If I were you, Walt, I’d stay in Mustique

Turns out that Bernie Madoff didn’t trade a single security in thirteen years.

  • Madoff’s operation was enormous, taking in 2,350 clients.
  • For at least 13 years, no securities at all were purchased on behalf of those clients. That means that every single transaction recorded, every cent of gain was simply made up out of thin air.

This may be bad news for Ol’ Bernie but it has to be even worse news for Walter and his Fairfield Greenwich Group. It’s arguable, I suppose, that their due diligence couldn’t be expected to uncover the fact that Madoff’s “auditor” was a retired old coot who split his time between a Florida trailer home and a strip mall in upstate New York – hey, how much expertise do you need to track a measly $50 billion? – but no trades in 13 years? You never tried to match a single one of them, did you Walt? Back when I hunted wicked stock brokers I used a very creative guy named Tom Benson to reconstruct trading activity in my clients’ accounts. Tom was wizard (he’s since moved from Naples but in his time he probably ran into Walt and Bernie at Palm Beach) who could usually generate a report, accurate to within a penny, in 3-5 days, max. Now, he was expensive – maybe as much as $5,000, but we were talking big money in those days, as much  as $1 million. Walter only had to worry about $7.5 billion and why would he spend a dime investigating how that was doing when (a) he was dealing with the Bernard Madoff and (b) he was skimming $270 million a year off the top, a tidy little profit that would screech to a halt if trouble were found at Madoff headquarters. No, there was no need to ever look at the accounts.

And you know, Walt’s friends in Greenwich still today insist that he’s just a wonderful, warm-hearted guy. I’m sure he is.

21 Comments

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21 responses to “If I were you, Walt, I’d stay in Mustique

  1. Vicky

    This is mind-boggling. What was the back office doing the whole time? What were they “processing”? It doesn’t seem possible they’d all be in on it.

    • christopherfountain

      Well the kids, Andy and Mark, claim they were either fly fishing, canoodling or both the past 13 years but that leaves Bernie’s brother Peter – lawyer, head of compliance – still needing an explanation. Did he engage in piscatorial pursuits too?

  2. cynic1

    Vicky … except for the Madoff “boys”… is it possible that there was no real back office … except to accept investors money. The only other plausible option would be that they were all into the scam.
    My follow up question would be … if he never bought any stock … then he couldnt have lost any money in the market … so where is the money?

  3. Walt

    Chris, Chris, Chris –
    COME ON NOW. You think the split strike conversion strategy was ALL old Bernie used? You never heard of a “buy and hold” strategy? Bernie invented that!!
    Now I have to admit, sales at the FFGG have been slow recently, what with the economy and all, so I really could use that Bar what’s her names contact info. How about helping me out on that?
    Anyway, it’s almost cocktail time!! Drop over if your in the hood!!
    Your Buddy,
    Walt

  4. Inagua

    The law is clear, Walt didn’t have to do any real due diligence. But Walt was paid by Bernie with stolen money, and stolen property has to be returned, even if it was acquired in good faith. Walt should enjoy Mustique for as long as he can before it gets sold to repay Madoff victims.

    • christopherfountain

      I don’t know, Inagua – if I’d paid Walt 2 and 20 to perform due diligence, I’d sure give arbitration or a law suit a try, before Bernie’s direct victims soaked Walt dry. But I agree, his days enjoying Mustique are numbered, one way or another.

  5. Inagua

    An institution which invested in the Bayou Ponzi on the advice of an investment counselor couldn’t even get to trial on the inadequate due diligence charge against the advisor. The judge threw it out. Sorry, but that is the state of the law.

    But Walt is dead on inadvertant receipt of stolen property. Either the Madoff Trustee or the FGG class action will nail him.

  6. Walt

    Oh Boy. Enjoying Mustique? Give me a friggin break Chris. This G&dd*&n place is so big, I can’t find a bathroom. Then I piss myself and Monica and the filly’s think it’s HYSTERICAL for Pete’s sake. Thank God for Pampers.
    But really, Monica and I just finished a few Pina’s on the portico, and discussed your suggestion that we stay down here for a while. Your opinion is right up there with Bernie and Ezra, so when you talk, I listen. You are a smart cookie.
    But a few retorts, if I may. You didn’t pay me to do due diligence. Whatever the heck that is. You paid me to manage your money. Which I managed to give to Bernie.
    Next, I appreciate the advice to stay here, but as I said, the plumbing problems are an issue. More importantly, I can’t afford to miss the Greenwich Spring Social Circuit. Do you have any idea how much money I get to manage from those charity love fests? I wear a tux (James Bond Style!!) act like Jimmy Stewart, and they practically throw money at me!! Can’t afford to pass on that.
    I already paid my annual dues at Round Hill. If I stay here, I pissed that money away. I am all about return on investment, so how would that look? Not good, my friend.
    Finally, the Filly’s are all here. With the idiot son’s in law’s no less!! As Bernie would say – OY VAY!! Vei!! Whatever. They are all bored and won’t stop neighing. It’s driving me nuts!!
    So my friend, thanks for the sage counsel, but I need to get back to Round Hill. And business really is a little slow, so can you please crank it up on that Bar what’s her name contact data? She can help me jump start sales.
    Monica says Hi!! Off to Bob Marley night at the Rip Tide!! Quarter Beers!! Stop by.
    Your buddy,
    Walt

  7. Jane

    On a truly serious note, has anyone (that would be you — Chris) checked out the extradition situation between Mustique and the US? Very curious.

