Madoff: Fortune Favors The Bold

"Fortes fortuna adiuvat"–Virgil

The question comes up over and over again. How could a massive fraud, which probably went on for well over thirty years, have gone undetected by federal regulators? The answer up until now was that the funds run by Bernie Madoff were rarely looked at carefully by the SEC or other financial regulatory bodies.

It turns out that the reality was worse than that.

According to The Wall Street Journal, "Bernard L. Madoff Investment Securities LLC was examined at least eight times in 16 years by the Securities and Exchange Commission and other regulators, who often came armed with suspicions."

A lot of what kept the Feds from seeing what was going on was simple misdirection by Madoff. He said he was in the hedge fund business. As long as investigators believed that he was subject to only the most modest regulation.

But, the answer that he used a series of small feints is not enough to explain his extraordinary capacity to avoid detection. The correct and more fundamental explanation is that he was the most bold liar in the recent history of Wall St. He was willing to commit fraud and the compound that with a fearless perjury. He exhibited a perverse bravery that no investigator could have expected. Madoff flummoxed regulators because of his audacious ability to lie.

Unlike police detectives, federal government officials expect that most targets, when faced with accusations and suspicions from competitors and clients, will give in to the inevitability that they will be caught. Madoff was never willing to make that admission, at least to himself. That gave him the ability to persist in deceit at a level which no one could have expected.

When the stakes were highest, he bluffed with a pair of twos.

Douglas A. McIntyre