Madoff: "They Had to Know..."

Convicted Ponzi schemer Bernard Madoff, in a jailhouse interview published Wednesday, said banks and hedge funds were "complicit" in his multi-billion dollar fraud.
"They had to know," Madoff told New York Times reporter Diana B. Henriques, who is working on a book about the case. "But the attitude was sort of, 'If you're doing something wrong, we don't want to know.' "

Madoff, serving a 150-year prison term in Butner, N.C., did not specify which banks or funds might have known about the scheme, and he didn't say that any of them were accomplices to his scheme.

The Times said that Madoff, in the interview and in e-mails sent to the reporter, claims to have been helping Irving Picard, the trustee seeking to recover assets stolen from investors.

Madoff: Banks 'had to know' about scheme
February 16, 2011
http://money.cnn.com/2011/02/16/news/companies/madoff_interview

"Bernie Madoff, Scapegoat" by Michael Moore

"Bernie Madoff, Scapegoat" by Michael Moore (for Time magazine)
Fri, 01 May 2009
Michael Moore
maillist@michaelmoore.com>

The following piece written by Michael Moore appears in this week's Time magazine (and in full at Time.com) as part of their annual "Time 100" issue highlighting their choices for "The World's Most Influential People."

Elie Wiesel called him a "God." His investors called him a "genius." But, proving correct that old adage from the country and western song, you never really know what goes on behind closed doors.

Bernie Madoff, for at least 20 years, ran a Ponzi scheme on thousands of clients, among them the people you and I would consider the best and brightest. Business leaders, celebrities, charities, even some of his own relatives and his defense attorney were taken for a ride (this has to be the first time a lawyer was hosed by the client).

We're clearly in one of those historic, game changing years: up is down, red is blue and black is President. Aside from Obama himself, no person will provide a more iconic face of this end-of-capitalism-as-we-know-it year than Bernard Lawrence Madoff.

Which is too bad. Yes, he stole $65 billion from some already quite wealthy people. I know that's upsetting to them because rich guys like Bernie are not supposed to be stealing from their own kind. Crime, thievery, looting — that's what happens on the other side of town. The rules of the money game on Park Avenue and Wall Street are comprised of things like charging the public 29% credit card interest, tricking people into taking out a second mortgage they can't afford, and concocting a student loan system that has graduates in hock for the next 20 years. Now that's smart business! And it's legal. That's where Bernie went wrong — his scheming, his trickery was an outrage both because it was illegal and because he preyed on his side of the tracks.

Had Mr. Madoff just followed the example of his fellow top one-percenters, there were many ways he could have legally multiplied his wealth many times over. Here's how it's done. First, threaten your workers that you'll move their jobs offshore if they don't agree to reduce their pay and benefits. Then move those jobs offshore. Then place that income on the shores of the Cayman Islands and pay no taxes. Don't put the money back into your company. Put it into your pocket and the pockets of your shareholders. There! Done! Legal!

But Bernie wanted to play X-games Capitalism, run by the mantra that's at the core of all capitalistic endeavors: Enough Is Never Enough. You have the right to make as much as you can, and if people are too stupid to read the fine print of their health insurance policy or their GM "100,000-mile warranty," well, tough luck, losers. Buyers beware!

It would be too easy — and the wrong lesson learned — to put Bernie on TIME's list all by himself. If Ponzi schemes are such a bad thing, then why have we allowed all of our top banks to deal in credit default swaps and other make-believe rackets? Why did we allow those same banks to create the scam of a sub-prime mortgage? And instead of putting the people responsible in the cell block in Lower Manhattan, where Bernie now resides, why did we give them huge sums of our hard-earned tax dollars to bail them out of their self-inflicted troubles? Bernard Madoff is nothing more than the scab on the wound. He's also a most-needed and convenient distraction. Where's the photo on this list of the ex-chairmen of AIG, Merrill Lynch and Citigroup? Where's the mug shot of Phil Gramm, the senator who wrote the bill to strip the system of its regulations, or of the President who signed that bill? And how 'bout those who ran the fake numbers at the ratings agencies, the lobbyists who succeeded in making sleazy accounting a lawful practice, or the stock market itself — an institution that's treated like the Holy Sepulchre instead of the casino that it is (and, like all other casinos, the house eventually wins).

