You have to wonder if even this made-up exchange would have raised eyebrows at the Securities and Exchange Commission.
EXAMINER: Mr. Madoff, how do you explain the remarkable returns you generate year after year even when others aren’t doing well.
BERNIE MADOFF: Ouija.
EXAMINER: Mr. Ouija, one of your employees? Is he a fund manager? (The examiner scribbles the name on a piece of paper with the words next to it: DON’T BOTHER TO FOLLOW UP)
BERNIE MADOFF: No, Ouija Board. (At which point Bernie pulls one out of his briefcase. He and the examiner place the board on their knees with their hands moving across the top. Moments later Bernie claims to hear a voice, whispering – “Bernie, buy July IBM 120 calls, sell September American Express 33 puts…”)
Actually, during a meeting on May 19, 2006, Bernie came pretty close to the Ouija Board approach to stock investing when explaining to examiners from the SEC how he did book such remarkable returns. You see, it was all about “feel.”
“Some people feel the market,” Bernie explained.
And others actually make informed decisions. But that wasn’t enough to raise any concerns.
Following this meeting, Bernie thought his goose was cooked. He informed examiners that his trades were cleared through an account at the DTC (and as we know today, his business was a classic Ponzi scheme and he did little to no trading at all). He even gave them his account number.
“I thought it was the end game, over,” he told the SEC Inspector General, who released a summary report yesterday on how the SEC blew many opportunities to nail Bernie before he essentially turned himself in last December.
And he added that he was “astonished” that the SEC never followed up with the DTC.
We all are, Bernie.