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<P class=style53>Bernie Madoff's Jewishness </P>
<P class=style53>Kevin MacDonald</P>
<P class=style54>January 8, 2008</P>
<P class=style358 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">The
Bernie Madoff scandal is endlessly fascinating. As the media has emphasized,
many of his victims were Jews and Jewish organizations. Madoff's behavior
violated a cardinal rule of Jewish business ethics which is based on trust
within the group. Indeed, a <em>New York Times </em>
<a href="http://www.nytimes.com/2008/12/18/business/18brokers.html"><strong>article</strong></a> commenting on
effects in the real estate industry noted that </P>
<P class=style361 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
the outsize impact on the industry may have resulted largely because Mr Madoff ... managed his funds much the way that real estate leaders [i.e.,
Jews]have
operated successfully for decades: He provided little information and
demanded a lot of trust. </P>
<P class=style361 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
“You have a lot of wealthy people who made a lot of money on handshakes,”
said Mark S. Weiss, a commercial real estate broker at
<a title="Brokerage Web site." href="http://www.newmarkkf.com/"><strong>
Newmark Knight Frank</strong></a>, where several brokers had invested
heavily with Mr. Madoff. There was “something about this person, pedigree
and reputation that inspired trust,” he said.</P>
<P class=style362 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
And the main thin
<SPAN class=style58>
<SPAN style="FONT-SIZE: 12pt; FONT-FAMILY: 'Arial','sans-serif'; mso-bidi-font-weight: bold">g
about Madoff's pedigree that inspired trust among his fellow Jews was simply
that he is Jewish. He traveled in all the best Jewish circles:
on
the board of Yeshiva University, a major donator to Jewish and Israeli
charities, hobnobbing at Jewish country clubs, and living in upscale Jewish
ghettos on Long Island, Palm Beach, and the upper eastside of Manhattan </SPAN></SPAN></P>
<P class=style362 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
<span style="font-size:12.0pt;line-height:115%;font-family:"Arial","sans-serif"">The Madoff scandal is a <em>
<span style="font-family:"Arial","sans-serif";font-style:normal;mso-bidi-font-style:italic">textbook example of how ethnic networks operate — and their pitfalls.
<span style="mso-spacerun:yes"> </span>In traditional Jewish society, like
other middlemen groups, business relationships are based on the assumption
that one can trust one’s co-ethnic. Indeed,
<a href="http://www.amazon.com/Trust-Ethnicity-Identity-Institutional-Gift-Exchange/dp/047210361X/ref=sr_1_4?ie=UTF8&s=books&qid=1229566351&sr=1-4">
<span style="mso-bidi-font-style:normal"><strong>Janet Landa</strong></span></a> notes that
this was one of the reasons for the success of middlemen minority groups,
such as the Overseas Chinese in Southeast Asia: </span></em>Close ethnic
bonds lower the costs of doing business because there is greater trust
within the ethnic group than between ethnic groups. <em>
<span style="font-family:"Arial","sans-serif";font-style:normal;mso-bidi-font-style:italic">This was certainly true in
traditional Jewish society, where a handshake with a co-ethnic was enough to
seal the deal, but business with outsiders was undertaken with much less
trust.<o:p></o:p></span></em></span></P>
<P class=style366 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
The Madoff
story from the beginning was presented by the media as a Jewish story. This
almost certainly is because Madoff got his start among Jewish investors and
because some of his victims were Jews. It was not because Madoff was Jewish. </P>
<P class=style61 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
<span class="style38">Consider </span>
<SPAN style="FONT-SIZE: 12pt; " class="style38">
<a href="http://en.wikipedia.org/wiki/Michael_Milken"><strong>Michael Milken</strong></a>,
the notorious 1980s junk bond king, who pled guilty to securities and
reporting violations and was sentenced to ten years in prison. (He served
less than two years — and is now <a href="http://www.newsweek.com/id/169180">
<strong>asking George W. Bush</strong></a> for a pardon.) In that case, the mere mention of
<a href="http://www.theoccidentalobserver.net/articles/Editorial-BailoutII.html">
<strong>Milken and his cronies</strong></a> with all those Jewish names was
enough to ignite a major uproar</SPAN>
<SPAN style="FONT-SIZE: 12pt; " class="style38">
complete with accusations of
anti-Semitism. Jewish activist
