The Crime Of Our Time: Why Wall Street Is Not Too Big To Jail

The Crime Of Our Time: Why Wall Street Is Not Too Big To Jail

by Danny Schechter

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"Schechter goes right for the jugular in this rich and informative analysis of the financial crisis and its roots. Not errors, accident, market uncertainties, and so on, but crime: major and serious crime. A harsh judgment, but it's not easy to dismiss the case that he constructs."—Noam Chomsky

Veteran journalist Danny Schechter investigates a


"Schechter goes right for the jugular in this rich and informative analysis of the financial crisis and its roots. Not errors, accident, market uncertainties, and so on, but crime: major and serious crime. A harsh judgment, but it's not easy to dismiss the case that he constructs."—Noam Chomsky

Veteran journalist Danny Schechter investigates a complex web of fraud and crime that he shows played a major—if largely unreported—role in bringing the economy down. His four-year investigation focuses on three interconnected cesspools of corruption: what the FBI calls an "epidemic of mortgage fraud," predatory and deceptive securitization by Wall Street, and insurance scams.

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Copyright © 2010 Danny Schechter
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ISBN: 978-1-934708-62-0



BEFORE: Madoff's cell phone message according to his long-time secretary was, "Hi, you've reached Bernie Madoff. I'm unavailable right now. If you need me, you can call my office at (212) 230-2424. Or just leave a message and I'll get back to you." (Please note this phone number is no longer in service.)

AFTER: Madoff became Prisoner Number 61727-054. He was sent to a federal prison in Atlanta for processing. That's the place that once housed Charles Ponzi, the man after whom the Ponzi scheme was named, but also such giants of dissent as Socialist Party leader Eugene Victor Debs and Jamaica's black nationalist hero, Marcus Garvey. He was later moved to a federal prison in Butner, North Carolina, which has a hospital. (There's a rumor he may have cancer.) He has now been slated for release on November 14, 2139 - 20 years less than his full sentence. Two weeks later, Madoff's accountant, David Friehling, pled "not guilty" to any wrongdoing.

His phrase, "indeed, criminal," was uttered in open court in the spring of 2009 by the arch-financial fraudster Bernard Madoff after he confessed to running an illegal Ponzi scheme.


used to emphasize a statement or response confirming something already suggested: It was not expected to last long, and indeed it took less than three weeks.

• ORIGIN: (Middle English) as "in deed"

"I knew what I was doing was wrong, indeed criminal," was the whole statement. Later Madoff's CFO, Frank DiPascali, would confess to another federal judge, "I knew it was criminal, and I did it anyway." He pled guilty to ten felony counts, including conspiracy and tax evasion.

For his candor and his chutzpah, this market genius credited with popularizing computer trading and chairing the NASDAQ exchange, will be spending the rest of his life behind bars as one more example of a big man taking a hard fall, as well as a symbol of all financial crisis crime, even if Madoff was not really connected to the crimes that shattered our economy.

Some of the details of how Madoff's firm operated came out in Frank DiPascali's testimony. The New York Times reported that "he and unidentified others helped Mr. Madoff perpetuate the crime - using historical stock data from the Internet to create fake trade blotters, sending out fraudulent account statements to clients and arranging wire transfers between Mr. Madoff's London and New York offices to create the impression that the firm was earning commissions from stock trades."

The SEC complaint alleged, "DiPascali helped generate bogus annual returns of 10 to 17 percent by fabricating backdated and fictitious trades that never occurred. The SEC further alleges that DiPascali helped Madoff cover up the fraud by preparing fake trade blotters, stock records, customer confirmations, Depository Trust Corporation (DTC) reports and other phantom books and records to substantiate the non-existent trading.

"DiPascali and Madoff ran an extraordinary and massive counterfeiting operation that concealed their fraud from investors and regulators alike," said Robert Khuzami, director of the SEC's Division of Enforcement. The site Seeking Alpha added, "DiPascali declined to identify any accomplices other than Madoff. To date, only Madoff, DiPascali and the firm's outside accountant David Friehling have been charged in connection to the $50-billion fraud, though authorities are said to be investigating at least ten other people."

Bernie, as he came to be known - as if his status as a folk character came straight out of a Woody Allen movie - had merged into popular culture after the media at first reported he committed a $50-billion-dollar scam, a figure few New Yorkers could wrap their minds around. Bear in mind that his criminal practices began years before the economy crashed, although it mirrored its get rich psychology. Madoff is thought to be in a league of his own: the Ponzi process itself now has a new name: "Madoffication."

As the courts looked into the details, that figure climbed to $65 billion. On the weekend before his sentencing the judge ruled he would have to give up his interest in all his properties. He then issued a whopping $171-billion-foreclosure order, three times the alleged size of the crime when it was first revealed.

His lawyers then said the "$177 billion" demand - it apparently went up after the first press reports - was exaggerated, as if differences in billions had no meaning.

The judge left his wife Ruth with a mere $2.5 million.

His lawyers argued he should only get 12 years in prison because of his age, (71), cooperation and his expression of "shame." They even denounced an "atmosphere of mob vengeance" even though his most vociferous critics were his own victims. Prosecutors rejected the argument, demanding instead a whopping 150-year prison term, the maximum.

The federal probation department recommended 50 years.

Finally, "M Day," July 30, 2009, came and Bernie went - sent away for a long, long time. Judge Denny Chin threw the book at him - the maximum sentence - to set an example, to warn others, to express how pissed off everyone was. Madoff said he will not appeal the sentence.

In his statement, Judge Chin explained that punishment has several purposes: First "retribution" for crimes that he characterized as "extraordinarily evil." Second, deterrence "and the symbolism is important here because the strongest possible message must be sent to those who would engage in similar conduct." And, finally, it was for the victims because, "Mr. Madoff's very personal betrayal struck at the rich and not so rich, the elderly living on retirement."

The media focused on well known victims like film director Steven Spielberg, who claimed to have lost $300 million, but tax returns uncovered by muckrakers at Web of Deception ( found that he earlier reported $126,093 in income from Madoff. Many prominent people gravitated to Madoff because he was known for his consistent and, unusually high returns. Many assumed he had "insider" knowledge.

The judge referenced 133 letters he had received from victims as a basis for his decision.

The Wall Street Journal reported the day before Madoff's sentencing that just $1.2 billion, of some $13.2 billion in estimated net losses suffered by investors since December 1995, had been recovered.

Although Mrs. Madoff got to keep $2.5 million for her living expenses, she had to give back millions in property, and fur coats said to be worth $48,500. The government is suing some investors who took large amounts of money out through so-called clawback actions. Some of these investors, who want more, are suing the government.

Every report on the details seemed to dish up different numbers: The Associated Press reported: "At the time of Madoff's arrest, fictitious account statements showed thousands of clients had $65 billion. But investigators say he never traded securities, and instead used money from new investors to pay returns to existing clients."

Prosecutors said the total losses, which span decades, haven't been calculated. But, they said, "1,341 accounts opened since December 1995, alone suffered losses of $13.2 billion. The sheer scale of the fraud calls for severe punishment," the prosecutors demanded.

In a high-profile case such as his, the public and the media would not accept another normal Wall Street "settlement," where fines are paid to avoid incarceration. In this case, the judge did not just rule on the law but branded Madoff's action "evil." At the same time, Madoff's lawyer called the sentence "absurd" and writer Michael Wolf suggested on his Newser website ( it was because he is Jewish:

The notion is that Bernie has come to represent the financial meltdown; he's symbolically paying for the whole thing. He's going to jail not just for the $15 billion he stole but for the other $6 or $7 trillion lost in the collapse.

