Monday, June 29, 2009

Reflections on the Madoff Sentence

Bernard Madoff was sentenced to 150 years in prison today for perpetrating an elaborate Ponzi scheme that swindled untold numbers of people out of a reputed tens of billions of dollars over a period of over twenty years.

I feel ambivalent about his sentence. On the one hand, Madoff ruined the lives of so many people that I believe he should spend the rest of his life in prison. Indeed, if we're going to have a death penalty, and the death penalty is reserved for those who commit the most destructive crimes, I believe that Madoff should receive the death penalty, even if that might be less punitive than enduring years if not decades in prison with no hope of getting out.

On the other hand, I'm a psychological determinist. That is, I believe that everything we do is the inevitable result of psychological causes that we did not cause. I don't know what caused Madoff to do what he did, but I believe that, given the interplay of his genetics, his brain structure and functioning, his environment, his life experience, and who knows what else, Bernie Madoff had to do what he did.

Yet, if that's true, how fair or just is it to punish Madoff with a life sentence for doing what he couldn't help but do? I wrestle with this question not only with respect to Bernie Madoff but also with respect to everyone convicted of any crime. I haven't arrived at any clear answers. But so far as Madoff is concerned, I believe that had he known before he began defrauding people that he could receive a life sentence for it, he might well never have done it, and others will almost certainly be deterred by his sentence from doing something similar. I also believe that "we the people" have a sense that justice has been served in the Madoff case and that this is better for our country than if we had the sense that guys like Madoff always get off relatively easy while the rest of us would have the proverbial book thrown at us for far less impactful crimes.

As I read what I've just written, I guess I'm making a utilitarian argument for Madoff's sentence. I'm arguing that its effects on potential white collar criminals and society as a whole is likely to be more good than bad. But still, to a psychological determinist like me, it hardly seems fair or just.

What's more, it would be interesting to ponder what I would think of Madoff's sentence if I could somehow know that it was unlikely to deter others from committing similar crimes or was unlikely to have a net positive effect on society. I suppose the vengeful part of me would still rejoice in Madoff's sentence. But another and presumably wiser part of me would probably feel profound misgivings.

But what I would like to see now is an effective investigation into just how Madoff was able to perpetrate fraud on such an incredible scale for such an amazingly long time despite ample cause for suspicion and even credible warnings that he was up to no good. Who wasn't on the ball, or worse, and what should our justice system do with THEM?


Coonhound said...


I'm not ready to present my "naked reflections" yet to the points you raise and in the "madoff madness" in general.

However, with that being said, I do want to point something out that I found perplexing from the beginning...and I realize my feelings here may be harsh...

But how be it that all his "innocent investers" never questioned the fact that their returns were much higher than the average rate of return of comparible funds?

I guess people see what they want to know the old saying "don't kick a gift horse in the mouth" or how about "loose lips sink ships".

I was just stunned when I had heard what kind of returns those people were getting on their Madoff investments. And I thought...geez, how the heck could they not of questioned it.

(Just my thoughts)

Nagarjuna said...

Coonhound, I'm not sure of all the facts of this case. I suppose I should look them up. But my understanding is that the rates of return on investments with Madoff were not extraordinarily high. I believe the averaged somewhere around 10%. But what WAS exceptional was the consistency of those rates of return. Nobody else was doing as consistently well as Madoff represented himself as doing.

But the thing was, the SEC gave him a pass, in effect certifying him as legitimate. And this helped build his reputation to legendary proportions,

So, I don't think people who invested with him had to be exceptionally or recklessly greedy to do it. They believed, with the backing of the SEC and the adulation of him on Wall Street, that Madoff wasn't a swindler but a fabulously successful financial genius who estended to them the profound privilege of being allowed to invest with him.

I think the real blame lies on the shoulders of Madoff, his accomplices, the SEC, and anyone else in high places who knew, suspected, or should have known or suspected that something fishy was going on but did nothing about it.

Coonhound said...

No doubt, I clearly see your point and do agree from an objective point of view.

However, considering how I am as a person, I would of questioned things and wondered had I of been so privileged to be invested with him. Of course, I can totally see not pushing it too far in my mind bc of his outstanding reputation. His name carried much weight, respect and admiration. I do believe that I could've been easily blinded by that, not to mention intimidated, as well.