Madoff's scam was totally different from the examples you cite in several key ways:
1. Madoff was dealing with sophisticated investors and financial institutions. His false statements had to be able to withstand a far higher degree to inspection.
2.Madoff had thousands of clients, and EACH one of them had literally thousand of transactions..stock buys and sells AND option strategies EACH month. And because it was all fake, they had to make sure that the stock price was accurate for the date and TIME of each transaction. That's a staggering degree of data and complexity.
3. When the first reports of the fraud came out, much was made of the secretive offices, which no one could access, and the 20 year old IBM computer system, which supposedly handled all the data and produced the fake statements each month. That alone would seem to require a fair degree of computer savy, and programming ability, which no one as yet named in the investigation seems to possess.
I remain highly scepticle that this is a one o two person fraud. heck, Madoff would often be away from the office for weeks, even months at a time..galavanting around the world, yet each day the data monster had to be fed...
Of course. I specifically noted the differences in scale and stated that Madoff couldn't possibly act alone or with a very few confidants - the closes relatives / employees / co-workers and certainly a lot of the data operators and "auditors" have been part of it... and some are already under investigation, indictment or convicted... and some may be walking away scott-free.
The question is whether some of his customers ("net winners" or "net losers" according to Irving Picard), even with [relatively] large amounts at stake and financial sophistication "had to know" that Madoff was specifically running a Ponzi scheme (as Irving Picard keeps charging and stating in his filings and PR, without having to prove an ounce of it)
For instance, KPMG couldn't find any fraud after two "risk audits" for Madoff's HSBC custodian account, including the latest audit in 2008 - less than a year from Bernie's undoing in December of 2008 from the redemptions caused by market meltdown...
He essentially got a Good Housekeeping Seal of Approval from the SEC several times after the rumours of "possible" "too good to be true" fraud led to investigations. In fact, the returns he promised and delivered to most of his customers - not the likes of "dial-a-return" Chais, Picower, Levy etc. - were not "too good to be true" - they were on a par or lagging behind average S&P500 returns (e.g., see the charts in Historical Returns S&P 500), but they were not as volatile and "avoided" the negative dips of the market, in which case they were not only safer, but far more "accessible" for leverage (which Wilpons and Katzes, among others, used for loans and other financial games. There are many investors and money managers who delivered far superior than "market returns" without excessive risk during the same period of time - Berkshire's Warren Buffett and Charlie Munger, Legg Mason's Bill Miller, Bridgewater's Ray Dalio, even bond managers PIMCO's Bill Gross and DoubleLine's Jeff Gundlach, just to name a few.
In other words, in financial language, he promised and "delivered" some alpha (positive relative returns) without excessive beta (volatility), or in layman terms - a "peace of mind". That may imply some shenanigans, or skills, or "insider's magic" but what it doesn't imply is the Ponzi scheme, especially if someone has been doing business on this scale for a long period of time - Ponzi schemes, as we all "know", by their very nature are not supposed to last long...
What enabled all these schemes to last this long (and have the same MO of understated returns) was 20+ years period of bull market and the investing culture of reasonably steady investment "into the market" where money was easy to roll over and steady deposits outnumber redemptions.
In any case, my point is that if you had an opportunity to invest in what you knew was a Ponzi scheme which ran for a while, would you "knowingly" invested in it, and would you stay with it for many years, and kept a "peace of mind"? Would the schemer have any incentive to tell any customer that he is running a Ponzi scheme (where he risks an immediate redemption which would collapse his pyramid), as opposed to implying that he has a "magic system" and "insider's track" or some sort of "secret sauce" (haven't we heard a variation on this many times?)?
Yes, Madoff had quite a few enablers and comrades in arms, but very few if any of his investors / clients (no matter how sophisticated) would "know" or even suspect that he was running a Ponzi scheme, or they would be looking to redeem their money as soon as possible.
What Picard accuses some Madoff's customers (because he needs to put pressure on them to get a better deal or create an outcry from the "victims") is simply illogical, contrary to any common or "sophisticated" sense, and was aptly characterized as "nonsense" under the guise of sleek legalese.
My main point was not about the mechanics of making the Madoff's scheme to work on that scale, but in the similarity of most victims / former clients of Madoff, Starr, McLeod et al - most would stay as far as possible if they suspected (let alone, "knew") about their investment being in the Ponzi scheme, and Picard's "had to know" / "should have known" / "turned the blind eye" is a ridiculous "broad brush" accusation to throw at most people / institutions with so much of their own money at stake.
Would Picard et al do that to the "net winners" who didn't roll over their accounts with McLeod? These are G-13/G-14 government employees / agents whose business it is to deal with the crimes? Did they "have to know" / "turn a blind eye"? What it says that we shouldn't react like there is any substance in Picard's accusations every time he files something before a judge, especially since we saw how many times his "facts" are contradicting his own arguments when he is asserting and is trying to convince us that someone "had to know" / "should have known" something that in real world defies logic.
2.Madoff had thousands of clients, and EACH one of them had literally thousand of transactions..stock buys and sells AND option strategies EACH month. And because it was all fake, they had to make sure that the stock price was accurate for the date and TIME of each transaction. That's a staggering degree of data and complexity.
Actually, most individuals (not high-net-worth individuals) would be in institutional/pension funds who invested with Madoff, so it would greatly reduce the number of accounts and not be thousands of client accounts (some accounts for the same client could be open and closed to show long-term/short-term gain/loss for tax purposes, as the case was with Wilpons / Katzes / Sterling).
Further, they were not self-directed (individually managed/traded) but "managed" by Madoff, so the clients wouldn't generate individual trades - they could just withdraw or deposit the money; Madoff could generate the "trades" any way he wanted to match redemptions / cash outflow in any account and "park" any kind of return ("dial-a-return" / Hillary's $100,000 from $1,000 "cattle futures" scheme) in any account he wanted/needed depending on the deposits / cash inflow.
That would greatly reduce the "paperwork." Yes, it's still time-consuming, but much more manageable and it was entirely under the control of Bernie and his accomplices, without clients knowledge of the mechanics.
It's a lot of work, but the pay was really good.
WRT Madoff’s obsession for detail, do not underestimate the greed factor. Greed was driving Madoff——Bernie had to shape up——greed kept the scam going.
He and the rest of the Madoffs had very, very expensive tastes. Bernie and Ruth were shopaholics——he bought $7500 sport jackets, she shopped everyday for designer clothing. Ruth and he both collected expensive jewelry and watches. All of the Madoff family’s real estate was located in prestige areas.
The bills for the Madoff family’s lavish lifestyle came due every month. That was a strong motivator.
Reading the several books that have surfaced in the aftermath-—one sees that not only Harry Markopolis was onto Bernie. Many MANY people asked the right questions——and reported their suspicions to L/E. But they could not get anyone to do anything about it. As I posted earlier, Bernie KNEW he was protected-—he knew that in L/E it’s a career killer to suggest someone of Jewish heritage was doing something illegal. No other explanation holds water.
Marshalling a protection racket was one of Bernie’s smart ploys. I would not doubt that Abe Foxman used the ADL club against anyone who dared suggest Bernie was a crook..........after a nice contribution from Bernie.