Actually there were many Jews who opposed Madoff. Vanity Fair reported:

Laura Goldman of the Tel Aviv-based LSG Capital decided not to invest with Madoff. She even sent anti-Madoff articles to members of the Palm Beach Country Club. "I was expecting a thank you, all I got back in return was a hostile response. Some of the Madoff investors said I was behaving unprofessionally and was bad-mouthing a competitor. Oh, they were nasty. Nasty! ... People called me an anti-Semite. I'm not only a Jew, I live in Israel."

Madoff's victims were not all rich or celebrities, despite the impression fostered by the victims. One of them, Lawrence Velvel wrote on OpEdNews (

Most of Madoff's victims are not the billionaires, "centa-millionaires," hedge funds, and banks that the celebrity-driven mass media has focused on, thereby causing the public to believe that the victims of Bernard Madoff are all wealthy plutocrats. Most Madoff victims are, instead, "small people." They are people who usually started with little or nothing, as members of the working class or lower-middle class, as immigrants, as children of holocaust survivors. They are people who worked like dogs all their lives, finally saved up enough money to make an investment in Madoff, and now find themselves wiped out.


When Madoff told his sons, and then, the FBI about his crimes, the speculation was immediate: Who else was involved? Did he act alone in the spirit of that "lone gunman" who is blamed for all U.S. assassinations? Soon, sure enough the men operating the "feeder" funds that kept him in business, and others who profited through his largess, were being accused of crimes by financial regulators, who looked the other way when "Bernie" became one of the richest operators on the Street.

He was known for impeccable balance sheets and cozy associations with the big shots of the Jewish world of New York, Palm Beach, and even, Tel Aviv. In the shock of the disclosure of his perfidy, the Ha'aretz newspaper said he had done "more harm to Israel than Hamas." (He had been seen as a big shot, a big macher in Yiddish, and a respectable philanthropist.)

Sam Antar recognized a criminal technique in the way Madoff ingratiated himself to leaders in his community, with a veneer of philanthropic activity. Antar told me, "He built a wall of false integrity around him. He was the guy that, that was in with every single social crowd. In with, with all the charities. So everybody thought of Bernie Madoff as some kind of a god. Nobody questioned him.

"The SEC investigator that did that audit ... she says, 'How am I supposed to find the second set of books?' Well, you weren't trained to find the second set of books, which is another problem that we have. We don't have trained investigators, and we don't have trained experienced investigators working with the government authorities to be able to prosecute these criminals. And you can't just send one investigator to find out what's going on; you need sometimes a team of investigators."

The people he ripped off denounced him in court even as many had, for years, welcomed his reassurances of the high returns they thought he was getting for their money. Many had lobbied their landsman to please manage their money, secure in the belief he would come through for them. Some went to him believing insider (i.e., illegal) connections were the source of his success. In short, many were no less greedy, assuming that the only way he could deliver high returns so consistently was because he was flaunting the law by engaging in insider trading. As long as their neatly prepared monthly statements kept coming, no questions were raised.

Madoff's crimes received the media attention they did, not just because of their scale, but because he had also ripped off the rich and famous. The millions of poorer subprime borrowers who have lost homes because of Wall Street scams were not, in contrast, considered sympathetic enough victims.

In Madoff's case, 15,400 investors filed claims. That number had skyrocketed to meet a deadline, the end of June 2009, set by Irving H. Picard, the courtappointed trustee in charge of the claims process.

The New York Times reported: "The claims tally adds a new metric to the enormous fraud, which was already remarkable for the amount of paper profits wiped out ($64.8 billion), the amount of cash that flowed through the Ponzi scheme since its inception ($170 billion) and the number of years the fraud continued undetected (nearly 30, according to the government prosecutors)."

The list of victims even included his sons Mark and Andrew who said they were out $15 million in compensation and investments. Andrew reportedly called this a "father-son betrayal of biblical proportions."

