Weekend at Bernie's

OK, I wasn't really at Bernie Madoff's house, and my weekend wasn't as funny as the 1989 film Weekend at Bernie's, but everywhere I went this weekend people were talking about Berard Madoff's alleged $50 billion Ponzi scheme. First, a father in my son's Saturday morning ice hockey class mentioned the alleged fraud to me as we were chatting. Then, later that afternoon as I was sitting on a Polar Express train ride in Phillipsburg, NJ, I heard a couple of adults discussing Bernie Madoff across the aisle. (If the kids were discussing Madoff, I really would have been floored). By the way, the train ride is a lot of fun for the kids - hot chocolate, Santa, elves, music, silver bells, the whole nine.Even New York sports radio hosts were chiming in, as New York Mets owner Fred Wilpon's Sterling Equities may have lost $300 million in Madoff's alleged scheme, according to CNBC. Will the Mets be able to afford all of their free agents in 2009? I'm sure the Mets will be fine. Commentators for NBC Sports' Sunday Night Football program also referenced it.

And, now that we are starting another work week, it seems that the Weekend at Bernie's may turn into the week, or year end at Bernies, as the story continues to unravel. We should be hearing about this scandal for some time because of its its sheer size and the fact that it comes at a time when the public, politicians and investors are increasingly unhappy with Wall Street. In fact, according to this New York Times article, investigators are curious to find out how such a large-scale scheme could operate for such a long time with allegedly only one person, Bernie Madoff, in the know:

So far, only Mr. Madoff, the firm's 70-year-old founder, has been arrested in the scandal. He is free on a $10 million bond and cannot travel far outside the New York area.

According to charges against Mr. Madoff, his firm paid off earlier investors with money from new investors, fitting the classic definition of a Ponzi scheme. It unraveled as markets declined and many investors who lost money elsewhere sought to withdraw money from their investments with Mr. Madoff.

But a question still dominates the investigation: how one person could have pulled off such a far-reaching, long-running fraud, carrying out all the simple practical chores the scheme required, like producing monthly statements, annual tax statements, trade confirmations and bank transfers.

Firms managing money on Mr. Madoff's scale would typically have hundreds of people involved in these administrative tasks. Prosecutors say he claims to have acted entirely alone.

"Our task is to find the records and follow the money," said Alexander Vasilescu, a lawyer in the New York office of the Securities and Exchange Commission. As of Sunday night, he said, investigators could not shed much light on the fraud or its scale. "We do not dispute his number - we just have not calculated how he made it," he said.

The New York Times also has a list of individuals, banks and charities who may have lost billions to Madoff's scheme. And the Wall Street Journal (registration required) has a number of articles focusing on the scale of the scheme, how the SEC missed its chance to uncover the fraud many years ago and how investors are expecting the worst in the exclusive Palm Beach area, where Madoff gathered a good portion of the assets for his fund, and are already selling off luxury assets (a Ferrari) and real estate.The Bernard Madoff alleged $50 billion Ponzi scheme will have everyone talking for a long time. Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio