BOOK OF THE DAY: The Believers: How America Fell for Bernard Madoff's $65 billion Investment ScamBy Adam LeBor Weidenfeld Nicolson 255pp, £18.99
WHY ARE people so engrossed by jailed überfraudster Bernard Madoff? White-collar criminals have never been a particular fascination of mine, and it’s hardly news that you can’t trust a Wall Street financier with your money, yet over the past year I’ve succumbed to Madoff mania.
I've noted with Schadenfreude the names of Madoffed celebrities, eagerly clicked through slideshows of the auctioned-off mansions and followed the Vanity Fairdebate about whether Ruth Madoff, his wife, deserves opprobrium or sympathy, or indeed the $2.5 million (€1.7 million) in property assets she was allowed to keep.
People are fascinated by Madoff because the colossal scale of his deception outstrips all similar scams and makes rogue traders such as Nick Leeson and John Rusnak seem like second-division shoplifters.
Adam LeBor’s excellent book, written with perfect restraint, explores how it came to pass that a staggering $65 billion imploded in December 2008 when Madoff admitted that his investment business was “one big lie”.
Why were so many financially literate people duped by Madoff? Why did they so often break the cardinal rule of investing – always diversify – and give all of their cash to “uncle Bernie”? And why were the many red flags ignored by regulators, allowing the Ponzi scheme to devour money for longer than Madoff himself thought possible?
As the title suggests, the book is not a biography of Madoff but a study of his “cult”. LeBor posits that it helps to think of Madoff as a godlike figure whose sociopathic ability to deceive was outweighed only by the vanity of his victims.
He practised what is known as “affinity fraud”, targeting what was ostensibly his own community, the Jewish elite of Manhattan, Long Island and Palm Beach. In fact, he would not have felt entirely part of their crowd as he was descended from poor eastern European Jewish immigrants rather than from the Yekkes, the rich German Jews who got there first. These urban professional Jews feared (correctly) that the arrival of slum-dwelling “Ostjuden” would trigger anti-Semitism.
LeBor goes along with the theory that, as the eastern European Jews never forgot the Yekkes’ disdain, Madoff would have harboured deep resentment for the country-club base he fleeced for decades. Even after the millions rolled into his successful (and legitimate) share trading company, Bernie and Ruth only made it as far as East 64th Street. The real establishment had penthouses on Park Avenue.
Although he seems confounded by the depth of Madoff’s cruelty, LeBor has limited sympathy for the investors who were so keen to join the secretive, exclusive fund that promised returns of 10 to 12 per cent every year.
Some investors complain that they were not the greedy ones, as many hedge funds were advertising far more spectacular gains. Others who questioned how he was achieving such unusually consistent returns found their doubts easily silenced by Madoff’s flattery: they were getting a special deal because they were special. And some investors thought, yes, Madoff probably was crooked, but assumed he was making his money from insider trading – a crime with which they were really quite comfortable.
LeBor’s book neatly chronicles the many shades of complicity. It is stuffed with finely detailed tales of hubris and hypocrisy. Madoff’s acolytes, hoping to avoid more lawsuits, fall over themselves to declare how much money they too have lost.
On the surface, this might seem repetitive, but each story of disintegrated paper wealth brings its own ego to light. Not everyone had the privilege of being defrauded by Madoff.
Laura Slattery is an Irish Timesjournalist
