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.”

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  • Robert A Scribner July 6, 2009 at 1:10 pm

    Madoff and associates perpetuated the gratest disaster on the people of the United States sence the 2nd World war . If this criminality is not thoroughly and competently investigated recognised and the systemic faults corrected, the US is doomed to be continusly flushed down the economic toilet by similar wolves in seeps clothing .
    I t is a sad comment on our developement, as an example to the world ,if this is not put right.
    I was wondering whare did Mrs.Madoffs two million she it seems was allowed to keep, come from ???Was it criminally aquired also?Just a thaught .

  • Michael July 6, 2009 at 10:52 am

    Am I reading this right? Are each of your bullet points groups you think belong in jail also?

    #1) The fund managers certainly deserve some kind of punishment. I don’t have the expertise to know what specific laws were broken. If any were they should get the maximum sentence and/or applicable fine. Even if no laws were broken their reputations should be tarnished enough that their investor base and thus income will go down.

    #2) Just because someone was naive enough to put all their eggs in one basket does not mean they should be in jail for doing so. It is not a crime to be stupid or naive. They’ve lost their money, and that is their punishment.

    #3) I don’t believe conflicts of interest can result in jail time. I agree it wasn’t a smart thing to do, but then maybe hindsight is 20/20.

  • Pat July 3, 2009 at 10:58 pm

    Lest we forget, Madoff also had any number of attorneys approve those documents before the SEC that aided in the hoax as legal, and honest.

    Negligence is one thing, but doesn’t the regulatory market demand more of the attorneys who vouch for the Madoff’s of the world?

  • Duke July 3, 2009 at 3:47 pm

    I think Bernie should be with general population in a maximum security prison. He needs to be around people he never associated with while he was swindiling money from investors. People like burglers, pickpockets, drugies, up to rapists and murderers. He needs to be set an example of to other Ponzi scheme operators.

  • Ron Weaver July 3, 2009 at 1:31 pm

    Over-reacting to problems that existed in the past could be even more anti-productive. Laws exist today that could have been used and prevented most of the abuses that caused the financial situation for many people. Some of the problems have already been solved by what already happened , people being more cautious in the future. Radical change has political motives. Let us use some common sense and fix what we have instead of entirely changing our system that has in the past made our country great. Bigger government is not the answer, nor is no enforcement or no regulations.

  • Alexandra MacAaron July 1, 2009 at 7:21 am

    Agreed! And I would go even further. There are many people in this country who have enjoyed the fruits of no labor. Why should we expect to pay less for more when as a nation our greatest talent seems to be consumerism?

    In his inaugural address, President Obama said, “Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.”

    It is time for some hard choices.