Last week, hedge fund manager Bernard Madoff was sentenced to 150 years in prison after pleading guilty to eleven felonies including securities fraud. The Ponzi scheme that he operated with a hedge fund as a front defrauded investors of approximately $65 billion. The loss of this money has forced charitable foundations and smaller investment outfits to shut their doors, cost hundreds of lost jobs, damaged the American financial system, and led to the suicides of Madoff's clients. The reverberations are still being felt, as domestic and foreign banks either shut down or go under drastic reorganization as a result of investments lost to Madoff.
The implications are, in some ways,
as far-reaching and drastic as the collapse of Enron. Except that
in this case, the key decisions were not made by a group of executives
and Board of Directors, but by one man.
The Madoff Affair is a one-hour
episode of PBS's excellent investigative documentary series Frontline.
The show chronicles the rise and fall of Bernard Madoff and the development
of his notorious Ponzi scheme. We are given a brief biography
of Madoff in his early years, a fairly in-depth view of the beginnings
of his dubious career as an investment advisor, and an overview of his
hedge fund years and recent downfall.
This program covers fascinating territory,
and includes interviews with former Madoff colleagues, investigators,
journalists, and a few defrauded clients. The strangest and most
entertaining participant is the outspoken, effervescent Michael Bienes,
a one-time CPA who funneled money invested with his sideline advisory
business to Madoff. He comes off as somewhat unreliable, but his
oddest statement comes at the opening of the program, when he reveals
that his first thought upon hearing of Madoff's December 2008 arrrest
was, "Sex crime!" This assumption is not elaborated upon.
We go on to hear of Madoff's predilection
for secrecy, and the baffling testimony of those who, for one reason
or another, did not question it. We are told of powerful investment
firms who trusted Madoff with huge sums of money, but who did virtually
no "due diligence" in verifying how exactly their funds were being
handled. We learn of filings made with the Securities and Exchange
Commission by individuals who were suspicious of Madoff's consistent
ability to make money, even in bad economic weather, and which were
either ignored or insufficiently investigated.
What this program does not do is delve
into the connections Madoff had with Washington lawmakers and regulators
that may have allowed him to evade official detection for literally
decades. These connections have been heavily reported in the print
media, but are not mentioned here. This issue raises some of the
most vital questions about the various financial scandals of the past
decade. In particular: To what extent does the private financial
sector have a hotline to federal regulatory agencies?
Americans love specialists and specialization.
They are obsessed with experts and the concept of inside knowledge.
So when Hank Paulson, former CEO of Goldman, Sachs, is made Secretary
of the Treasury, nobody blinks. Paulson is so inside, so of
the financial industry - he must be right to keep an eye on it.
I am not attempting to cast aspersions
upon Paulson in particular. I only use him as an example to illustrate
the point that we are often too ready to trust "experts," who are
so knowledgeable about their business that we may as well not even bother
asking any questions. This, at least, was the attitude of Madoff's
investors; this was also the attitude of millions of people who signed
mortgages they couldn't afford. If the regulatory agencies meant
to curb illegal behavior in financial markets are populated by Madoff's
and Ken Lay's industry colleagues, by people who have spent some part
of their adult lives working in financial markets, which generally consists
of trying to make money by moving around other piles of money (sometimes
hoping that no one notices where exactly those piles are at a particular
moment) - then where does this take our financial system? I
don't have answers, but I was hoping that this program might spend
some time trying to suss them out; in an hour, I suppose that was not
The other topic the program doesn't
examine is the question of where the money invested with Madoff went.
Virtually nothing on this subject is discussed. I understand that
the answer is still being sorted out, but some brief overview of the
evidence would have been helpful.
The single disc is housed in a standard
keepcase with the usual PBS and Frontline artwork.
The image is anamorphically-enhanced
and presented in its original 1.78:1 aspect ratio. This program
is brand-new, originally broadcast on May 12 of this year. The
image is crisp, although the blacks are a bit funky in places.
Overall, a fine presentation.
A simple, serviceable 2.0 stereo mix
is provided. Music is subtle, and the dialogue is appropriately
Although it could have easily been expanded into a multi-part presentation, this episode of Frontline provides a good overview in broad strokes of the Madoff scandal. Interested viewers can certainly follow up online by checking out the great reporting that's being done on this story by the Wall Street Journal, the Financial Times, and the New York Times. Recommended.