Bernie Madoff, the Ponzi schemer who died in prison today while serving a 150-year sentence, provided great wealth for my blog, Re:Balance, if not to the broad array of credulous customers from all levels of society, from whom he extracted over $17 billion. One of my favorites, from March 27, 2009, is re-offered here in full, lest the memory ever fade of an irresistible pedagogic moment for my graduate students in Risk Management and Decision Making:
Teed off at Bernard Madoff?
Bernard Madoff was observably crooked, and his long-running swindle could easily have been stopped, early on. Except that those in the know either didn’t care, or had their own interests to be served.
Calling a halt to his scheming did not require a wake-up call at the soporific SEC, so thoroughly outed after the fact by whistle-blower Harry Markopolos, or performance of the due diligence that the feeder funds promised their customers, for which they and their gatekeepers will now pay the litigation cost.
Instead, it was as simple as the questionable honesty of Madoff’s golf game – and the mutually corrupted readiness of his country-club set of investors to subvert the integrity of that ancient sport.
Deep in “Madoff’s World,” Mark Seal’s delicious piece in the April 2009 edition of Vanity Fair, Seal observes that in the catalog of Madoff’s obsessive-compulsive mannerisms, his golf game was as tightly managed as the rest of his life. He quotes Donald Trump: “Out of hundreds and hundreds of rounds, he never shot lower than 80 or more than 89.”
Although the former guy may not top everyone’s list of character witnesses, there’s an unmistakable clue to Madoff in his throwaway line, “Experts say he’s either the most consistent golfer in the world or he’s cheating.”
In golf as in most other endeavors, whether recreational or professional, there is simply no way to avoid the occasional bad day. A weekend duffer with no hope of approaching par will still have the rare round where the gods smile, drives are straight and every putt drops. Still, there are two tails to every bell curve. Symmetry teaches that there are days when the sand traps eat up approach shots and the cup seems to have a lid – and an honest scorecard shows it.
So the only way Madoff could have shown his reputed consistency would have been through all the available manipulative devices: improved lies, do-over shots and disregard of the whiffs and the penalties for landings in the water.
Golf being an activity where integrity relies crucially on self-reporting, that brings up the role of Madoff’s interested enablers – the playing partners who would have seen his doubtful conduct in the bunkers and on the greens – but who if they called him, stood to lose their privileged access as early beneficiaries of his Ponzi scheme.
Regular readers know that I have neither aptitude nor appetite for golf (here), choosing instead to keep the game safer for everyone by staying in the clubhouse. For its culture and protocols I rely on my friend Joe, who played scratch in college and still posts a handicap in the single digits.
He tells of a now-retired professional athlete of epic dimensions, who receives a guest’s celebrity welcome on courses worldwide, but who will never be invited into serious club membership – because he is known to fiddle his scores, stiff his caddies and welsh on his bets.
That measure of the seriousness with which the game’s code is taken, and the apt phrase from the fractured Latin of the law schools – falsus in unum, falsus in omnibus – point the finger of accountability at Madoff’s companions. Facing the disrepute of Madoff’s violations, they evidently elected to accommodate their source, lest the promised stream of their investment returns be closed off.
Joe taught me that the dour Scots who invented the game called it “golf” because the more pungent four-letter words were already taken – “hell” or “damn” or the stronger alternatives, muttered or shouted in exasperation at the shanked drive or the malignly placed tree branch.
Would that Madoff’s blind-eyed followers had had the honesty to call “foul.”
[Ed. note: This article was originally published on Re:Balance on April 14. It has been re-published with permission.]
Jim Peterson is a 19-year veteran of Arthur Andersen’s internal legal group. He has been writing about the accounting firms and the Big Audit model since 2002, on his blog, Re:Balance, and in his two books, “Count Down: The Past, Present and Uncertain Future of the Big Four Accounting Firms” (2d ed. 2017) and “DOA: Can Big Audit Survive the UK Regulators?”
Photo credit: Reuters/Lucas Jackson via Alamy