It's turning out to be a global swindle. The NYT has an impressive - and very long - examination of how Bernie Madoff went well beyond the Jewish financial and philanthropic crowd in getting the required cash to keep fueling his alleged Ponzi scheme. The crunch came as his investors pulled out more of their money to cover losses elsewhere - and Madoff appears to have gotten more desperate in trying to prop up the operation. The Times describes "a cash-gathering swath through the Persian Gulf, then Southeast Asia. Finally, they were hurtling with undignified speed toward China."
Whatever else Mr. Madoff’s game was, it was certainly this: The first worldwide Ponzi scheme — a fraud that lasted longer, reached wider and cut deeper than any similar scheme in history, entirely eclipsing the puny regional ambitions of Charles Ponzi, the Boston swindler who gave his name to the scheme nearly a century ago.
What's fascinating about the scheme is how far it reached, thanks largely to the mostly unregulated world of hedge funds. Investment money that was plowed into a particular fund wound up being used by Madoff. Regulators apparently hadn't a clue - there really was no way for them to figure any of this out. One source for his money was the Fairfield Greenwich Group, an investment firm founded by Walter Noel, a former hot-shot at Chemical Bank. Lots of access to prestigious social circles, says the Times. Noel then hooked up with a small brokerage firm run by a guy named Jeffrey Tucker.
It was Mr. Tucker who introduced Fairfield to Mr. Madoff. In the early 1990s, Fairfield began placing money with him, according to George L. Ball, the former president of E. F. Hutton and Prudential-Bache chief executive who knows Mr. Noel socially. That began a long partnership that helped the Fairfield firm earn enviably steady returns, even in down markets — and that lifted Mr. Madoff into a global orbit, one that soon extended his reach into some of the most fabled banking centers of Europe. If the wealthy Jewish world he occupied was his launch pad, the wealthy promoters he cultivated at Fairfield Greenwich were his booster rocket.
The Fairfield Sentry fund was one of several so-called feeder funds that became portals through which money from wealthy foreign investors would capitalize on Mr. Madoff’s investment prowess — collecting those exclusive, steady returns that had made him the toast of Palm Beach and the North Shore so many years ago. The Sentry fund quickly became Fairfield’s signature product, and it boasted of stellar returns. In marketing materials, Fairfield trumpeted Sentry’s 11 percent annual return over the last 15 years, with only 13 losing months. It was a track record that grew increasingly attractive as markets grew more volatile in recent years.
Is it possible that all these fund managers and investors were in the dark about what Madoff was doing? Not likely. Question may not be how much they knew, but how much they didn’t want to know. Eleven Times reporters worked on the story, which was written by the veteran business reporter Diana B. Henriques.