ACLU hit by Madoff
Today I got an email from the ACLU soliciting donations because of the Madoff Ponzi effect. Alma Montclair writes: Ponzi scheme appears to have affected two significant sponsors.
In the last couple of weeks, however, we've been hit hard in a way that no one could forecast. You have, no doubt, heard about the Bernard Madoff Ponzi scheme in which investors have been horribly defrauded of up to $50 billion. What you may not know is that two foundations that have been incredibly generous and longstanding supporters of our national security and reproductive freedom work have been victimized by the Madoff scandal -- forced to close their doors and terminate their grants.
That means that $850,000 in support we were counting on from these foundations in 2009 simply won't exist. We're dealing with that reality and remain committed to continuing our critical work in these areas.
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ACLU is an important organization and this news underlines the fact charitable organizations were really hurt by Madoff and his crew.
Besides the aches and pains of the ACLU, food shelves will go empty, homeless shelters will be hurt, and many fine charitable aims will be thwarted.
December 23, 2008 6:11 PM | Reply | Permalink
Madoff's was a swindler extraordinaire, but in all congames, the pitch only works when a rube swallows a hook, line and sinker baited with the light scent of larceny. Here's an investing aphorism that validates universally:
If you were introduced to an private funds manager through word of mouth passed in locker room gossip or out on the 9th green, reverently detailing a too good to be true high and steady annualised rate of return, delivered stringed to a front-loaded $20,000,000 minimum stake; it is prudent to assume: it is too good to be true.
I am amazed that so many well-seasoned successful business paragons in reality, just jumped off the turnip truck yesterday, as it was entering The Big Apple's city limits.
December 23, 2008 7:30 PM | Reply | Permalink
In various ways these victims were shielded from sufficient involvement to have drawn what seems in retrospect the obvious conclusions.
Many were dealing with the feeder funds on which they relied. And which they will now sue.
And even of those dealing directly with Madoff's firm , many were entrepreneurs so occupied with their companies that investing was secondary.
December 24, 2008 5:25 AM | Reply | Permalink
Investors that got swindled through a third-party manager who laid off their investments to Madoff are not blameworthy. I was referring to major financial players who were feeding into Madoff's fund. Those players are not Wall Street naive. They knew damn well that Madoff wasn't playing the game by the advertised Smith/Barney rules. Many of these same persons were raking a cut without doing anything to hav honestly earned it.
Thierry de la Villehuchet, the investment manager whose suicide is reported because of his clients' Madoff exposure, estimated at 1.4bil, and 75% of his management portfolio's total assets. How much was his rake?
Madoff low-balled his fixed base management fee rate, and didn't have performance triggers. That meant extra points for the managers of the feeder funds to scrape for themselves, or send upstream to free up their own feeders. Executives, and managers of the entities getting a piece of the action had tight connections from past business association and/or same family. Some of the connections were even same person under different branding. I totaled the top 30 Madoff investors and it ended up over half of the 50bil.
A access pass directly to Madoff usually required a hook-up through a networked social connect. Major league fund managers who earned their fee the Old Fashioned Smith Barney Way, exercising due-diligence before they handed their clients' money over to a third-party, wouldn't play ball with him. This was because when they showed up with a fat portfolio, asking standard questions about his business practises, they received a non-specific vague outline of an investment strategy of how he scoured the global financial markets, looking for sure thing arbitrage positions. In the current era of massive data centers running sophisticated software 24/7/363, endowed with official trading authority, that game gets you pennies normally, a lucky nickle on a good day. Madoff never set-up potential investors with a meet-n-greet the floor traders, didn't use an independent trade clearing house, and didn't open up audit reports for scrutiny.
Now some of those used as fodder for the feeder funds have been initiating lawsuits for fiduciary malfeasance. The feeder funds retain high-end shysters, who share many of the same interconnections, setting up a feedback loop that created "they're not crooks, they're ignorant rubes" sob story noise to weaken the signal. I'm not alleging that they were conspirators in the Ponzi Scheme, but they are not innocent victims of it either, and knew he threw doctored balls. They believed that Madoff stayed ahead of the floor by leveraging knowledge from his brokerage side, and onside connections, but hey, why why yank on the emergency break, when you're riding in a sleeper car on the gravy train?
December 24, 2008 11:26 AM | Reply | Permalink
Yes, yes, yes. Fairfield and others were making a bundle.
