The Crime Book

119

several clients under his own name

to make it appear that Madoff had

fewer investors.

Family business

Madoff’s firm continued to grow.

By 2008, it was a multibillion-dollar

family business: his niece was

employed as a compliance officer,

and his two sons, Andrew and

Mark, were placed in charge of the

company’s legitimate operations

outside of the private investment

division. This division was a

secret even within the company,

and was highly illegal – clients’

investments were deposited into

Madoff’s private accounts rather

than being invested.

When investors asked for their

money back, Madoff’s firm would

return their investment with

interest, along with a fabricated list

of trades based on real data. The

money actually came from other

investors’ contributions. Perhaps

because of the aura that developed

around Madoff and his magic

investments, most saw no reason to

doubt the returns. One Madoff fund

for his investors’ money focused on

shares in the S&P 100-stock index.

It reported a 10.5 per cent annual

return for 17 years. Even when the

US stock market collapsed in 2008,

the fund was up.

For decades, people trusted in

Madoff’s consistency – and not just

the wealthy. Thousands of working

people gave him responsibility for

their life savings. His firm seemed

legitimate, and he was, by all

appearances, a trustworthy and

credible businessman, who had

See also: Charles Ponzi 102–07 ■ Jérôme Kerviel 124–25

WHITE COLLAR CRIMES

I certainly wouldn’t invest in

the stock market. I never

believed in it.

Bernie Madoff

served on an SEC advisory

committee and as nonexecutive

chairman of the world’s second-

largest stock exchange.

When the scale of Madoff’s

deception was revealed, his

hundreds of thousands of victims

included Hollywood stars Kevin

Bacon, John Malkovich, and Steven

Spielberg, the French aristocrat and

financier René-Thierry Magon de la

Villehuchet, and the UK army

veteran William Foxton. Tragically,

de la Villehuchet and Foxton were

driven to suicide as a result of their

financial losses.

Investigations commence

The point at which Madoff began

his Ponzi scheme is unclear. When

he finally confessed in 2008, Madoff

insisted that the fraud had started

in the early 1990s, but federal

investigators believe that it may

have begun as early as the 1970s

or mid-1980s. In fact, Madoff’s

investment operation may never

have been legitimate – his financial

operations were always highly

secretive, to the extent that his ❯❯

Whistleblowers

Whistleblowers are an important

but controversial factor in the

detection of crimes that might

otherwise continue unchecked by

bureaucratic processes. Despite

the harassment and intimidation

whistleblowers often experience,

they are protected by the law.

After noting the due diligence

of whistleblowers during Madoff’s

case, the SEC set up a specific

whistleblowing fund intended

to encourage financiers to come

forward with vital information on

financial crimes.

Whistleblowers, however, are

also important in other fields,

including education and

healthcare, where workers are

encouraged to speak up against

negligence and poor conduct. In

matters of state, whistleblowers

can be extremely controversial.

Former CIA employee Edward

Snowden has been alternatively

celebrated as a patriot and

criticized as a traitor, while

former US Army soldier Chelsea

Manning was court-martialled

and jailed for leaking

confidential documents to

condemn US foreign policy.

Edward Snowden leaked classified

information in 2013, which revealed

details about secret US-led global

surveillance programmes.

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