Comments on: Fund managers are not paid to hand money to scam artists

By: drew

drew — Sat, 10 Jan 2009 00:40:57 +0000

Thanks Knife, and welcome to my blog.

You pick up on an interesting point, and I did not mean to minimize the role of the SEC in this affair. I can see why fund managers trusted Madoff, given both his reputation and with his firm coming up clean through SEC investigations.

None of this vindicates bankers or fund managers however, who still should have known better.

By: Knife

Knife — Fri, 09 Jan 2009 04:00:07 +0000

oh. wtf. it shows the link i posted as my “latest blog post…”

By: Knife

Knife — Fri, 09 Jan 2009 03:59:32 +0000

You’re right, and this is an excellent analysis. However, like you said, Madoff did build an excellent reputation, a number of SEC investigations provided “reassurance” (if nothing else) to potential investors that everything was Kosher. Madoff’s firm was also a “market maker,” meaning forging the books to look like legitimate trades were occurring would not have been difficult.

That said, I totally agree; proper due diligence would’ve given a “WTF?” reaction somewhere.

p.s., I found this on one of the sites you linked to in the article; found it a rather interesting analysis (not of Madoff, though he is in the title). http://www.politonomist.com/madoff-the-second-largest-ponzi-scheme-00450/

By: Andrew

Andrew — Thu, 08 Jan 2009 00:20:58 +0000

Exactly right, Karen. To be sure, Mr. Madoff had built up an extremely good reputation within the industry, and it was understandable that bankers and fund managers had very high levels of confidence in him. Nevertheless, you would have thought that surely, given Enron and other financial scandals, finance professionals would have learned their lesson - where there is secrecy, lack of transparency and a story which doesn't add up, something is wrong. Everyone, from individuals, right up to finance professionals, must exercise a great deal of diligence during the process of deciding where to place their own funds and/or well as those of their shareholders/clients for investment. Andrews last blog post..Fund managers are not paid to hand money to scam artists

By: Karen Swim

Karen Swim — Wed, 07 Jan 2009 14:40:59 +0000

Andrew, great post on this very sad scandal. When the news broke I was really shocked and illuminates another issue - blind trust. In the past decade alone, one would believe that we have witnessed enough financial scandals to know that we can blindly trust no one with our investments. We must perform our own due diligence and vigilantly follow-up. It is a shame that families lost their entire nest egg and even more of a shame that people are not taking responsibility for their role in the losses. Karen Swims last blog post..7 Limiting Beliefs Fatal to New Business Owners