And what of Madoff's clients themselves? What did they think was going on to guarantee them incredible returns on their investments every single year — when no one else on planet Earth was getting anything like that? Some have admitted they did have an inkling "something was up," but no one really wanted to ask what it was that was making their money grow on trees. They were afraid they might find out it had nothing to do with gardening. Many of Madoff's victims have told investigators that, over the years, they have made much more than the original investment they gave Bernie. If I buy a stolen car from the guy down the street, the police will take that car from me regardless of whether I knew it was stolen. If I knew it was stolen, then I go to jail for receiving stolen property. Will these "victims" give back their gains that were fraudulently obtained? Will the head of Goldman Sachs reveal what he was doing at the meetings with the Fed chairman and the Treasury secretary before the bailout? Will Bank of America please tell us what they've spent $45 billion of our TARP money on?

That's probably going too far. Better that we just put Bernie on this list.

Moore's new documentary on the wonders of capitalism will be in movie theaters this fall.

Freddie Mac acting CFO found dead

http://www.marketwatch.com/news/story/Freddie-Mac-acting-CFO-dead/story.aspx

Freddie Mac acting CFO found dead in apparent suicide
U.S. officials express condolences to Kellermann's family and colleagues
By Sam Mamudi & Ronald D. Orol, MarketWatch
April 22, 2009

NEW YORK (MarketWatch) -- The acting chief financial officer of Freddie Mac was found dead at his home Wednesday morning in an apparent suicide.

David Kellermann, acting chief financial officer at the government-controlled mortgage company, was found dead at his home in Fairfax County, Va.

Kellermann was named acting CFO in late September, three weeks after the government took charge of Freddie Mac. He had previously been senior vice president and corporate controller there.

His death came as staff from the Securities and Exchange Commission and Justice Department were probing the home-finance company about issues including possible accounting violations.

Freddie disclosed the investigation in a March 11 filing, and the firm said it was "cooperating fully in these matters."

According to the SEC filing, Freddie said it received a federal grand jury subpoena Sept. 26 from the U.S. attorney's office for the southern district of New York. The subpoena sought documents related to accounting, disclosure and corporate-governance matters, according to the filing.

But that subpoena was later withdrawn and the investigation was taken over by the U.S. attorney for the eastern district of Virginia.

According to the filing, on Oct. 21, Freddie said the SEC had begun its own investigation, asking Freddie for documents. Specifically, on Jan. 23, Jan. 30 and Feb. 25, the SEC issued subpoenas for documents. The agency also began its own interviews of company employees, Freddie said in the filing.

In addition to the investigation, Freddie Mac received a request from the House Committee on Oversight and Investigations on Oct. 20 seeking documents for a hearing it held on Dec. 9.

Freddie Mac has received more than $30 billion in government support as the mortgage and credit crisis intensified.

Kellermann's apparent suicide surprised some key regulators in Washington, who expressed their condolences.

"On behalf of the Treasury family, we are deeply saddened by the news this morning of David Kellermann's death," said Treasury Secretary Timothy Geithner in a statement. "Our deepest sympathies are with his family and his colleagues at Freddie Mac during this difficult time."

The Federal Housing Finance Agency issued this statement: "For many years, we have known David as a person of the utmost ethical standards who was hardworking and knowledgeable in his field. As the Acting Chief Financial Officer of Freddie Mac during particularly challenging times, David was an inspiration to his staff and many others who were privileged to work with him. We extend our condolences to his family, friends and colleagues."

Kellermann's apparent suicide would be the latest of several putatively motivated by the financial crisis. French financier Rene-Thierry Magon de la Villehuchet killed himself in December after losing roughly $1 billion of his own and clients' money to the Ponzi scheme orchestrated by Bernard Madoff.

Seventy-four-year-old German billionaire Adolf Merckle in January committed suicide after the conglomerate he controlled, with investments in pharmaceuticals, cement and other sectors, experienced problems related to the global financial crisis.

