Very Good Comments on Madoff

http://dealbook.blogs.nytimes.com/2008/12/15/a-longtime-partnership-costs-fairfield-greenwich-dearly/

15 comments so far...
1.
December 15th,200810:23 am
Readers should also read Sunday’s NYT piece on Senator Chuck Schumer - who lined his campaign coffers with big donations from Investment Banks and Private Equity firm (nothing more than Hedge Funds these days) in exchange for influence peddling. Also, when Bush appointed Christopher Cox (as a political favor no doubt), a lowly congressman from California - with little knowledge and no experience of Wall Street - to head the SEC, it was a tell-tale sign to me that regulation and oversight was not a priority. Other Democrats (Chris Dodd of CT) and many Republicans are culpable for this fine mess and should be held accountable - with hearings. Throw the bums out!
— Posted by David
2.
December 15th,200812:41 pm
now that the cat has popped out of the bag…..one wonders how many more hedge funds will turn out to be bogus as the requests for redemptions avalanches
— Posted by michael
3.
December 15th,200812:47 pm
Fairfield claims they were swindled by a sharp operator, yet many firms (like Aksia) smelled something fishy and declined to invest. FGG was greedy and lazy, and should not be bailed out. People need to be accountable for their actions.
— Posted by BlueState
4.
December 15th,20081:47 pm
I’m with you, David,
Dingle’s bell got taken away from him with the help of a similar “conflict of interest” article. NYTs should come up with one of those great graphic for all major influence peddlers and their willing collaborators. Healthcare, Finance, Agriculture, the daily yoke stuff over who’s barrel most of us can be found.
Schumer the Tumor has got to go!
— Posted by Abby Tucson, AZ
5.
December 15th,20082:04 pm
Am I missing something?
Fairfield Sentry fund charged “1 percent of assets under management and 20 percent of profits” - but they didn’t actually do any investing of their own - all they did was pass 100% of the money on to Madoff.
Even in some alternate universe where Madoff never committed any fraud, wouldn’t Fairfield still be guilty of fraud themselves for taking a fee for doing nothing? They were just a shell for Madoff - which means the only value-add they might conceivably have brought to the table to justify their fees was the due diligence they did to make sure Madoff wasn’t a fraud.
Whoops - they didn’t do that, either, did they?
That makes them only a little better than Madoff, in my book.
— Posted by Eric
6.
December 15th,20084:46 pm
If Madoff does this, it’s a crime. When the government does this, we call it Social Security. SS is a ponzi scheme. Should anybody who got campaign contributions from Madoff return them to the investors who lost everything?
— Posted by Joe
7.
December 15th,20084:49 pm
Eric - you are right on the money 21 percent for screwing up? Now… What about the SEC? No one is nailing these guys for their Incompetence!
— Posted by Brian
8.
December 15th,20086:01 pm
Eric, Come now. Caveat emptor. Did anyone force clients to sign-up for these funds and obviously all were very large and sophisticated investors. Is greed now underwritten by the US Government? Fairfield will be giving back any fees it earned plus more to defend itself against the inevitable claims to come that it’s “due diligence” was criminally faulty and did not follow a “duty of care”. Madoff has admitted fraud, the only question is how?
— Posted by Ed.Eskimo
9.
December 15th,20087:14 pm
A True Story:
I first came in contact with Madoff’s funds back in 1994, when Walter Noel and Jeffrey Tucker, founders of the Fairfield Greenwich Group called on me in London and pitched the Fairfield Sentry fund, managed by the one and only Bernie Madoff. It was the proverbial ‘low-volatility, non-correlated real deal’, generating 60 -150 bps each and every month; I think it had less than six down months in its history. Funny thing was, neither these two gentlemen, with distinguished pedigrees and years of experience courting the HNW and institutional HF crowd, or anyone else associated with the firm, could intelligently explain to me how the firm generated its performance. It was just “look at the track record” — and what a record it was. And low and behold, along comes the Tremont Group, and Kingate Global Advisors ( London) and who knows how many other cockamanie firms ‘private-labeling’ this goof-ball vehicle and raised billions of dollars, charging their clients 1 and 20 (yes, back in the day, that was the going rate). The beauty of it was that they just hired Madoff as the ’sub-advisor’, and went out and touted the numbers, and took in the money, of course not knowing what on earth was going on. To add to the comedy, an associate, with 20+ years in the business in a senior capacity with several major firms, joined Fairfield (years ago) to expand their business and seek other sub-advisory relationships (like Madoff) and raise capital; he hadn’t the foggiest notion as to how the performance was generated, but just harped on the beauty of the track record, and “how could you not invest”…….oyyyyyy CAVEAT EMPTOR.
— Posted by SRE

10.
December 15th,200811:28 pm
These high net worth investors have the money to lose. Its the basic requirement to invest in a hedge fund. Talk of bailing out hedge funds?! Are most of our leaders corrupt now, or are they that desperate that they need to show some loyalty to the richest 1% in the States? Institutional investors should never have been invested but were chasing down some desperate returns after the last bubble burst. Investment consultants and slick, smooth talking institutional sales people created an illusion of elitism, “proprietary strategies”, that have hurt countless American families. They have the money to bleed now, and they need to return the money back to the end investor not the HNW. What happened to the notion that the markets were a zero-sum game?
— Posted by Houston
11.
December 16th,20086:29 am
The Madoff “Ponzi scheme” may well have more unsuspecting victims: all of us, because we may be paying for it.
From today’s NY Times:
Tax rules allow investors who fall prey to criminal theft perpetrated by their investment advisers or brokers to claim a tax deduction stemming from their losses.
Under the rules, investors can deduct their losses against 90 percent, and in some cases all, of their adjusted gross income. So an investor who lost $1 million to Mr. Madoff and whose adjusted gross income is $600,000 can claim a tax loss of $939,900. That is the result of $1 million reduced by 10 percent of the adjusted gross income, and minus a $100 fee that is applicable under I.R.S. rules, according to Robert Willens, a tax and accounting authority who provided the example.
— Posted by jm
12.
December 16th,200810:21 am
I do not feel one bit sorry for any of these investors.
They all knew, or should have known, that the returns from this imposter were too good to be true.
These people all thought they were a little bit smarter and a lot more entitled from legitimately working people.
They received above market returns and, because of this, their principal is not gone. If they spent their excessive returns/principal on an extrvagant lifestyle, country clubs and 2nf, 3rd and 4th homes, then that was their choice.
I an sick and tired of do-nothing lame-brained thinking they are more entitled to a good life than me while a work and they play.
— Posted by Hubert Bradley
13.
December 16th,200811:05 am
Sophisticated investors??? Please.
Do your due diligence, and do not place de-facto trust in these disgraced people. Have we not prove that “the brightest” are not the “best.”
I feel we have.
Anyhow, let’s state the obvious: Lawyers win again.
— Posted by - Not a Fan of the Funds
14.
December 16th,200812:45 pm
reply to jim #11
I thought the deduction for investment losses is only good against your passive income (except $5k).
— Posted by mark
15.
December 16th,20081:50 pm
Reply to Mark #14.
The distinction in this case is that the investors may have a “theft” deduction available to them. If money was lost due to incompetence on the part of the manager, then the investors would have passive losses. But if the losses are deemed “theft” then different rules may apply.
See: “Investors With Madoff May Get Tax Relief ” from today’s NY Times.
— Posted by jm