Just One More Thing About Bernie Madoff

Jon Stewart interviewed Bethany McLean on The Daily Show Thursday night. She is the reporter who broke the Enron story, and her words of wisdom should be abided by us all: if you don't understand how it's making money, it probably isn't.

Today's New York Times reports about a 1992 investigation into the business dealings of Frank Avellino, an accountant who had been funneling clients' money to Madoff since the 1960s. According to the Times: The documents show that Mr. Avellino and Michael Bienes, his business partner, kept almost no records at Avellino & Bienes, a firm that oversaw $440 million. When court-appointed auditors asked Mr. Avellino to prepare a balance sheet, he responded that “my experience has taught me to not commit any figures to scrutiny.”

Imagine saying that to an IRS auditor!

In addition to curtailing the audit quite quickly, the S.E.C. also took at face value Mr. Avellino’s depiction of the deal he offered investors, which guaranteed returns of up to 20 percent a year while requiring him and Mr. Bienes to make up any shortfalls.

I'm curious, aren't you, just why that investigation went nowhere!

The Times also reported this morning about a Thursday night discussion at the YIVO Institute for Jewish Research about the Madoff scandal.

The evening was called "Madoff: A Jewish Reckoning."

Mort Zuckerman, chair of Boston Properties who lost some $30 millions to Madoff, questioned the theme. According to the Times, Zuckerman objected to the name of the panel: Kenneth Lay of the Enron Corporation was not referred to as a “prominent Protestant energy fraudster,” he noted, nor is Gov. Rod Blagojevich of Illinois referred to as a “prominent Serbian-American politician.”

However, I have to disagree. Jews have always been clanish, the reasons why have to do with anti-Semitism and their exclusion from landowning, office holding, and many forms of trade and commerce in Europe after the Diaspora. Yet this clanishness has also been the way Jews have survived. Many ethnic groups admire the recirculation of money within the Jewish community, as Jews tend to be clients and customers of other Jews.

So I believe the Jewish community has to take responsibility for Madoff's preying on fellow members of the clan. It was perceived as a privilege to have enough money to invest with Madoff, and that insecurity, shared by Madoff and his victims, unfortunately is part of the outsider nature of being a Jewish person living in America. However, as I've said before, the returns on Madoff investments were so wildly unrealistic that people should have suspected that something not quite kosher was making these returns possible. That is the complicity that connects the perpetrator to the victim in a ponzi scheme.

There are a lot of questions about how some of the charities that lost endowments through Madoff were run. There are a lot of questions about this scandal, but as Bethany McLean suggested in her Daily Show interview, the real questions aren't about the Madoff scandal, but about how Bank of America, Citibank, and Wall Street are operating. Where is that money going?