Bernard Madoff

Recently, Wall Street broker Bernard (Bernie) Madoff, former president of NASDAQ and revered and respected investor, confessed to pulling off the biggest fraud in history, a $50 billion scam. Bernie was known for his generous philanthropy, especially to Zionist, Jewish, and Israeli causes. A one-time lifeguard on Long Island in the 1960s, Madoff launched his financial career by raising money from colleagues, friends, and relatives among wealthier Jews in the Long Island suburbs, Palm Beach, and Manhattan, promising a modest, steady, and secure return of between 10 to 12 percent, covering any withdrawals in typical Ponzi fashion by drawing on funds from new investors.

For almost four decades Madoff built up a clientele that came to include some of the biggest banks and investment houses in Scotland, Spain, England, and France, as well as major hedge funds in the United States. Madoff drew almost all of the funds from wealthy private clients who were recruited by brokers working on commission. Madoff’s clients included many multi-millionaires and billionaires from Switzerland, Israel, and elsewhere, as well as the U.S.’s largest hedge funds (RMF Division of the Man Group and the Tremont). Many of these super-rich clients practically forced their money on Madoff, who imposed rigorous conditions on his potential clients, most of whom considered themselves lucky to have their funds invested with the highly respected Madoff. He insisted they have recommendations from existing investors, deposit a substantial amount, and guarantee their own solvency. Madoff’s standard message was that the fund was closed, but because they came from the same world (board members of Jewish charities, pro-Israel fundraising organizations or the “right” country clubs) or were related to a friend, colleague, or existing clients, he would take their money.

Madoff set up advisory councils with distinguished members and contributed heavily to museums, hospitals, and upscale cultural organizations. His reputation was enhanced by his funds’ record of never having a losing year. Madoff shared with his super-rich clients (Jews and Gentiles) a common upper class lifestyle and mixed cultural philanthropy with low-key financial profiteering. He played his colleagues with a soft-spoken, but authoritative appearance of expertise, covered by a veneer of upper class collegiality.

Madoff’s mega-fund shared many similarities with recent high level scams—constant high returns unmatched by any other broker; lack of third party oversight; a backroom accounting firm physically incapable of auditing the multi-billion dollar operation; a broker-dealer operation directly under his thumb; and the total obfuscation of what he was actually investing in. The obvious similarity of signs with other fraudsters were overlooked by the rich and famous, the sophisticated investors, and high paid consultants—as well as Harvard MBAs and an entire army of regulators from the Securities and Exchange Commission (SEC)—because they were totally embedded in the corrupt culture of “take the money and run” and “if you’re making it, don’t ask questions.”

The Big Swindle

Madoff’s investment fund primarily dealt with a limited clientele of multi-millionaires and billionaires who kept their funds in for the long haul; the occasional withdrawals were limited in amount and were easily covered by soliciting funds from new investors fighting to have access to Madoff’s money management. The long-term big investors looked toward passing their investments on to their kin or for eventual retirement. The wealthy lawyers, dentists, surgeons, distinguished Ivy league professors, and others who might need to draw from their funds for an occasional fancy wedding or celebrity-studded bar mitzvah, could do so because Madoff had no problem covering the withdrawals by attracting new funds from wealthy individuals, among them owners of sweatshop garment factories, meatpacking outfits, and slumlords. Madoff was no Robin Hood: his philanthropic and charity contributions facilitated access to the rich and wealthy who served on the boards of the recipient institutions and proved that he was one of them, a kind of super-rich intimate from the same elite class.

The shock, awe, and heart attacks that followed Madoff’s confession that he was “running a Ponzi scheme” drew as much anger for the money lost and the fall from the moneyed class as for the embarrassment of knowing that the world’s biggest exploiters and smartest swindlers on Wall Street were completely taken in by one of their own. Not only did they suffer big losses, but their self-image as rich because they are so smart and of “superior stock” was utterly shattered. They saw themselves as suffering the same fate as all the schmucks they had previously swindled, exploited, and dispossessed in their climb to the top. As a result, a number of the biggest losers have so far refused to give their names or the amount they lost.

The Inadvertent Hand of Justice

It is worthwhile to list the inadvertent positive outcomes of Madoff’s swindle. First of all the swindle of over $50 billion may make a big dent in U.S. Zionist funding of illegal Israeli colonial settlements in the Occupied Territories, and lessen funding for AIPAC’s purchase of Congressional influence and financing of propaganda campaigns in favor of a pre-emptive U.S. military attack against Iran. Some investors will have to lower or eliminate their purchase of Israel bonds, which subsidize the state’s military budget.

Secondly, the swindle has further discredited the highly speculative hedge funds already reeling from massive withdrawals. Madoff’s funds were one of the last “respected” operations still drawing new investors, but with the latest revelations it may accelerate their demise.

Thirdly, Madoff’s long-term, large-scale fraud was not detected by the SEC, despite its claims of at least two investigations. As a result, there is a loss of credibility. More generally, the SEC’s failure demonstrates the incapacity of capitalist government regulatory agencies to detect mega-frauds. This failure raises the question of whether alternatives to investing in Wall Street are better suited to protect savings and pension funds.

Fourthly, Madoff’s long-term association with NASDAQ, including his chairship while he was defrauding his clients of billions, strongly suggests that the members and leaders of this stock exchange are incapable of recognizing a crook and are prone to overlook felonious behavior of “one of their own.”