In 2002, J. Clifford Baxter, a former Enron Corp. vice chairman, was found dead in his car in Houston, in an apparent suicide, after the company collapsed in a massive corruption scandal and bankruptcy filing.

Ronald D. Orol is a MarketWatch reporter, based in Washington.

LET IT DIE: Rushkoff on the economy

http://www.arthurmag.com/2009/03/16/let-it-die-rushkoff-on-the-economy/

LET IT DIE: Rushkoff on the economy
by Douglas Rushkoff

March 15, 2009

With any luck, the economy will never recover.

In a perfect world, the stock market would decline another 70 or 80 percent along with the shuttering of about that fraction of our nation’s banks. Yes, unemployment would rise as hundreds of thousands of formerly well-paid brokers and bankers lost their jobs; but at least they would no longer be extracting wealth at our expense. They would need to be fed, but that would be a lot cheaper than keeping them in the luxurious conditions they’re enjoying now. Even Bernie Madoff costs us less in jail than he does on Park Avenue.

Alas, I’m not being sarcastic. If you had spent the last decade, as I have, reviewing the way a centralized economic plan ravaged the real world over the past 500 years, you would appreciate the current financial meltdown for what it is: a comeuppance. This is the sound of the other shoe dropping; it’s what happens when the chickens come home to roost; it’s justice, equilibrium reasserting itself, and ultimately a good thing.

I started writing a book three years ago through which I hoped to help people see the artificial and ultimately dehumanizing landscape of corporatism on which we conduct so much of our lives. It’s not just that I saw the downturn coming—it’s that I feared it wouldn’t come quickly or clearly enough to help us wake up from the self-destructive fantasy of an eternally expanding economic frontier. The planet, and its people, were being taxed beyond their capacity to produce. Try arguing that to a banker whose livelihood is based on perpetuating that illusion, or to people whose retirement incomes depend on just one more generation falling for the scam. It’s like arguing to Brooklyn’s latest crop of brownstone buyers that they’ve invested in real estate at the very moment the whole market is about to tank. (I did; it wasn’t pretty.)

Now that the scheme we have mistaken for the real economy is collapsing under its own weight, however, it’s a whole lot easier to make these arguments. And, if anything, it’s even more important for us to come to grips with the fact that the system in peril is not a natural one, or even one that we should be attempting to revive and restore. The thing that is dying—the corporatized model of commerce—has not, nor has it ever been, supportive of the real economy. It wasn’t meant to be. And before we start lamenting its demise or, worse, spending good money after bad to resuscitate it, we had better understand what it was for, how it nearly sucked us all dry, and why we should put it out of our misery.

Chartered Corporations

Back in the good ol’ days—I mean as far back as the late middle ages—people just did business with each other. As traveling got easier and people got access to new resources and markets, a middle class of merchants and small businesspeople started to get wealthy. So wealthy that they threatened the power of the aristocracy. Monarchs needed to come up with a way to stabilize their own wealth before the free market unseated them.

They invented the corporate charter. By granting an exclusive charter, a king could give one of his friends in the merchant class monopoly control over a region or sector. In exchange, he’d get shares in the company. So the businessperson no longer had to worry about competition—his position at the top of the business hierarchy was locked in place, by law. And the monarch never had to worry about losing his authority; businesses with crown-guaranteed charters tend to support the crown.

But this changed the shape of business fundamentally. Instead of thriving on innovation and progress, corporate monopolies simply sought to extract wealth from the regions they controlled. They didn’t need to compete, anymore, so they just sucked resources from places and people. Meanwhile, people living and working in the real world lost the ability to generate value by or for themselves.

For example: In the 1700s, American colonists were allowed to grow corn but they weren’t allowed to do anything with it–except sell it at fixed prices to the British East India Trading Company, the corporation sanctioned by England to do business in the colonies. Colonists weren’t allowed to sell their cotton to each other or, worse, make clothes out of it. They were mandated, by law, to ship it back to England where clothes were fabricated by another chartered monopoly, then shipped back to America where they could be purchased. The American war for independence was less a revolt against England than a revolt against her chartered corporations.

The other big innovation of the early corporate era was monopoly currency. There used to be lots of different kinds of money. Local currencies, which helped regions reinvest in their own activities, and centralized currencies, for long distance transactions. Local currencies were earned into existence. A farmer would grow a bunch of grain, bring it to the grain store, and get receipts for how much grain he had deposited. The receipts could be used as money—even by people who didn’t need grain at that particular moment. Everyone knew what it was worth.

The interesting thing about local, grain-based currencies was that they lost value over time. The people at the grain store had to be paid, and a certain amount of grain was lost to rain or rodents. So every year, the money would be worth less. This encouraged people to spend it rather than save it. And they did. Late Middle Ages workers were paid more for less work time than at any point in history. Women were taller in England in that era than they are today—an indication of their relative health. People did preventative maintenance on their equipment, and invested in innovation. There was so much extra money looking for productive investment, that people built cathedrals. The great cathedrals of Europe were not paid for with money from the Vatican; they were local investments, made by small towns looking for ways to share their prosperity with future generations by creating tourist attractions.

Local currencies favored local transactions, and worked against the interests of large corporations working from far away. In order to secure their own position as well as that of their chartered monopolies, monarchs began to make local currencies illegal, and force locals to instead use “coin of the realm.” These centralized currencies worked the opposite way. They were not earned into existence, they were lent into existence by a central bank. This meant any money issued to a person or business had to be paid back to the central bank, with interest.

What does that do to an economy? It bankrupts it. Think of it this way: A business borrows 1000 dollars from the bank to get started. In ten years, say, it is supposed to pay back 2000 to the bank. Where does the other 1000 come from? Some other business that has borrowed 1000 from the bank. For one business to pay back what it owes, another must go bankrupt. That, or borrow yet another 1000, and so on.

An economy based on an interest-bearing centralized currency must grow to survive, and this means extracting more, producing more and consuming more. Interest-bearing currency favors the redistribution of wealth from the periphery (the people) to the center (the corporations and their owners). Just sitting on money—capital—is the most assured way of increasing wealth. By the very mechanics of the system, the rich get richer on an absolute and relative basis.

The biggest wealth generator of all was banking itself. By lending money at interest to people and businesses who had no other way to conduct transactions or make investments, banks put themselves at the center of the extraction equation. The longer the economy survived, the more money would have to be borrowed, and the more interest earned by the bank.

Financial Meltdown

Which is pretty much how things have worked over the past 500 years to today. So what went wrong? Nothing. The system worked exactly as it was supposed to. The problem was that after America’s post WWII expansion, there was really no longer any real growth area in the economy from which to extract wealth. We were producing and consuming about as much as we could. Almost no commercial activity was occurring outside the corporate system. There was no room left to grow. Sure, outsourcing, lay-offs, and technology created some efficiencies, but wars, rising costs of health care, and exchange rates essentially offset any gains.

Making matters worse, all that capital that the wealthy had accumulated needed markets—even fake markets—in which to be invested. There was a ton of money out there—just nowhere to put it. Nothing on which to speculate.

The dot.com boom seemed to offer the promise of a new market, but it fizzled almost as quickly as it rose. So speculators turned instead to real assets, like corn, oil, even real estate. They started investing speculatively on the things that real people need to stay alive. What real people didn’t understand was that there is no way to compete against speculators. Speculators aren’t buying homes in which to live—they are buying houses to flip. Speculators aren’t buying corn to eat or oil to burn, but bushels to hoard and tankers to park off shore until prices rise. The fact that the speculative economy for cash and commodities accounts for over 95% of economic transactions, while people actually using money and consuming commodities constitute less than 5% tells us something important. Real supply and demand have almost nothing to do with prices. We do not live in an economy, we live in a Ponzi scheme.

Luckily for us, the banks, and the speculators depending on them, made a bad wager: they bet on our continuing capacity to provide a reality on which to base their highly leveraged schemes. We just couldn’t do it. They put us between a rock and a hard place. With George W’s help, they sold us on the notion of home ownership as a prerequisite to the American dream. And they created a number of loan products which made it look as if we could actually afford over-priced homes. The banking industry spent hundreds of millions of dollars lobbying for laws making bankruptcy difficult or impossible for average people to accomplish—while simultaneously selling average people loans that they would never be able to pay back.

