Two years after Bernie Madoff’s arrest, the United States Attorney for the Southern District of New York announced the indictment of two key back-office employees. The first question is, “What took them so long?” (A question for another day.) More interesting to me is who these people are and how the largest Ponzi scheme in recorded history operated for so long undetected?
I should say at the outset, I was surprised by the backgrounds of the indicted employees. In my representation of Madoff victims, I have seen the elaborate and very detailed statements sent out each month by Madoff’s crew of thieves to thousands of investors, including many “sophisticated” fund managers. These statements were written under the name Bernard L. Madoff Securities of Wall Street and London. They identified specific securities owned and explained a complex trading methodology that, like magic, paid returns exceeding 10% every year.
I would have thought this grand multi-billion dollar ruse was the work of some computer programming genius. Think Mark Zuckerberg of Facebook or his friend Sean Parker, the inventor of Napster. Or perhaps some super nerdy, M.I.T. Ph.D. student who hacks into the Department of Defense’s operational control system for weekend fun.
Nope, it was two Italian grandmothers from New Jersey (I’m actually guessing they are grandmothers – but they could be): Jo Ann Crupi and Annette Borgiorno. Both from working class backgrounds hired by Madoff back in the 1980s as key punch operators.
The indictment explains that to fool regulators, they merely set up a phony (second) set of books. (How clever!) Continuing on the low-tech theme, Madoff’s crew kept records of investments on handwritten note cards – I’m guessing those three by five cards we used in grade school for our class speeches.
If true, what does this say about the SEC and other regulators – fooled by the oldest trick in the book – two sets of books? Maybe down the road we’ll find that Madoff had a super-computer and the world’s greatest programmers money (a lot of money) could buy. But for now, these latest indictments merely throw more mud in the eye of those who should have dug deeper. Not only the regulators, but those “sophisticated” investors (fund managers) who looked the other way while taking their huge monthly fees.