Many investors believed his sons were in on it. His secretary told Vanity Fair that her boss carefully planned the final act of his Ponzi scheme, confiding supposedly in no one, insulating his family from responsibility. Suspicion surrounded his wife Ruth who eventually issued a statement expressing sympathy for those who were defrauded, sounding like a betrayed woman:

From the moment I learned from my husband that he had committed an enormous fraud, I have had two thoughts - first, that so many people who trusted him would be ruined financially and emotionally, and second, that my life with the man I have known for over 50 years was over ... I am embarrassed and ashamed. Like everyone else, I feel betrayed and confused. The man who committed this horrible fraud is not the man whom I have known for all these years.

Despite her statement and profession of innocence, Ruth Madoff would be sued too, as this release from the Trustee's office explained:

Irving L. Picard, the Trustee appointed to liquidate the business of Bernard L. Madoff Investment Securities LLC (BLMIS), filed suit today against Ruth Madoff, the wife of Bernard L. Madoff, seeking to recapture at least $44,822,355 in funds that were transferred from BLMIS during the past six years directly to Mrs. Madoff or for her benefit to companies in which she was an investor.

In the Trustee's complaint, filed in bankruptcy court in Manhattan by the Trustee's law firm, Baker & Hostetler LLP, Mr. Picard details 111 transactions which he alleges were fraudulent transfers or conveyances recoverable under the bankruptcy code.

Noting that "for decades, Mrs. Madoff lived a life of splendor using the money of BLMIS's customers," Mr. Picard states in the complaint that "regardless of whether or not Mrs. Madoff knew of the fraud her husband perpetrated" money she received from BLMIS should be recovered "to the extent possible for the benefit of BLMIS and its defrauded customers."

"Under pressure by investors claiming that not enough money has been recovered, Picard is clearly playing to the public," business journalist Gary Weiss commented on his blog (, "Certainly Ruth is not the first wife to have benefited from the thievery of her husband. Down through history, from Mrs. Jesse James to Mrs. Lansky to Mrs. Gotti and, of course, our beloved if fictional Carmela Soprano, wives have enjoyed lavish lifestyles because of their husbands' criminality, and I imagine they could have been sued by the feds by the same logic that Picard is using. I guess there might have to be a bankruptcy involved, but maybe not. Prosecutors can be creative, after all."

The court would order Mrs. Madoff to file a monthly financial report itemizing all personal expenses above $100. Picard had found a hundred and a eleven wire transfers from the Madoff firm to her bank account, and noted that she was listed as holding an interest in her husband's British affiliate.

Ruth Madoff was known as a serial shopaholic, addicted to almost unlimited consumption of luxury items. She bought an expensive cashmere sweater the day after her husband was arrested. She made charitable donations with the company's credit card financed by stolen money, money stolen from other charities, "Even after Bernie was behind bars, Ruth was out spending like there was no tomorrow," wrote Jerry Oppenheimer in his book Madoff With the Money, an examination of the family's criminal background that contends he was obscenely materialistic with no redeeming values.

"The evidence of Ruth's piggishness was in black and white," Oppenheimer concluded after studying court records itemizing their American Express account. "Her charges in December 2007 to January 2008, after the markets melted down, were $29,887.94. The total Amex bill for the Madoff clan was $100,121.99." No wonder the trustee Irving Picard would later sue her and her sons for millions more.


Excerpted from THE CRIME OF OUR TIME by DANNY SCHECHTER. Copyright © 2010 Danny Schechter. Excerpted by permission of The Disinformation Company Ltd..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Meet the Author

Danny Schechter: Danny Schechter is a veteran journalist who writes and speaks about economic and media issues. He is a multiple Emmy Award winner, having been a producer for ABC News, CNN and other major networks. His daily blog ‘News Dissector’ appears on, the website he edits, with weekly online commentaries on Huffington Post, Buzzflash, Alternet, Global Research, ZNet, Creative-I and many others. He has directed numerous films including In Debt We Trust and Plunder: The Crime of our Time.

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