  8. Red

    The more I hear, the more I almost –almost– admire Madoff. It was pure, pure theft on such a grand scale, and no one bothered to verify a thing. And what about that whistle-blower years ago, whom the SEC ignored. Didn’t the SEC notice there were no Madoff transactions????? Unbelievable.

  9. The Fun Continues

    I was going to put a link to amazing quantity of due diligence claims on the Fairfield Greenwich site, but alas, I am too late:

    https://www.fggus.com/guest/help.html

    It seemed certain that the only reason that page after page describing the “due diligence” Fairfield supposedly undertook on EVERY hedge fund manager was left up on their site for so long after Madoff’s arrest was due to Walter Noel’s legal team saying that if you take it down, it will look like you’re trying to hide something. I guess as the wagons circle, someone has decided it probably doesn’t matter anymore. I downloaded the PDF that was available publicly before this “upgrade” to their site, and the due diligence claims are outrageous, both in quantity and in tone – as more information surfaces, it really reads as a comedic script. Regardless of the letter of the law, the juxtaposition of the unending due diligence claims by Walt and Company as against Madoff’s actions (NO trades?) will royally piss off any jury. The thing I don’t really understand is what Fairfield sent to their investors every month. I have an actual Madoff statement, and the stocks are listed right on the document. Fairfield would have had to receive a similar statement (albeit 1 million times the number of shares traded on mine) every month too. No one checked the trade price or the number of shares traded?

    • christopherfountain

      So it’s finally been taken down! When the story first broke (Bernie was arrested December 12 and I think the Noel connection came out the next day) I went to the FFG site and pulled their due diligence page.I may have posted it on this blog, rather tan just discuss it. I’ll go look because if I did, it would be nice to repost it and make sure it lives on in Internet land, easily stumbled upon by the curious. And it really should end up in a corporate securities law text book some day.

  10. Walt

    Red -
    I LOVE YOU. You get it. Bernie was the Oracle. You don’t ask any questions if he would take your money. Just hand it over. Due Diligence? WTF is that? Due diligence and you are out of the club.

    Who needs that. And the SEC? No one even thought about them. They were the least of our problems. They are dumber than my Ass(_l_) hole. And still are. Those dummy’s don’t have a clue.
    So thanks for the kind words. Stop by for a drink, and we can bare back ride the filly’s on the beach. Cut it out Chris you perv!!! That isn’t what I meant.
    Pina’s on me!!
    Fondly,
    Walt

  11. Walt

    Hey Guys. Take a chill pill. Seriously. To play in this game you need to be an “Acreddited Investor”. Which means your not a schmuck. But you were. Hard to deal with right? But get over it. Chris talks about stolen money, fraud, blah blah blah. But he won’t give up Bar what’s her names contact info. WTF is that? I need that Honey to retool the GF Group. Amongst other things. Stop by Mustique. Weather is great,
    Your senile buddy,
    Walt

  12. I am originally from Mustique, we don’t want him there.

    All the top level management at SEC should be prosecuted, I find it hard to believe they didn’t know that crooked Bernie wasn’t doing any trading during one of their audits.

    If you see Walt anytime soon let him we are fighting to get him off the island.

  13. Greenwich Gal

    Walt – the contraction of “you are” is “you’re”…just trying to keep you appearing educated, you know….

  14. Walt

    Greenwich Gal -
    [Come on, Walt - would you want one of your Fabulous daughters to read this? I'm editing it out. ED] Here’s the rest, though.

    Appear educated? I went to HAAAVAHD for Pete’s sake. I started in Trust’s and Estates at Chemical. All the “can’t miss” hires start there. Talk to a widow, maybe an orphan, smile a lot, and you are (you’re? your? WTF? I am confused!!) Anyway, thanks for the English lesson. Pop in for a drink and maybe you can teach me long division.
    All the best,
    Walt

  15. Inagua

    Red,

    I share your fascination with Madoff’s accomplishment. Do you realise that he began operating this Ponzi in 1960 when was 22 years old? That his wife was his first bookeeper? That his CPA father-in-law helped him sell the Ponzi in the early days? That his first two Ponzi salesmen had worked at his father-in-law’s CPA firm? That he opened a broker/dealer operation at age 22 having never worked in the securities industry?

    From those known facts, I speculate that the Ponzi scheme was initially run by Bernie’s father-in-law out of his CPA firm, and that Bernie in effect married into the Ponzi. Bernie took the Ponzi to new heights through superior salesmanship and the improved cover of a broker/dealer rather than a CPA firm. But he might not have started it. That distinction might belong to the late Saul Alpern. And there isn’t even a plaque, or a signpost or a statue…

  16. fred

    ol’ towny was right. didn’t he comment some months ago about following bern’s tickets?

  17. Red

    Thank you Inagua — that is fascinating and yet disturbing information. After all, it was hard enough for me to choose between those two bad boys (Walt and Bernie) — now do I have to pine away for this Saul Alpern, perhaps the real mastermind, whose evil brilliance still beckons even from beyond the grave? What’s a good girl to do?

  18. Inagua

    Red,

    Bernie is the hands down champ. He ran the world’s greatest non-violent financial crime for 48 years. Walt is merely a greedy salesman who didn’t understand his product.