Investigation of Madoff Victims Could Reveal Ring of Old Criminals


Last week, Irving Picard, the trustee in charge of Bernie Madoff's estate, filed civil lawsuits against some of the biggest investors in his Ponzi scheme, including New York–based financiers J. Erza Merkin, Jeffry Picower, and Stanley Chais, alleging that they should have known that their up-to-300-percent returns were the result of fraud. Now The Wall Street Journal is reporting that criminal charges could be filed against those men and at least five others, including Palm Beach philanthropist Carl Shapiro, who provided Madoff with a $250 million cash infusion just days before Madoff turned himself in. According to the Journal, in going through Madoff's belongings, federal investigators have found evidence that indicates that all or some of his "victims" were in the habit of dictating exactly how much they wanted their returns to be. Apparently, like all grandparents:

Mr. Madoff was a "meticulous" record keeper who kept correspondence between some clients and the firm, said people familiar with the probe.

Fascinating. As Financial Times columnist John Gapper wrote in this week's New York, this is to be expected: Long-running Ponzi schemes never "just feature fraudsters and victims who are entirely innocent...there are also passive accomplices who assist the fraud, people who know that something is wrong but are lulled by self-interest into doing nothing." He points to William Dorrit, the title character of the Dickens novel who entrusts (and loses) his own and friends money to the fraudulent Victorian banker Merdle. But if Stanley Chais, 82, Carl Shapiro, 90, and Picower and Merkin (a comparatively spry 67 and 55) are all found guilty of being active accomplices, as the Journal indicates they may be, a different analogy may be in order: It's like Ocean's 11 with old guys!

Madoff Victims Investigated [WSJ]
Dickensian Denial [NYM]