Madoff: Many Questions Remain

by Ben Stein

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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