Problem
I. Access the Wall Street Journal's (WSJ) podcast, The Journal, April 16, 2021 episode entitled "The Legacy of Ponzi Schemer Bernie Madoff" (21:05). In this episode of The Journal, Ryan Knutson and Jamie Heller, both of the WSJ covers the recent death of Bernie Madoff. Madoff, notorious for running the largest ponzi scheme ever in history died while serving out his 150-year sentence in federal prison. Madoff was 82 years old.
II. Madoff's money management firm consistently "yielded" 8-12% returns, which at many times beat the market. Jamie Heller states plainly that these returns were "too good to be true". The episode mentions various red flags identified over the years about Madoff's scheme, from Harry Markopolos, a Boston-based whistleblower, going to the SEC to the Barron's news investigation. Harry Siegel, a former Deloitte partner who invested with a Madoff feeder-fund, even mentions red flags he picked up while doing due diligence prior to this investment. Why do you feel that the professional skepticism around Madoff's returns systemically failed, across various watchdog groups and investors in the fund? Do you feel any party was turning a blind eye to the reality of the situation? Why or why not?
III. Ultimately, all investors in Madoff's ponzi scheme are victims. Funds from individual investors' retirement savings, worthy charitable causes, and more evaporated in the unraveling of the fraud during the housing market crash. Funds that investors had taken out prior to the uncovering of the fraud (the "net winners") were clawed back to be distributed among the damaged parties (the "net losers"). Mark Madoff, Bernie's son, died by suicide two years after the revelation of the ponzi scheme. Do you feel Madoff's 150 year sentencing is meaningful or just considering Madoff's disposition after the fraud was uncovered? Why or why not? How does Madoff's sentencing send a message to the financial community at large about fraudulent behavior?
IV. What was the most interesting takeaway you learned in listening to this episode (a fact that was new to you, wowed you, enlightened you, etc.)? Why?