009, 12:00AM
So, Bernard Madoff has been sentenced to life plus a century and a quarter in federal prison for destroying the lives of thousands -- tens of thousands, hundreds of thousands -- of innocent men and women. That's a good thing, and I think we can assume that he won't enjoy his prison time a great deal. Many friends of mine from the Nixon days went to prison, and I can tell you that none of them enjoyed it much (although former Nixon aide Chuck Colson did start a prison fellowship that has done great work).

But now that Madoff is in prison for good, many questions remain:

1. We now have reports that 10 others could be arrested in connection with the Madoff scandal, and that is certainly not a surprise. How could he possibly have juggled thousands of non-existent "trades" each month by himself? It is like saying that one man assembled all of the Buicks made in the past 30 years. Madoff had to have received help from not just one but many men and women. He had a huge trading operation. What were they trading? The idea that one man did all of this by himself is infuriatingly preposterous.

Let's see some real resources devoted to getting this case going. It has just been started and is not anywhere near finished.

2. By the same token, the investment advisors who guided billions into Madoff's phony accounts have to be held to account. They are required to behave according to fiduciary standards. That means they have to put the client's interest ahead of their own, do stringent investigation, and avoid even the appearance of conflict of interest. Clearly, in many, many cases, none of these requirements were met.

The idea that Madoff could have generated great returns in every kind of market year after year should have set off alarm bells in every advisor's mind. (I can tell you that when some princes of Lehman tried to get me to invest in Madoff a few years ago and when I looked up his returns, they smelled fishy to me right through the Internet screen.) Clearly, only rarely did any advisor see further than the immense kickback fees Madoff paid.

These people bear serious investigation and punishment.

3. It is quite literally inconceivable that Madoff's wife and family did not know what he was doing. His brother, Peter ("Thou art Peter, and on this rock, ‘bro', I will found my scam") was the compliance officer, for Pete's sake. How could he not know what was going on? The sons had grown up in the business. How could they not know? The eagle-eyed wife, who made her first public statement yesterday, was said to have watched the accounts closely. How could she not have known?

4. This is by far the most important part: The SEC is supposed to be watching for exactly these kinds of scams. Yet the SEC missed them, and they even brought in Madoff family members to monitor markets! That is how much they missed what was going on.

It gets a lot worse. A man named Harry Markopoulis repeatedly warned the SEC that this was a scam, that results such as what Madoff claimed were simply not possible. He sent detailed accusations about Madoff to the SEC. They were completely ignored.

Now, when do the people who ignored these vital communications go on trial? Madoff at least has the excuse that he wanted to be rich -- and, in a way, while it's a pitiful excuse, it's at least understandable.

What excuse do the regulators have? Why are they not being tried for criminal dereliction of duty? When they go on trial, we really will have a new day in securities law.

And now we come to the most important part (and pardon me for shifting gears): Now we have a new administration. It is going for a national energy policy largely formulated and regulated by bureaucrats. We have seen in Madoff how bureaucrats behave. Do we really trust them to keep the lights on and the air conditioning going? Do we really believe they can make 15 percent of our power needs from wind and solar in a few years? Do we trust a bunch of pointy-headed bureaucrats to guard the bedrock of our economy -- energy -- to decide who is allowed to make fuel and who isn't?

I don't, and I am extremely frightened to think that the same people who allowed Madoff to put across the worst scam in securities history will be in charge of keeping America's energy pipeline going.

Think about it. Is this what you want?

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294 Comments

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  • Yahoo! Finance User - Thursday, July 16, 2009, 10:44AM ET  Report Abuse

    • Overall: 1/5

    The real question: Why does anyone take Ben Stein's advice, if you can call it that. His articles about the economy and the stockmarket have consistently been wrong. Here we go again. If you elect people who have no respect for government's role, they promote and appoint people who feel the same way (and in the case of republicans, they demote or fire anyone who disagrees with them). It's no wonder that they were asleep at the wheel whether it's the SEC or FEMA, etc. They created a self-fulfilling prophecy. My congratulations to the last republican congress, George W. Bush and Ben Stein. Please keep spewing the party propaganda....America needs to hear it and see it in action.

  • David - Sunday, July 12, 2009, 12:30PM ET  Report Abuse

    • Overall: 3/5

    Yes more of the crooks need to be exposed. You left out all the international wire transfers Madoff did. The Federal Reserve tracks all such transfers. So who got a large portion of the stolen money over all these years ?

