If it walks like a duck, and quacks like a duck…
About three years ago I served on a federal jury. The defendant was charged with running a Ponzi scheme that bilked his clients out of more than $65 million. While not on the same scale as Bernard Madoff, the idea was similar.
The defendant in this case would pay client #1 with money he got from client #2, and so on. He had operations in the U.S., England and Australia. A few clients could afford to invest millions of dollars, and others who were retired, had pooled their pensions and nest eggs in hopes of earning enough money for a comfortable life. All was lost.
Over the course of the two-week trial we heard all sorts of excuses… that the defendant believed his investments were good, that he had no intention of defrauding his clients, that he was willing to return as much of the seed money as he could, and so on, and so on.
Throughout the case the jury heard testimony that the defendant claimed he could guarantee as much as 300% return on investments, that the principal funds were insured and could not be lost, only the interest was at risk.
On the first day of the trial the prosecutor played us a tape of a telephone conversation between the defendant and a couple he eventually secured as clients. During the conversation the wife asks how much risk was involved, could they lose their investment. Initially the defendant told her there was zero risk, then said ‘it was more likely that Barclay’s would fail than their investment.’
If you’re not familiar with Barclays, it is one of the oldest and most respected financial institutions in London. Zero risk? Seriously? We had our lie.
When the jury was finally given the case for deliberation, that tape was one of the things we asked to review. In our instructions we were told that we could only vote to convict if we believed, beyond reasonable doubt, that the defendant knew his investments were bogus.
It took us less than two hours to return our guilty verdict. The defendant was sentenced to 33 years in prison ~ six months for each $1 million he stole.
All this has been on my mind with the news of Madoff’s $50+ BILLION scheme. He even stole form his own family!
I have to wonder that somewhere along the line some of these clients had to ask ‘is this too good to be true?’ Like with the case I was involved with, did these people actually think they would see 300% return on their investments? Really?
I’m not excusing either of these men. What they did was heinous! It was wrong on SO many levels. And, I’m not blaming the victims… BUT… where was commonsense in these cases?
Would any of these investors actually answer those ridiculous e-mails we all get on occasion promising millions of dollars for little or no out-of-pocket risk to us? The investments these men offered, in some cases, were just as transparent.
I think in both of these cases, the thieves were very charming, very charismatic, very believable, and perceived to be very powerful. With the amounts of money involved, it was easy to be fooled, to be overwhelmed by the promise of incredible returns on investment.
Madoff should be punished just as harshly should he be found guilty, but this should also serve us as a cautionary tale to be more involved in our own money matters, and recognize that ‘if it walks like a duck, and quacks like a duck, it’s probably a duck.’