The Madoff Affair (2009)

The Madoff Affair is a documentary film that was shown on US television (PBS) in May 2009. It is an episode of the long-running program Frontline that focuses on the news (season 27, episode 10). Here is some basic information about it:

** Produced by Marcela Gaviria and Martin Smith

** Written by Marcela Gaviria and Martin Smith

** Run time: 54 minutes

PART ONE

This film is the story of Bernard Madoff (born 1938) and his financial crime, which is often referred to as a Ponzi scheme. The crime was perpetrated for decades without being discovered by the authorities and it concerned a huge amount of money, almost 65 billion US dollars. It is considered the largest financial fraud in the history of the US.

This documentary explains how this crime took place. It also shows how the financial oversight - the SEC – failed to intervene and stop him. Madoff was only caught because of the general economic crisis of 2008, which forced him to confess to his sons, who then reported him to the FBI. He was arrested in December 2008.

Since this film was aired in May 2009, it cannot not tell us what happened to Madoff after his arrest. I can tell you what happened to him. He was found guilty in a court of law and in June 2009 he was sentenced to 150 years in prison.

What is a Ponzi scheme and where does the name come from? It is named after an Italian immigrant Carlo (later Charles) Ponzi (1882-1949), who used this scheme in the US in 1920. How does it work? Basically, you pay early investors with money from later investors. Another way to explain the process is to say that you “rob Peter to pay Paul.” As the scheme goes on, you need more money and more investors. It is be difficult to continue and impossible to find a happy ending for all who are involved.

Several witnesses were interviewed for the film. The list of names is quite long, but it is included to show just how serious and comprehensive this investigation is. Some of them are former Madoff investors, who lost their money, while others are reporters who have followed and studied the case for a long time. Here are the names in the order of appearance:

** Sandra Manzke, CEO, Maxam Capital
** Bettie Greenfield, Madoff investor
** Lawrence Velvel, Madoff investor

** Diana Henriques, reporter at the New York Times, author of Bernie Madoff: The Wizard of Lies (2011)
** Katherine Burton, reporter at Bloomberg, author of Hedge Hunters (2010)
** Martin Smith, reporter for Frontline

** Michael Bienes, Avellino & Bienes
** Joan and Arnold Sinkin, Madoff investors
** Bob Norman, reporter at the Daily Pulp

** Harvey Pitt, chairman, SEC, 2001-2003
** Mitchell Zuckoff, author of Ponzi’s Scheme (2005, 2006)
** Ross Intelisano, Rich & Intelisano, LLP

** Sherry Cohen, Fairfield Greenwich Group, 1987-1998
** Joe Weisenthal, Clusterstock (a blog about the financial industry)
** Myret Zaki, reporter at Le temps, Geneva, Switzerland

** James Mackintosh, reporter at the Financial Times
** Rick Caputo, Madoff Securities, 1993-2005
** Nader Ibrahim, Madoff Securities, 2000-2003

** Frank Casey, Rampart Investments, 1998-2001
** Michael Ocrant, editor of MAR Hedge (a newsletter published 1994-2006)
** Stuart Singer, Boies, Schiller and Flexner, LLP

** Burt Ross, Madoff investor
** Lucinda Franks, reporter, the Daily Beast

PART TWO
As stated above, the film explains how the financial oversight - the SEC - failed to intervene and stop Madoff. One financial expert (Harry Markopolos) discovered that there was something seriously wrong with Madoff’s business long before he was arrested. He tried to warn the SEC several times, but they did not want to listen to him.

Markopolos is mentioned in the film. We see him testifying at a public hearing that was held in the beginning of 2009, after the arrest of Madoff, but he was not interviewed as a witness. Markopolos is the author of the book No One Would Listen (2010, 2011). The documentary film Chasing Madoff (2011) is based on his book.

There were other early warnings and two of them are mentioned in this film:

# 1. In May 2001, an article by Michael Ocrant was published in MAR Hedge, a bi-monthly newsletter about hedge funds, a very specialized publication that did not have a wide circulation. The title is “Madoff tops charts; skeptics ask how.”

# 2. In May 2001, an article was published in Barron’s, a weekly paper about the financial market of the US, which has a much wider circulation than the newsletter MAR Hedge. The title is “Don’t Ask, Don’t Tell: Bernie Madoff Attracts Skeptics in 2001.”

The latter article is mentioned and even shown on the screen, but for some reason the name of the author is never mentioned. The author is Erin E. Arvedlund, who has since then written a book about the case: Too Good to Be True: The Rise and Fall of Bernie Madoff (2010).

Both articles raise questions about Madoff and his business: how can he offer an almost constant return of one per cent per month on his investments? Whether the market goes up or down, Madoff offers his clients a stable return. Is this really possible? Is he for real or is there a more sinister explanation?

Both articles raised a red flag concerning Madoff, but there was no response. Neither from the news media nor from the SEC.

CONCLUSION

The Madoff Affair is an excellent documentary film. The crimes of Bernard Madoff are explained in a way that is easy to understand. The lack of activity on the part of the SEC is documented, but not explained, because it is difficult or impossible to explain.

If you are interested in the history of the modern world – in particular the world of banking and investment – then this film is something for you.

PS # 1. Ripped Off: Madoff and the Scamming of America is a documentary film that was shown on the History Channel in April 2009.

PS # 2. Madoff is a movie that was shown on US television (ABC) in February 2016. The leading role is played by Richard Dreyfuss. The Wizard of Lies is a movie that will be shown on US television (HBO) in 2017. In this version the leading role is played by Robert De Niro.

PS # 3. Unraveled is a documentary film (from 2011) about Marc Dreier, a former Manhattan attorney, who was arrested in December 2008 for orchestrating a massive fraud scheme that netted over 700 million dollars from hedge funds. In July 2009 he was sentenced to twenty years in prison.

*****

Bernard Madoff

(currently serving a sentence of 150 years in prison)

*****