  • Tony d - Sunday, July 12, 2009, 12:39AM ET  Report Abuse

    • Overall: 1/5

    The real question??? WHAT WERE THE GOVERNMENT AGENCIES THAT WATCH FOR THIS DOING??? Nothing. Now no one wants our money. What a failure. The ME generation drug addicts and free sex wackos have destroyed everything.

  • David - Friday, July 10, 2009, 6:18PM ET  Report Abuse

    • Overall: 1/5

    sorry but this seems to little more than redundant populist band wagon jumping pap...and more than a little slow out of the blocks

  • Liam - Thursday, July 9, 2009, 10:23PM ET  Report Abuse

    • Overall: 1/5

    What a douche bag,,,Ben sits on the sidleines sucking his thumb for eight years while Bush's SEC appointees (especially Chrrssy Cox) eviscerate the enforcement and regulatory role of the SEC and now Ben has the temerity to blame government employees for incompetence. News flash for Benjamin, if the head of your agency stifles deep dive investigations, the bureaucrats are doomed to fail. How dare you then casually toss out your silly conservative blather about government "being the problem".

  • Yahoo! Finance User - Thursday, July 9, 2009, 6:12PM ET  Report Abuse

    • Overall: 1/5

    The monetary system is a ponzi scheme. Watch how money is created: http://video.google.com/videoplay?docid=7065205277695921912&ei=JGtWSoWnDJCWrAPl-83ABg&q=zeitgeist addendum&hl=en

  • pragmatic - Thursday, July 9, 2009, 1:08PM ET  Report Abuse

    • Overall: 4/5

    Very good points. It is an irony that the current financial industry crisis was largely created by governmental agencies such as Fannie Mae and Freddie Mac and the authorization given them by HUD to buy sub prime loans. As a result of that bad regulation and unneeded governmental agencies, we get more regulation and more agencies. What has Sorbanes Oxely really done other than to increase the cost of business and make America businesses less competitive globally?

  • Yahoo! Finance User - Thursday, July 9, 2009, 12:56PM ET  Report Abuse

    • Overall: 4/5

    Could hhave been more in depth but otherwise OK

  • Yahoo! Finance User - Wednesday, July 8, 2009, 6:50PM ET  Report Abuse

    • Overall: 2/5

    Nary a few have gone to prison, after LTCM, Enron, FNM, Mozillo,Lereah, Toll Bros etc etc..Insider trading, rob, cheat, lie. Crime pays and very well thanks you! Welcome to the real America...not for the average working fool, but most or all our corporate elite, and politicians. Now for some levity...Too funny ---I won't keep spamming you, but this one was funny too. Hitler, and the housing bubble.. http://www.youtube.com/watch?v=bNmcf4Y3lGM

  • Sketch - Wednesday, July 8, 2009, 5:40PM ET  Report Abuse

    • Overall: 2/5

    Nothing new here, except the weak connection between poor SEC regulation (get real; they aren't going to be tried, the most we can hope for is they are all dismissed and banned from government service and the SEC is disbanded and replaced with offices in the FBI for fraud and the FTC for regulation. The real ripoff of the proposed energy policy is all those traders making fortunes trading those co2 credits that are given to coal producers but gas producers (much less damaging) have to buy! Talk about political corruption. and will speculators run the price of these co2 permits up and down to pick the pockets of mainstreet and the american consumer? Probably worse than the price of oil futures, which is an obscene hedge fund leveraged scam.

  • w - Wednesday, July 8, 2009, 4:41PM ET  Report Abuse

    • Overall: 5/5

    I agree with you Ben about regulators being tried for criminal dereliction of duty, but what would have happen if we had no regulations. maybe that one positive thing about this down turn it's flushing out all the crooks. unfortunately all us tax payer will have to pay for there crimes.

  • Yahoo! Finance User - Wednesday, July 8, 2009, 2:55PM ET  Report Abuse

    • Overall: 4/5

    The best article Ben has written in a long time.

  • Yahoo! Finance User - Wednesday, July 8, 2009, 2:26PM ET  Report Abuse

    • Overall: 5/5

    If the family reaped the rewards of his thievery, then the family should be forced to pay for his transgressions. Putting the old man in prison to die and letting the family live off the remaining scraps seems to be a better deal than working honestly all your life and paying to have a life insurance policy. Take away anything that family can not justify purchasing with their own earned and let them live like the rest of us - poor!