The banks didn’t really care, anyway, since they never meant to keep these loans. They simply provided the cash to mortgage companies, who then packaged the loans. In return for putting up the original cash, the banks also won the right to underwrite the sale of those mortgage packages to investors—investors like pension funds, retirement funds, or you and me. Get it? The banks get all the interest, but we put up all the money. Our retirement accounts and pension funds invest in the very mortgages that we can’t pay back. The bank collects any interest, playing both sides of the equation but responsible for neither.

And when the whole scheme begins to break down, what do we do? We try to bail out the very banks that created the mess, under the premise that we need these banks in order for business to come back, since only banks can lend the capital required for businesses to flourish.

Yes, It is Wrong

President Obama may be smarter than most of us, but he’s still attempting to rescue the very institutions that robbed us in the first place. He’s not a socialist, as conservatives may be arguing, but he is a corporatist. Using future tax dollars to fund government job programs is one thing. Using future tax dollars to give banks more money to lend out at interest is robbing from the poor to pay the rich to rob from the poor.

As painful as it might be to watch, and as irritating as it might be to those with shrinking retirement savings, the collapse of the centralized corporate economy is ultimately a good thing. It makes room for a real economy to rise up in its place. And while it may be temporarily uncomfortable for the rich, and even temporarily devastating for the poor, it may be the fastest and least violent way to dismantle a system set in place for the benefit of 14th Century monarchs who have long since left this earth.

If the corporate supermarket chain’s debt structure renders it incapable of stocking its shelves this spring, this may be the wake-up call that consumers need to finally subscribe to a Community Supported Agriculture farmer. If the former associate fund analyst at Lehman realizes that he is unable to get a job not just because his industry is contracting but because his work day creates no real value for anyone at all, he will be forced to learn how to do something that does. If an urban elite parent realizes he can no longer pay private school tuition for his kids, maybe he’ll consider donating to public school the time he would have spent earning that tuition.

In short, the less we are able to depend on business-as-usual to provide for our basic needs, the more we will be forced to provide them for ourselves and one another. Sometimes we’ll do this for free, because we like each other, or live in the same community. Sometimes we’ll exchange services or favors. Sometimes we’ll use one of the alternative, local currencies coming into use across the country as Central bank-issued currencies become too hard to get without a corporate job.

Deprived of centralized banks and corporations, we’ll be forced to do things again. And in the process, we’ll find out that these institutions were not our benefactors at all. They were never meant to be. They were invented to mediate transactions between people, and extract the value that would have passed between us. Far from making commerce or industry more efficient, they served to turn the real world into a set of speculative assets, and real people into debtors.

The current financial crisis is the best opportunity we have had in a very long time for a bloodless revolution against the faceless fascism under which we have been living, unaware, for much too long. Let us seize the day.

Longtime Arthur columnist Douglas Rushkoff has just finished his life’s work, “Life Inc: How the world became a corporation and how to take it back,” to be published June 2, 2009 by Random House. His live talk radio show, Media Squat Radio, airs Mondays 7-8pm EDT on WFMU. Streams at www.wfmu.org and iTunes.

Mystery of Madoff's rapid confession

http://www.guardian.co.uk/business/2009/mar/13/bernard-madoff-usa

Mystery of Madoff's rapid confession
Legal experts were flummoxed by the fraudster's willingness to admit every criminal charge laid before him, but was he trying to protect others who may have been implicated?
Andrew Clark in New York
Friday 13 March 2009

It was a brutally casual way to inform a man of his fate. After listening to a lengthy monologue by Bernard Madoff's defence lawyer on why the fraudster should remain on bail in his Manhattan penthouse, Judge Denny Chin waved away the prosecution.

"I don't need to hear from you because it is my intention to remand Mr Madoff," said the judge. He spoke almost as an aside, as if Madoff wasn't in the room.

There was a collective intake of breath. In the overflow room at New York's federal courthouse, full of hard-bitten hacks watching proceedings on a video link, a few people started clapping. The old man was finally going behind bars.