This is where knew or SHOULD HAVE KNOWN really comes in as a test of duty; duty to the so-called 'clients'. Notice how they always call them clients instead of customers.
This a pretty comment and you should ressurect it again after the first of the year. A lot of revelations will come out in the next two weeks because all the journalist/pundits are hot on it.
Washington Post has all these articles they will not let me in on.
Thanks Psuedo.
December 24, 2008 2:58 PM | Reply | Permalink
Just to the point of the individual investors who got stung. I know three of them. One fits the model of the sophisticated investor who should know better. The other two have spent their lives doing things,successfully . And were far more likely to discuss the Jets than the carry trade.
Having enough money to become Bernie's prey doesn't automatically imply a life time of reading Barrons. Certainly that was not the case with these last two.
There's only so much time you can spend on the markets if you're also trying to get things done.
December 24, 2008 9:13 PM | Reply | Permalink
thanks flavius, for the lesson on the differences between nature and nuture. Those are difficult to learn from self-reflection alone.
I grew up in Las Vegas, and even when living elsewhere, it always has remained the referential point of return. Simply being aware within that environment has embedded a skill-set that: recognizes the faint attractive aroma of snake-oil, flags movement at the periphery of a misdirect, sees the dissonant flick as the card gets pitched from the bottom of the deck, picks out shills in an audience, differentiates between the whispers of grifters and touts, sees a prowling shark in the water, and the wolves that walk amongst us in their sheepskin suits. This skill-set runs hidden in the background directly off root, and being able to see the predators transcends the herd-bond, and leaves me straddling the fence between predator and prey, a point of view where hauteur need be guarded against.
It's a dangerous game in muddy waters to blame victims, The guy who gets blasted off a green-lighted crosswalk by a speeding drunk driver is not at fault, but he still should have looked both ways before stepping out onto the asphalt. There still need be a proper separation between those swept in from the feeder tides, and the patsies who were pitched-in believing they were getting a piece of the larceny.
If your three friends were all individual investors, I'm still left wondering the circumstances that led to their contact point with Madoff. Do you think any of the three felt they'd gotten juiced-in as a function of an insider social networking track? I understand they are you friends who have suffered a great undeserved indignity. Yet life has afforded me the great fortune of straddling many fences, and opportunities to cross over them without impairment. I know the seduction of aristocracy's forms, and the call of everyman. Both are wrong, both are right, and it's hard to stay balanced in the middle.
December 24, 2008 11:09 PM | Reply | Permalink
Two of them were brothers. Not sure how the first got involved with Madoff, but his brother just copied him
The third I know of from a completely different connection. Again I don't know how he got involved but certainly unconnected with the first two.
None of the three were in finance. Nor had inherited wealth- which might have given them an early familiarity with investing. But that already starts to get me into the sort of speculation I want to avoid.
I indirectly know a fourth case whose plight illustrates another way this happened. A widow who I think was just continuing the practices of her husband.
They were victimized to varying extents ranging from one who lost everything to one who lost 20%.
Real people,who did favors, watched the Jets or Live from Lincoln Center, supported Amnesty International and ,yes, the ACLU. Not card board cut outs, impersonal investors .Not that you in anyway suggested that.
None of them will be enjoying this holiday season.
I hope you are.
December 25, 2008 6:46 AM | Reply | Permalink
I got that e-mail also. Bummer!
December 23, 2008 10:08 PM | Reply | Permalink
They were gambling, and they knew they were gambling. Pseudo's post says they knew Madoff was cheating, somehow, they just wanted in.
A pool hustler I knew called it "getting their nose open". He said that it is almost impossible to con someone unless you pivot off of the Mark's greed. When the emotion of greed kicks in, one's blood pressure rises, along with other physiological changes, including a flair of nostrils. If you notice a person's nostrils flairing, his nose is open, he is ready to be conned. Most of the Madoff victims were conned by their own greed.
December 24, 2008 3:22 PM | Reply | Permalink
That's a lesson learned in the Vegas grade school curriculum. MBAs should have a compulsory apprenticeship degree prerequisite, learning where the ropes are in the ring, as poker dealers, and from every house position on a craps table.
December 24, 2008 8:26 PM | Reply | Permalink
And, incidentally, flaired nostrils are a poker tell. It means the player has a good hand. It is why so many of the players cover their mouth and nose or look down after a strong bid.
December 24, 2008 3:26 PM | Reply | Permalink