  • Yahoo! Finance User - Wednesday, July 8, 2009, 2:24PM ET  Report Abuse

    • Overall: 1/5

    The magnitude of Madoff's ponzi scam is a insignificant in relation to the Obama Administrations bailouts, debt load, transfer of funds into union coffers, and manipulation of the legal system. . . Yet the American public is still in the Hope stages, much like Bernie's investors were one year ago...

  • myrony - Wednesday, July 8, 2009, 11:26AM ET  Report Abuse

    • Overall: 1/5

    Yeah, the Madoff's are a hideous lot, and there is no way they are innocent. This is not news. In typical neo-con rhetorical style, market fundamentalist Stein uses the Madoff disaster as a lead-in to argue for less government oversight of financial markets. Lawyers with no quantitative background run and populate the SEC. An above average lawyer, i.e. more intellectually gifted and competent than Stein, may be able to keep up with the likes of Madoff. There is no way they are going to keep up with the mathematicians, et al. that created the derivatives which blew up the financial system. The SEC needs to pay better, and over the counter financial transactions need to fund it through a stamp tax. This will encourage firms to use exchange traded instruments, which are by definition standardized and relatively simple to understand, model, and track systemic exposure. What is worse than the Madoff debacle, and something Stein seems to shy away from is that the US tax-payer has bailed out the likes of Goldman Sachs, only so they can pay themselves 8-figure bonuses made with the free money from the government. Even more odious, most of the payments to AIG have flowed through to banks who were on the other side of the losing trades AIG made. Stein and his ilk scream that it is horrible that the government might end up owning some banks. Why the hell shouldn't the government own the banks? It is (ostensibly) our government, and we paid for the banks. Republicans will continue to complain along these lines: "The government cannot run anything well." More correctly, Republican governments cannot run anything well, probably because they are too busy stealing on a massive scale. Think of all the government building done during the 30's: Hoover Dam, most National Parks, many university buildings, and winning World War II. This was all done by Democrats with Republicans complaining the entire time. Incidentally, there were inspectors with serious powers attached to these programs which essentially stamped out fraud. As Stein pooh-poohs the Obama attempt at getting a sane energy policy in this country, he implies in typical dishonest neo-con style, that it can best be done with the private sector. That is Ben the con-man wanting to get double-digit returns on oil stocks like he did in the good-ole Bush years. Remember, Bush Cheney developed an energy policy with current big oil companies as well as Enron? Their Interior Department Bush appointees, and former lobbyists, overseeing the leasing of Federal (our) land to oil companies were fired for cocaine fueled orgies with female oil company lobbyists? I suppose the current round of thieving is an appropriate coda to the massive theft perpetrated by Republicans since Reagan through Bush, Clinton was a scoundrel too, as the middle class has been destroyed through taxes, and trade policies designed to enrich the very top wealth holders. The game is rigged. People need to get informed and demand change from congressmen. Otherwise, it will be business as usual. Incidentally, Ben Stein had stated publicly, that via his inheritance, Stein's old-man was one of Nixon's henchmen, he had a pre-crash fortune of around $35 million. I hope some of that was with Madoff and he had a large Bear and Lehman position. Nevertheless, Stein loves having the playing field tilted in his favor, and will continue to write pieces like this to dumb-down and misdirect the public dialogue so that the level of intelligence or honesty never rises above what is found on Fox News.

  • Yahoo! Finance User - Wednesday, July 8, 2009, 11:20AM ET  Report Abuse

    • Overall: 5/5

    mark_97 You employ a one-to-many fallacy by stating Madoff is representative of the private sector. Just ain't so.

  • D - Wednesday, July 8, 2009, 11:04AM ET  Report Abuse

    • Overall: 5/5

    Ben is the only light of reason in a sea of frustration. WHY are they now giving back Ruth Madoff's passport? Supposedly she won't be indicted... Then who else will be? So sad to say, absolutely no one!!

  • Alfredo - Wednesday, July 8, 2009, 10:48AM ET  Report Abuse

    • Overall: 5/5

    He is 100% correct in all his points. It will be inresting to see what happens next, with Madoff and our country.

  • Kelly - Wednesday, July 8, 2009, 10:27AM ET  Report Abuse

    • Overall: 4/5

    Fine - but what the heck do we do about it? Supposedly, we vote in people who will make these changes, but they never do - I don't care which party it is. So, then you vote them out and someone new in who promises to make these changes, and again, it never happens. I feel like the public is never really listened to - once in office (any office), the public is largely ignored. Yes, we know what needs to be done, but who's actually going to fire the folks in the SEC and hire up people with the guts to do what needs to be done? And if the SEC missed this and it was so obvious, what else are the missing?

