Financial Scam Hits Wall Street, Global Investors

Bernard Madoff was known as a Wall Street investment manager with a golden touch. He brought in enormous sums from people and institutions and consistently delivered double-digit returns, even in the toughest times.

Now Madoff has been arrested and charged with massive fraud. Federal prosecutors say Madoff ran a giant Ponzi scheme and that he lost tens of billions of dollars of his investors' money.

NPR's Jim Zarroli tells Renee Montagne that Madoff was a respected, venerable figure on Wall Street. A former chairman of the Nasdaq stock market, Madoff headed a trading firm that bore his name. He also took money from people and invested it.

He met a lot of customers through country clubs and charities in Palm Beach and New York, and he did very well, Zarroli says. That kind of success breeds success. People heard about the gains he was making, and they flocked to him. It was prestigious to invest with him.

Madoff's investors included some well-known names, including New York Mets owner Fred Wilpon and former Philadelphia Eagles owner Norman Braman. New Jersey Sen. Frank Lautenberg said his charitable foundation invested with Madoff.

Not all of Madoff's investors were well-off. Barbara Flood, a Manhattan stylist and designer who was introduced to Madoff by an acquaintance> Madoff agreed to take her on even though she didn't have a lot of money.

In an interview with NPR, she explained what it was like to deal with Madoff.

"You could never talk directly to Bernie Madoff," she said. "He was not available, even to friends — I mean even to me, he was not available. And you'd get a statement, and you couldn't read the statement. And nobody could understand what the statement said.

"But after trying to figure out apples and oranges, you know, my accountant would say, 'Well, the thing is, he's always making money.' And always making money sounded very good to all of us," Flood said.

Zarroli says there was an "emperor-has-no-clothes aspect to this case. And everyone was wondering, how can Bernie Madoff make so much money. But no one really thought to look too far beneath the surface because, after all, he was Bernie Madoff. He had to have his methods."

The alleged Madoff scheme also hit several charities and other groups. The Robert I. Lappin Charitable Foundation, which helps young Jews visit Israel, said it was forced to shut down and terminate its staff after losing the money it invested with Madoff. A pension fund for the town of Fairfield, Conn., the French Bank BNP Paribas and hedge funds also reportedly suffered big losses.

A securities industry executive warned the Securities and Exchange Commission in 1999 that Madoff's returns were too good to be true. But it isn't clear how much the SEC did about that report, or how much jurisdiction the agency had to regulate Madoff's fund, Zarroli says.