Bernie Madoff has admitted guilt to an astounding fraud. And his actions have harmed numerous individuals and institutions. At least $50 billion has vanished. The scope of the fraud is so vast that regulators are convinced it couldn't have been done solely by Madoff.

Yet, in many respects Madoff is only more successful in his confidence game than others. He built an affinity fraud, preying on those who would implicity trust him because of their mutual associations. For Madoff, that was the Jewish community. As Nobel prize winner Elie Wiesel said, "To us it happened the way it happened to so many others, meaning we had friends who were very close friends of Madoff, and years ago [a friend] just came to us and he said, 'Look, you work, you work so hard, what are you doing with your money?' "

And there it began.

For Madoff, it began equally simply: "When I began the Ponzi scheme," he told the court yesterday, "I believed it would end shortly and I would be able to extricate myself and my clients from the scheme. However, this proved difficult, and ultimately impossible."

The essence of my scheme was that I represented to clients and prospective clients who wished to open investment advisory and individual trading accounts with me that I would invest their money in shares of common stock, options and other securities of large well-known corporations, and upon request, would return to them their profits and principal. Those representations were false because for many years up and until I was arrested on December 11, 2008, I never invested those funds in the securities, as I had promised. Instead, those funds were deposited in a bank account at Chase Manhattan Bank. When clients wished to receive the profits they believed they had earned with me or to redeem their principal, I used the money in the Chase Manhattan bank account that belonged to them or other clients to pay the requested funds. The victims of my scheme included individuals, charitable organizations, trusts, pension funds and hedge funds.

Madoff fooled the sophisticated and the gullible. But in many ways, everyone is complicit. Perhaps Madoff's gullible victims may be exempted from the following criticism: Throughout history, the con man has been able to sucessfully operate not because he is uniquely deceptive but because his victims--in their greed--are willing to be decieved. Granted, none of Madoff's victims are deserving. They were ripped off.

But let's not turn Madoff into an unhuman monster. The wickedness of Madoff's heart is no worse than that of any other's. And the truth is, it may be that as Madoff now sits in prison, he knows better than most of us just how desperately wicked the human heart is.

Posted by Rob Moll on March 13, 2009 11:06AM