Friday, May 28, 2021

Book Review: Wizard of Lies (audiobook edition)

Diana B. Henriques, The Wizard of Lies: Bernie Madoff and the Death of Trust. Old Saybrook, CT: Tantor Audio, 2011.
Genre: nonfiction
Subgenre: business, crime, economics, finance, con men
Format: streaming audiobook
Source: Hoopla Digital via Madison County (KY) Public Library  
Award note: The book was long listed for the 2011 Best Business Books from the Financial Times and McKinsey Book of the Year Awards. (Link to full list. I may need to look over this list for other reading ideas and books to add to the TBR list)

If memory serves me right, I picked up this book because it was mentioned in some documentary I watched about Bernie Madoff, probably an episode of the CNBC show American Greed.  Given that this can be a bit dense book at times because of all the details of Madoff's crimes and schemes, I think for me it was better to listen to it than reading it. By the way, the narrator for this book is a woman, which for me is the first time to listen to a female narrator in an audiobook. That is a small detail but it caught my attention this time. The pacing of the narration started out a bit fast but it soon settled into a good pace.
The book opens with a prison visit to Madoff, so the story begins at the end,  and we will work backwards. The book ends back with Madoff in prison. The author describes the journey to the prison. Madoff is in a medium-security prison, not horribly harsh but it is not "Club Fed" either. For me, reading the book confirmed a theory I have heard about Madoff, that Madoff's big crime was he swindled and stole from the wealthy and from seemingly smart people, in addition to all the "little people" he stole from as well. If it had just been "little people" he may have gotten lighter time. His interview with the author is the first interview he granted after arrest and imprisonment. He had remained silent before this time. 
In chapter 2, we start getting the history of Madoff, how he started and rose. Even early on Madoff took chances, did somewhat shady deals, and even screwed over members of his own family who worked for him. 
To be honest, as I stated, this may be a book that is better to listen to than to read in text. A lot of the book is basically outlining in some detail the various schemes and scams that Madoff and his firm ran. He certainly was creative in finding ways to scam people and make more money, fooling a lot of so-called experts and intelligent people along the way. He was also a good marketer, making himself seem as a secure place to invest in during risky times like the tech crash in 2000. By the way, there were articles that at some point highlighted how Madoff's successes could not really be duplicated by others, yet people kept on giving him money. Even when there were warning signs, they often went unheeded by those who could do something. So yes, Madoff was a dangerous crook, but he did not do it by himself. Madoff's schemes were enabled in large part by Wall Street and its greed. He also helped to shape the greedy market we know now, plus a lot of people were more than willing to follow him into what became a precipice. 
The book also describes the fall as well. For a while, Madoff, being Jewish, meant that people's prejudices about Jews were triggered when Madoff's scam was revealed. However, the crimes went way beyond any Jewishness as Madoff pretty much scammed people and institutions in the U.S. and around the world. He did start exploiting his good reputation in Jewish communities close to him, but he eventually exercised that initial goodwill and influence from anywhere he could. 
The real impact was among the small investors and other obscure victims who lost it all except for maybe the house they owned and any money left in their pockets. The rule of do not put your eggs in one basket was widely ignored here. Overall, Madoff's scam wiped out large and small investors, including small ones who did not see themselves as "investors," i.e. had their retirement through their jobs in hedge funds and such. The small destitute people left by Madoff were the ones mostly forgotten. To be honest, reason Madoff was so condemned was that he ripped off rich people, people who still had plenty left by the way while those who lost it all never got any help from the government (who failed to regulate folks like Madoff) or anyone else. 
Here are some other highlights from the book I found interesting: 
  •  Ronald Reagan's appetite for deregulation would mess up the SEC in its ability to enforce regulations and police stock markets, financial institutions, etc. This also enabled Madoff to get his Ponzi going. 
  • More amazing is Madoff and his business were about to sink then something new came along to prop him up for a while longer: hedge funds, which he milked for all he could. How he survived suspicions about his scam, audits, and even a complaint here or there is amazing. He had that "feel for the market" along with some serious charm to keep people calm long enough. Eventually, the house of cards would fall. 
  • People who were victims griped when the trustees in charge of sorting out Madoff's scheme and returning any remaining money could not pay back fast enough, but a big issue that most of them were not aware, or did not care, is that Madoff and his company kept seriously antiquated records in paper and even microfilm. This meant processing the information would go extremely slow. A computer network had to be created to speed up the process. 
  • Victim statements to court, some of which the author presents, are very moving and jarring at times. Compared to those, the statement Madoff made in court seems fairly useless, a token statement mostly given all the damage and lives he ruined, stealing ruthlessly and without remorse as one of the prosecutors stated in trial. 
  • Madoff in the process also destroyed his family, who many believed was as guilty as he was (and they may have been to varying degrees but no evidence found). One of his sons took his own life unable to bear this burden. As for their assets, federal marshals liquidated at auction all they could from the fanciest boats and real estate to the most mundane personal belongings. This process further symbolizes the family fall. When the narrative gets to the point, and the author gives details of the remaining mundane belongings getting auctioned (by now the big fancy things had been auctioned off), it is just a sad and pathetic note with a touch of tragedy given that victims, if lucky, might get back pennies on a dollar.
 In the end, the book also reminds us of lessons people need to take from this that they often ignore. For one, never put your eggs in one basket nor put your faith in one man or firm to manage money or other important things. Two, if it seems too damn good to be true, it probably is. This is more so if it is way too good and never goes down despite other investments and economic items going down. The author interviews Madoff in prison and between that and her research we get this very good book that shows us how Madoff worked his scheme without regard of who got hurt, and a lot of people did get hurt, including his own family. This is one worth a read if you want to understand his crimes, his times including the 2008 economic downturn, and all the signs along the way that were either ignored or that people who should have known better were either too incompetent or chose not to see. In the end it is a story of greed, arrogance, hubris, and neglect in seeing the signs available. I really liked this one, and if you are interested in the topic, this is a book I'd recommend. 

4 out of 5 stars. 

Book qualifies for the following 2021 Reading Challenges: 

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