If the 70-year-old fraudster himself was surprised at being sent directly to jail, he didn't show it. He would have been warned by his defence team that he ran the risk of instant incarceration by pleading guilty to 11 counts of fraud, perjury and money laundering.

In fact, throughout the 90-minute hearing, Madoff looked as if he had been drugged. He stared fixedly at some point in the middle distance, slouched slightly forward with his arms resting on a table. His speech of "apology" was delivered in a flat monotone.

The only time he showed any tangible reaction was when one of his victims, George Nierenberg, aggressively demanded that Madoff meet his eye, moving towards him and saying: "I don't know whether you've had a chance to turn around and look at your victims."

Madoff, rather reluctantly, swivelled round and briefly eyeballed his former client before Judge Chin ordered Nierenberg to cool off.

Being Bernie Madoff's defence counsel is a job from hell, even by the standards of white-collar litigation. Madoff seems to have been intent on self-immolation from the moment his $65bn (£47bn) fraudulent scheme came to light in December.

Many legal experts were flummoxed by Madoff's decision to confess to every criminal count on the table this week without any sniff of a deal with prosecutors. If he had gone with "not guilty", he could have bought himself another year of bail. Or by co-operating with the feds and by talking them through the paperwork, he might have won a delay and a shorter term. Instead, he's probably in jail until he dies.

The probable explanation is that Madoff hopes to take the bullet for his family and colleagues. Peter Henning, a former fraud prosecutor turned law professor at Wayne State University in Detroit, says: "I think he's protecting his family. Any plea deal would definitely have required him to implicate others."

During his words of penance to the court, Madoff was at pains to emphasise that while his investment advisory outfit was a fraudulent hole, his company's proprietary trading and market-making operations were "legitimately and honestly run businesses". His sons, Andrew and Mark, were senior executives on this "honest" side of the Chinese wall. Madoff's 63-year-old brother, Peter, was in charge of trading.

It is almost inconceivable that Madoff could have spent 20 years squirreling away clients' money in a Chase Manhattan bank account, conducting virtually no legitimate transactions, without anybody at Madoff Investment Securities smelling a rat – even if, as he asserts, he was deliberately employing under-qualified staff with no expertise in the securities industry.

For the feds, catching the kingpin before they get to any henchmen poses an unusual difficulty – because of his reputation as America's biggest liar, Madoff is a radioactive witness. Any evidence he gives in future trials can be easily and quickly discredited.

"He's the king of this fraud. That's not someone you'd ever want to use as a witness," says Sam Buell, professor of law at Washington University in St Louis. "You could never use him in court – a jury would be outraged at having this guy testify against somebody who's less culpable."

So there are virtually no grounds for clemency towards Madoff – he clearly isn't being very helpful and, even if he was, his aid is of dubious utility.

The record sentence for a white-collar crime in the US is the 24-year term handed to Enron's Jeffrey Skilling in 2006 (although an appeals court ruled this was too harsh and that it should be recalculated). Madoff could find himself exceeding that.

Some argue Madoff's crime is worse than those of the bosses of corrupt companies such as Enron, WorldCom and Tyco. After all, many of Madoff's victims lost their life savings. In the case of, say, Enron shareholders, the damage is spread relatively thinly among a larger number of people.

"In some ways, this is a worse kind of fraud – it's preying on individuals rather than a fraud on the market," says Buell. "The victims here run the gamut from the very, very wealthy to the not-all-that-affluent."

Federal inmates in the US have to serve at least 85% of their sentences before they qualify for early release on grounds of good behaviour. If Madoff, 70, gets a relatively lenient 20 years and lives beyond the age of 87, he could conceivably see daylight again. But it's not very likely.

To his victims, it's hard to extend forgiveness or compassion to somebody who won't help prosecutors unravel the details of his crime, irrespective of Madoff's claim that he is "deeply sorry and ashamed".

One investor, 71-year-old Judith Welling, raised her arm in a victory salute as she exited the courthouse on Thursday. She put $1.5m into Madoff's fund and thought her nest egg had grown to $2.5m until she learned that the financier's empire was based on a pack of lies.

