Documentary - Chasing Madoff
Ponzi – Named after Charles Ponzi, a 1920’s fraudster, a Ponzi scheme is a form of fraud in which belief in the success of a non-existent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
"A classic Ponzi scheme built on treachery and lies"
If you ever read about Bernie Madoff you will be stunned by the depths of his, for want of a better word, evil and how far into the world his scheme had spread before he finally negotiated his own arrest in December of 2008. Madoff did not take all this money himself, $50billion is a huge amount to essentially steal on your own. Instead he used companies, people, royalty even, to do his dirty work for him. He managed a scheme that built on people’s greed and unleashed it around the world to the most greedy of people; the financial institutions. The problem was that when the scheme finally failed it was innocent people that were caught in the eye of the storm. The banks and investment firms, the royal families of various European countries, were all bailed out by their respective governments, but these banks and hedge funds had been investing normal people’s money. The retirement plans of thousands of people were completely wiped out as councils, town financiers and the like were talked into investing with Madoff as he” will make your money grow and it will be safe”. In fact Madoff’s growth was a straight line on the graph, rising year on year and was discovered by one man in five minutes to be a fraud.
A money manager at a Boston financial firm met with a French nobleman about how his investments all panned out and took the information back to his company and gave it to his associate Harry Markopolos to look at, hoping Harry could develop a product they could market to people that did the same thing. Within five minutes Harry had established that Madoff was running a fraudulent scheme. He was taking investors’ money and paying them back profit, but not by actually buying anything as he had said he was, he was paying them back from new money that was coming in from new investors. For this to continue, the scheme always needed new money. By the time Harry and his now two colleagues had proved the Ponzi, they estimated Madoff had garnered around $7Billion and sent their findings to the government’s regulatory commission the SEC (Securities and Exchange Commission) which are the financial police, but the SEC weren’t interested. Harry kept investigating.
Markopolos discovered the involvement of offshore banks frequented by drug cartels and organised crime, and the prospect of taking down Bernie Madoff now made him fear for his life, the life of his wife and, across his nine year investigation, his children that were born. As an ex-army officer, Harry moved home, gained a firearm license and weaponised his home office, knowing that one day someone would come to try and take his life, but still contacted the SEC every year to try and get them to deal with the fraud. He had a journalist write an article about the fraud to no avail and even The Wall Street Journal buried the story. Madoff had contacts in powerful places and Harry was now sure that he had the SEC in his pocket.
Eventually Madoff’s scheme crumbled as the world’s economy failed and his investors tried in vain to get their money back. This led to the Journal eventually publishing Harry’s article and the Government oversight committee investigating the SEC, where they found the main SEC contact investigator had left to go and work for Madoff and one of the heads had gone to a Madoff family wedding. Harry Markopolos was finally proved to be right. After nine years, someone was finally listening but it was too late for those who now had lost upwards of $50Billion. Harry was commended by the Government as a hero but he is personally disgusted by the title as he didn’t actually get the crime stopped but is working with the Government on new legislation.
The sad postscript is that the French nobleman who had introduced the highest percentage of investors to Madoff took his own life along with Bernie Madoff’s son, and whilst 300 companies were shown to have been involved there are currently fewer than twelve people who have been arrested.
The documentary itself is not the best filmwise. Quite arty segments between scenes often detract from the main narrative, and I didn’t learn anything I didn’t already know about Madoff, but seeing Harry Markopolos in person, showing his investigative techniques and watching his paranoia grow as he thought someone would kill him were superb. The already televised committee footage of the Senator’s investigating the board of the SEC was also welcome as we don’t get the channels in the United Kingdom that broadcast such things so I had only ever read the reports.
If you are a scholar of investment fraud then this is maybe not the best documentary for you but if you are a newcomer that wants to learn about the ease and extent of financial fraud then it really is a must watch.
Image - IMDb.
Image - IMDb.
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