The fifth point is that the investment advisors from top banks in Europe, Asia, and the U.S., managing billions of funds, did not carry out the most elementary due diligence of Madoff’s operation. Apart from severe bank losses, tens of thousands of influential, affluent, and super-rich individuals lost their entire accumulated wealth. The result is total loss of confidence in the leading banks and financial instruments as well as the general discrediting of “expert knowledge,” a weakening of the financial stranglehold over investor behavior, and the demise of an important sector of the rentier class, which gains without producing any useful commodities or providing needed services.

The sixth point is that since most of the money Madoff stole came from the upper classes around the world, his behavior may have reduced inequalities, somewhat, making him the greatest “leveler” since the introduction of the progressive income tax. By ruining billionaires and bankrupting millionaires, Madoff has lessened their capacity to use their wealth to influence politicians in their favor—thus increasing the potential political influence of the less affluent sectors of class society and perhaps inadvertently strengthening democracy against the financial oligarchs.

A seventh point can be made that by swindling lifelong friends, self-same ethno-religious investors, narrow ethnically defined country club members, and close family members, Madoff demonstrates that finance capital shows no respect for any of the pieties of everyday life as great and small, holy and profane, are all subordinate to the rule of capital.

Eighth, among the many ruined investors in New York and New England, there are a number of mega slumlords (real estate moguls), sweatshop owners (fancy name-brand clothes and toy manufacturers), and others who barely paid the minimum wage to their mainly women and/or immigrant laborers, and who evicted poor tenants and swindled employees out of their pensions before moving their operations to China. In other words, Madoff’s swindle was a kind of secular retribution for some of the past and present crimes against labor and the poor.

Point number nine is that Madoff struck a severe blow against anti-Semites who claim that there is a “close-knit Jewish conspiracy to defraud the Gentiles,” laying that canard to rest once and for all. Among Madoff’s principle victims were his closest Jewish friends and colleagues, people who shared Seder meals and frequented the same upscale temples in Long Island and Palm Beach.

Madoff was discriminating in accepting clients, but it was on the basis of their wealth, not their national origin, race, religion, or sexual preference. He was very ecumenical and a strong backer of globalization as he defrauded the Anglo-Chinese bank HSBC of $1 billion, the Dutch arm of the Belgian bank Fortes of several billion, the Royal Bank of Scotland, the French bank BNP Paribas, the Spanish bank Banco Santander, and the Japanese Nomura of a total of $1.4 billion—not to mention hedge funds in London and the U.S., which have admitted holdings in Bernard Madoff Investment Securities.

The tenth point is that Madoff’s swindle will likely promote greater self-criticism and a more distrustful attitude toward other potential confidence people posing as reliable financial know-it-alls. Among self-critical Jews, they are less likely to confide in brokers simply because they are zealous backers of Israel and generous contributors to Zionist fund drives. That is no longer an adequate guarantee of ethical behavior and a certificate of good conduct. In fact it may raise suspicion of brokers who are excessively ardent boosters of Israel and promise consistent high returns to local Zionist affiliates.

The final point is the demise of Madoff’s enterprise among his wealthy Jewish victims will adversely affect contributions to the 52 major Jewish American organizations, numerous foundations in Boston, Los Angeles, New York, and elsewhere, as well as the Clinton/ Schumer militarist wing of the Democratic Party (Madoff bankrolled both of them, as well as other unconditional Congressional supporters of Israel).


Madoff’s swindle and fraudulent behavior is not the result of a personal moral failure. It is the product of a systemic imperative and an economic culture, which informs the highest circles of our class structure. The paper economy, hedge funds, and all the sophisticated financial instruments are all Ponzi schemes. They are not based on producing and selling goods and services, rather they are financial bets on financial paper growth based on securing future buyers to pay off earlier cash ins.

The failure of the SEC is predictable and systemic. Regulators are selected from the regulatees, are beholden to them, and defer to their judgments, claims, and audit sheets. They are structured to miss the signs and to avoid over-regulating their financial superiors. Madoff operated in a Wall Street milieu where everything goes, where impunity for mega-bailouts for mega-swindlers is the norm. As an individual swindler, he out defrauded some of his bigger institutional competitors. The whole system of rewards and prestige goes to those best able to juggle the books, cover the paper trails, and fleece willing victims.

Some right-wing conspiracy theorists are claiming that Madoff is a secret Islamic-Palestinian agent (from Hamas) who set out to deliberately undermine Israel’s most powerful, affluent, and generous U.S. backers and foundations. After all, Madoff aimed his blows where it hurts the most: mega-bank accounts, confidence in the capitalist system, self-esteem and, yes, even cardiac well-being.          

Does that mean the left should form a Bernie Madoff Defense Committee and call for a bailout in line with Paulson’s bailout of his Citibank cronies? Should we proclaim “equal bailout for equal swindlers?” Well, there is no reason to mount the barricades for Bernard Madoff. It’s enough to recognize that he has inadvertently rendered an historic service to popular justice by undermining some of the financial props of a class-ridden injustice system.

Surely, others of equal importance and influence are tied to the Madoff affair. It’s hard to believe that a single person could pull off a scam of this size and duration by himself. Nor can any serious investigator believe that $50 billion has simply “disappeared.”


James Petras is a retired Bartle Professor (Emeritus) of sociology at SUNY Binghamton and adjunct professor at Saint Mary’s University, Halifax, Nova Scotia. He has published extensively on Latin American and Middle Eastern political issues.