|Bernie Madoff in October 7, 1999, photographed by Jonathan Saunders.|
Bernie Madoff's 150 year prison sentence, pronounced on June 29, 2009, is considered largely symbolic. Now in his mid-70s, suffering from kidney cancer and heart disease, the maximum term is more than necessary to ensure that this "psychopath" and "monster" never experiences freedom again.
While Madoff's crime of defrauding millions in the largest Ponzi scheme in history has been described as "extraordinary evil," the case also reminds me of the "banality of evil."
In the years since his one-way trip to Butner Federal Correctional Complex (25 miles northwest of Raleigh, NC), it has been difficult for prosecutors to convict co-conspirators. In many cases, the bankers and regulators who made his scheme possible — with their arcane credit-default swaps, lax regulatory enforcement, and badly managed financial firms— can claim that they were simply doing their job.
Nonetheless, a lawsuit brought by investors in July 2013 sought to redeem $60 million in investor funds lost to Madoff by showing that their custodial bank— Westport National — failed at its job. Vowing to vigorously defend itself, bank lawyers argued if the US government couldn't figure out the scheme, how could a poor little ol' community bank in Connecticut possibly do it?
They had a hard enough time figuring out what was in the vault! When president Richard T. Cummings, Jr., a 36-year veteran of banking with a finance degree from Georgetown, was asked how the bank maintained accurate records, he replied "I can't answer that question."
What due diligence did the bank do to ensure that customers’ assets existed, and were safe? “I don’t know.”
And anyway, lawyers argued, the bank's ability to safeguard funds was limited to “ministerial” duties. Like those administered by Dennis Clark, the bank’s former vice president and manager of custody services.
Testifying by video deposition (he died in 2012), Mr. Clark said that he sometimes reviewed Madoff's trade confirmations out of “curiosity,” but then simply filed them away. He did not verify prices for derivative securities because he did not understand how puts and calls were priced.
Mr. Clark did, however, make an effort to look up stock prices listed on Madoff's monthly statements. (Fees for the bank were based on assets under management — real or imagined, the New York Times reported.)
Many of the disputed custody accounts at Westport National were referrals from Robert L. Silverman, a professional actuary who ran a consulting firm about half a mile from the bank.
More than a dozen Westport customers told their lawyers that Mr. Silverman recommended the arrangement. Mr. Silverman’s business, PSCC Services, got about four-fifths of the fees the bank collected from Madoff accounts, according to the New York Times.
"These investors were betrayed twice," Connecticut Attorney General Richard Blumenthal said in 2010. "First by Madoff and then by their advisers."
“I live in a tormented state now, knowing of all the pain and suffering that I have created," Madoff said at his sentencing in 2009. "I am sorry,” adding abruptly, “I know that doesn’t help you.”