"Frankly, in my book, he's the lowest of the low," she said.

Beast of the Month - February 2009

Beast of the Month - February 2009
Bernie Madoff
Ponzi Scheme Con Artist

"I yam an anti-Christ..."
John Lydon (aka Johnny Rotten) of The Sex Pistols, "Anarchy in the UK"

Let's hand it to the good ol' USA, even now with the economic crisis, we're still number one in one major economic category: business fraud. (Sorry, Nigeria.) Yes, because America is the center of the economic universe, it still leads Planet Earth in swindles. And in America, the most famous form of fraud is the good old-fashion Ponzi scheme.

Like many great American traditions, the Ponzi scheme wasn't actually invented in the US: indeed, in the 1844 Charles Dickens novel Martin Chuzzlewitt, one is perfectly described. In fact, the man who the Ponzi scheme is named after, Charles Ponzi, was, like many great American trailblazers, an immigrant to this country. But in Chuck Ponzi, the swindle was perfected and popularized, so it is rightfully named in his deserved honor, and thus the Ponzi is as American as General Tso's chicken or nachos.

At the age of 21, Ponzi came to America in 1903 with only $2.50 in his pocket. Like another Italian-born American folk legend who immigrated to the East Coast two years later, Angelo Siciliano AKA Charles Atlas, he was a man short of money but strong of will and dreams to make it in the New Atlantis. But unlike Atlas - who made his fortune on marketing bodybuilding, thus paving the way for future American immigrant folk legend Governor Arnold - Ponzi earned his wealth in Boston on an investment scheme in 1920.

Ponzi's plan was a simple one as presented: exchanging international reply coupons bought in Italy for postage stamps in the US, he could make enormous profits. He formed a business, the Securities Exchange Company, to use foreign agents to make such mass transactions. Investors were offered a 50 percent return after 45 days, or double the investment in ninety. Incredibly, he was able to make the payouts, and quickly amassed $15 million dollars in investments. It appeared almost too good to be true.

It WAS too good to be true. The whole coupon exchange plan was a hoax, something the Boston Post had pretty much uncovered by late July. The real way Ponzi was able to meet his enormous payouts was by rapidly increasing his investor base by both reinvestment of "returns" and finding more suckers. He was arrested by the Feds in August, charged with mail fraud in using postcards to his "investors" in the scam (his only apparent actual business with the postal service.) He became the first business villain of the roaring twenties, and even with his quick rise and fall, the influence of Ponzi on the public's confidence in business investments is vast: no doubt in 1934, when FDR formed the Securities and Exchange Commission as part of the New Deal, the name and initials were used to replace the bad name to security trades given thanks to Chucky P.

Today, $15 million is chump's change when it comes to investments. Still, no Ponzi con since Ponzi has managed to match him in infamy. At least not until last year, when the curious case of Bernie Madoff, The Konformist Beast of the Month, came to light.

The aptly named Madoff ran a brazen Ponzi scheme which was unique in two ways. One was in how respectable the mastermind of the fraud was. The other was in its sheer amount: at $50 billion, it's the largest Ponzi scheme in history, even if you include MLM pyramid schemes like Amway.

Unlike the scrappy and streetwise Ponzi, Madoff was as inside the Wall Street establishment as you could get, having been a former chairman of the NASDAQ stock exchange. Indeed, it is arguable that the NASDAQ wouldn't exist without him, as the technology behind it was developed by his firm. This is what makes his story so strange: the reason respectable folks like Madoff don't form Ponzi schemes is because they don't have to.

Not having to didn't stop Madoff. And he managed to long avoid some of the key pratfalls of most Ponzis, which he is believed to have started in the 1970s. To begin with, he targeted charities, which are unlikely to make sudden withdrawals of their cash, actions that usually lead to Ponzi black holes being unmasked. He further promised modest but consistent returns of around 10 percent annually, enough to keep charities afloat, but not too high to arouse suspicion. The ten percent number also allowed him 10 years of time for every dollar taken before any investment became completely worthless, thus also making it unnecessary to desperately seek more and more capital. Meanwhile, by being an insider schmoozer who hung with the rich and famous in Long Island and Palm Beach, he managed to obtain large amounts of investment painlessly from well-to-do who had little reason to suspect he was a con artist. Indeed, though it became the world's largest hedge fund, he would turn down would-be-investors who sometimes literally begged to become his clients, which only added to his fund's appeal.

