So, Mr. Bernard Madoff is going to jail for 150 years. Seems like a fairer sentence than the twelve his lawyers asked for. But you know what? I don’t think he should be there alone; I think he should have some company.
Quite a lot of company in fact. Who should be there with him?
- For starters, all the fund managers who fed him funds and either didn’t do their homework (usually known as due diligence) or didn’t fess up to knowing that this was a Ponzi scheme. Collecting fees for work you do not do, or allowing clients to invest in a scheme you know is bogus, is as bad as perpetrating fraud in my book.
- Investors who gave him all their money to manage. How dumb is that, when one of the basic tenets of investing is utilizing the “benefits of diversification” (otherwise known as don’t put all your eggs in one basket)?
This fundamental investment principle suggests that if you invest, it should be in a broad range of strategies, asset classes and/or investment instruments. That way, if one stock, asset class or strategy does not do well, you will be cushioned by the performance of your other investments. In fact, the same principle seems to have eluded a number of otherwise intelligent employees at both Lehman Brothers and Bear Stearns, who held the bulk of their own investments in company stock and suffered because of it. I am not sympathetic to them. If you are silly enough to make this mistake, then live with the consequences.
- The Board of Directors of Yeshiva University. Now who in their right mind would invest in a fund managed by one of the institution’s board members? This is a basic principle as well, called “conflict of interest.’” It doesn’t matter if you feel you have a superstar investor as a Director. If you do, that should be the person running your investment committee: the person who will oversee the selection of the institution’s outside money managers, and vet them on the institution’s behalf. You absolutely do not give that person your money to manage!
There are some very basic and fundamental truisms of investing that have been forgotten in this instance. Mr. Madoff may be a crook but there are a number of other “ordinary citizens” who may have also been “criminally negligent,” and deserve to be right in there with him. Misery does love company.
Antoinette Geyelin, known as Toni, is a native New Yorker. A graduate of the Brearley School and Barnard College (AB Latin American Area Studies), her banking career began at the Chase Manhattan Bank in its prestigious Credit Training Program. Among the first women to be accepted into this program, upon completion she became the first female credit officer sent by Chase into the Latin American market. Fluent in Spanish and subsequently Portuguese, Toni has spent a significant portion of her career working with Latin America as a commercial banker, an institutional banker, a sovereign debt specialist, and most recently as a private wealth management executive.
Adept at managing change and steering turnarounds in the financial service sector, she has held executive positions with Bankers Trust, CIBC Oppenheimer, Deutsche Bank and as Treasurer for Sotheby’s. Additionally, Toni managed the startup of a registered investment advisory firm for a group of Brazilian investors and most recently assisted her husband in the launch of his new business. Married with two “almost” grown children, Toni currently serves as a Trustee with the Walter C. Klein Foundation. She is a former trustee of the Brundage, Story and Rose Investment Trusts and the Diocesan Investment Trust for the Episcopal Diocese of New York. She served as a director of TIP Neighborhood House in the South Bronx and the Executive Council on Diplomacy (formerly the Executive Council on Foreign Diplomats in America).
She is proud that her closest contact with Bernard Madoff was advising clients, ten years ago, to avoid one of his funds “because I didn’t trust the group.”