  • Yahoo! Finance User - Wednesday, July 8, 2009, 9:31AM ET  Report Abuse

    • Overall: 5/5

    Absolutely correct. No way one Bernie Madoff could have done this level of fraud alone. Tthere certainly are others who helped him. And, Regulators are supposed to act on 'Madoffs' of this world, and, they did not do it. If these people are let off scotfree, then there will be more MADOFFs.

  • Yahoo! Finance User - Wednesday, July 8, 2009, 8:46AM ET  Report Abuse

    • Overall: 1/5

    Hmmmnnn.... maybe Madoff can start a Jihad cult in prison just like Chuck Olson's fellowship. Then they wont smell too fishy in internet your eyes.(How come you didnt inform the SEC, and pitifully point the finger to Harry Markopoulis who solely had the guts). Shame on you.Tired on your common sense duty. If you had pursued together, things might have been different.

  • wade - Wednesday, July 8, 2009, 8:01AM ET  Report Abuse

    • Overall: 5/5

    Ignore the /DNC ops who post negetive on everything ben writes . These are good questions that should be answered. he should be gettint lots of company in the slam.

  • Dennis - Wednesday, July 8, 2009, 7:44AM ET  Report Abuse

    • Overall: 1/5

    Why didn't YOU contact the SEC when something looked "fishy"? It's easy in hindsight to say what needs to be done, but a lot harder to actually uncover stuff when its going on and there's a conspiracy to hide it (either active, or inadvertent via incompetency). And what is with that last paragraph?!? How does Madoff have to do with energy policy? "Bureaucrats" at the state level in virtually every state have been requiring more and more "alternative" energy every year and setting goals and deadlines for that, and that's been going on for over a decade now. Yet the power is still on, and the A/C's are still running. You act like its completely unreasonable that the government should set policy for energy use. Bush did it. And virtually every president before him did so as well. Utter hogwash! The government runs our fire departments, police departments, highway departments, etc. and they somehow function.

  • mark - Wednesday, July 8, 2009, 7:43AM ET  Report Abuse

    • Overall: 1/5

    So, Ben, the private sector (Madooff, et al.) committed these crimes, and the public sector (SEC) missed them. Your conclusion is that the private sector should be trusted with our country's energy policy instead of the public sector? This is beyond a non sequitor, it's classic conservative intellectual dishonesty.

  • Paul - Wednesday, July 8, 2009, 6:51AM ET  Report Abuse

    • Overall: 5/5

    Its about time someone brought attenton to Madoff's sons who work in the same building and actually claimed to be innocent. Some gulliable CNBC reporters bought it with out questioning the merit.

  • daveb - Wednesday, July 8, 2009, 6:18AM ET  Report Abuse

    • Overall: 3/5

    Gullible and lazy sum up the people that were duped by Madoff. Look no further than Obama's pre-election real estate dealings and think about his ethics.

  • Yahoo! Finance User - Wednesday, July 8, 2009, 4:13AM ET  Report Abuse

    • Overall: 4/5

    Ok Ben, he's in the klinker...now, when are you going to tell us about stock prices, housing prices, and how to go surfing....

  • MichaelF - Wednesday, July 8, 2009, 4:01AM ET  Report Abuse

    • Overall: 5/5

    The yahoo Finance user that commented at 8:52 pm on 7-7 must tell you something, that unfortunately, we live in a society today where MOST of the people, in what used to be this great nation of ours, embrace entitlements, handouts government protection and freebies. This majority elected the present administration. Achievers and great noble men have been outnumbered by crooks and parasites.

  • Joe - Wednesday, July 8, 2009, 3:27AM ET  Report Abuse

    • Overall: 5/5

    SEC Snakes guard hen house. Class Action lawsuit against SEC authoriatives and send them to jail house next to Madoff and families.

  • JimmyP - Tuesday, July 7, 2009, 11:37PM ET  Report Abuse

    • Overall: 2/5

    It is to laugh. Remember LTCM? They rewrote the laws so "IT would never happen again!", Enron, ditto, Mozillo, Toll Bros, FNM CEO's, GM, How about Goldman? they helped out ...wink, wink AIG get TARP funds, and immediately got a 12 billion check from them. Friends, and family have thrown up their hands and now calling all their leaders crooks. There is no justice until those responsible are held accountable. Bernies' wife and sons didn't know..pfttt. Do not pass go, do not buy etf's, bonds or paper derivavtives..Have physical precious metals or as you well know...the tax man cometh to take it away, someone has to pass out the money to all these crooks.

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