But a con artist he was, with a rather famous list of victims: Jeffrey Katzenberg, John Malkovich, Sandy Koufax, Zsa Zsa Gabor, Yeshiva University, the Elie Wiesel Foundation, and charities set up by the publisher Mortimer Zuckerman and Hollywood film director Steven Spielberg. (For those playing Six Degrees of Kevin Bacon at home, the actor and his wife Kyra Sedgwick were indeed investors as well.) The list of Jewish investors bilked by fellow Jew Madoff left some anti-Semites on the Internet confused about the whole enterprise: didn't Madoff read the Protocols and realize he was supposed to screw the goy?

Though the SEC investigated Madoff at least eight times since 1992, they apparently did a sloth-filled job, as no evidence of a scam was ever uncovered. This despite being warned this was so by financial analyst Harry Markopolos, who in 2005 would send the SEC a report with the subtle title The World's Largest Hedge Fund is a Fraud. The Markopolos report itemized 29 red flags that the Madoff fund was a Ponzi con. Markopolos also sent the information to the Wall Street Journal the same year, who decided not to pursue the story. A 2001 article in MARHedge magazine shined suspicion of his track record of 72 straight months without a loss, a streak it deemed practically implausible. Charles Gradante, co-founder of the hedge-fund research firm Hennessee Group, agreed with this assessment, telling the L.A. Times in 2008: "You cannot go 10 or 15 years with only three or four down months. It's just impossible." After the hoax was uncovered, financial software company RiskData analyzed Madoff fund returns and discovered it was similar to those in previously uncovered fraudulent funds, something that should have raised warning signs in its own right.

Even with all these suspicious facts, there was apparently little interest among authorities to do detective work on such an esteemed Wall Street investor. Indeed, the only person in power who seemed to have any real interest in investigating Madoff was Eliot Spitzer, who did so in 2006 as New York's Attorney General. Spitzer, who also had investments in the Madoff fund, would become Governor the following year before being destroyed in a conveniently timed sex scandal expose early last year.

How he got away with it for so long may be the least of the remaining mysteries surrounding the Madoff scam. Two claims are repeatedly made in the mainstream press about the fraud: that Madoff did the whole thing by his lone gunman self, and that nearly all of the $50 billion is gone for good. Considering the main source for both these claims is Madoff himself, perhaps they shouldn't be taken on faith. Is it possible Madoff is just a fall guy for a larger money looting operation, and the money is now hidden in some offshore bank accounts?

Whether there is a larger conspiracy or not, in some ways, Madoff is a rather convenient scapegoat for the recent crime spree by Wall Street. After all, $50 billion is nothing compared to the money lost so far in the economic crisis. Meanwhile, the $700 billion bailout, widely opposed by the public from the start, has been pretty much been unmasked as the fraud and dollar black hole The Konformist warned it was last October. With unemployment at the end of January at 7.6 percent (with over 3.5 million jobs lost since December 2007) the masses need a face to attach their rage to, before they focus their rage against the system. Then again, considering Madoff was a swindler who targeted charities to the tune of billions, he is probably a more deserving scapegoat for the crimes of humanity than Britney Spears.

And perhaps the Madoff con is just the tip of the iceberg. Already, the SEC has busted two more Ponzi schemes in the post-Madoff era, worth $50 and $17 million each. Another hedge-fund scam, which may have bilked investors of up to $350 million in Florida, was discovered last month when the manager suddenly disappeared. None match the scope of the Madoff enterprise yet, but anything is possible at this point. In any case, if enough of these Ponzis posing as respectable funds start popping up, perhaps Madoff, like Ponzi before him, will enter the lexicon as an adjective in its own right.

In any case, we salute Bernie Madoff as Beast of the Month. Congratulations, and keep up the great work, Bernie!!!