<I style="mso-bidi-font-style: normal"> </I> </SPAN>
<A href="http://backissues.cjrarchives.org/year/92/1/hoyt.asp">
<B style="mso-bidi-font-weight: normal">
<SPAN style="FONT-SIZE: 12pt; TEXT-DECORATION: none; text-underline: none" class="style38">Alan
Dershowitz</SPAN></B></A><span class="style38"> was cent</span>
<SPAN style="FONT-SIZE: 12pt; " class="style38">er stage, </SPAN>
<span class="style38">even purchasing a full page ad in the <EM>New York Times </EM>(at a cost of
$450,000) and ads in three other newspapers. </span></P>
<P class=style61 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
<span class="style38">To get an idea of how innocuous the references
to Jews were during the Milken scandal, the following is the offending
paragraph from a review of James B. Stewart's </span>
<a href="http://www.amazon.com/Den-Thieves-James-B-Stewart/dp/067179227X">
<b style="mso-bidi-font-weight: normal">
<i style="mso-bidi-font-style: normal">
<span style="FONT-SIZE: 12pt; TEXT-DECORATION: none; text-underline: none" class="style38">
Den of Thieves</span></i></b></a><i style="mso-bidi-font-style: normal"><span style="FONT-SIZE: 12pt;" class="style38">
</span></i><span style="FONT-SIZE: 12pt;" class="style38">by </span>
<a href="http://www.observer.com/node/36098">
<b style="mso-bidi-font-weight: normal">
<span style="FONT-SIZE: 12pt; TEXT-DECORATION: none; text-underline: none" class="style38">
Michael M. Thomas </span></b></a><span style="FONT-SIZE: 12pt;">
<span style="mso-spacerun: yes" class="style38"> </span></span><span style="FONT-SIZE: 12pt;" class="style38">in
the <i style="mso-bidi-font-style: normal">New York Times Book Review</i>:
<span style="mso-bidi-font-style: normal"> </span></span><span style="mso-bidi-font-style: normal"><a name="Ponzi"></a></P>
</span>
<p class="style64"><span style="FONT-FAMILY: 'Arial','sans-serif'">James B.
Stewart . . . charts the way through a virtual solar system of peculation,
past planets large and small, from a metaphorical Mercury representing the
penny-ante takings of Dennis B. Levine's small fry, past the middling ($10
million in inside-trading profits) Mars of Mr. Levine himself, along the
multiple rings of Saturn — Ivan F. Boesky, his confederate Martin A. Siegel
of Kidder, Peabody, and Mr. Siegel's confederate Robert Freeman of Goldman,
Sachs — and finally back to great Jupiter: Michael R. Milken, the greedy
billion-dollar junk-bond kingdom in which some of the nation's greatest
names in industry and finance would find themselves entrapped and corrupted.
<span class="style58"><o:p></o:p></span></span></p>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
Merely a listing of Jewish names was sufficient to bring down the wrath of
the Jewish activists. </P>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
But Madoff's Jewishness is front and center in this scandal. So perhaps
it's no coincidence that both the <em>
<a href="http://www.latimes.com/news/local/la-me-madoff-jewish-charities24-2008dec24,0,5946662.story">
<strong>Los Angeles Times</strong></a> </em>and the <em>
<a href="http://www.nytimes.com/2008/12/24/us/24jews.html?_r=2&hp=&adxnnl=1&adxnnlx=1230066031-GT/BY+/rdjuiWGAVUE+yYA">
ach
other with statements from various Jewish luminaries reaffirming Jewish
ethics and recounting the sense of betrayal Jews felt because Jews were
among the victims. </P>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
However, the Jews-as-victims angle is at least a double edged sword. As in
the Milken case, the default strategy is to proscribe any mention that
a person like Madoff, who feeds into all the negative Jewish stereotypes, is
Jewish. Indeed, some voices within the Jewish
community are bemoaning the fact that Madoff's Jewishness is so central to
the media coverage. For example, in a
<a href="http://www.google.com/hostednews/ap/article/ALeqM5jSLnvHBSvCHcE2Obpw4lyDZqrthAD959SJMO0">
<strong>letter to the </strong><em><strong>New York Times</strong></em></a>,
David A. Harris, Executive Director of the American Jewish Committee wrote,
"Yes, he is Jewish. We get it. But was this relevant to his being arrested
for cheating investors, or so key to his evolution as a businessman that it
needed to be hammered home again and again?"</P>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
I strongly suspect that the answer to Harris's question is 'yes'. For one
thing, Madoff seems to have personified the sort of guru I wrote about in
<em>
<a href="http://www.authorhouse.com/BookStore/ItemDetail~bookid~8622.aspx">
<strong>The Culture of Critique</strong></a></em>: Someone with a great deal
of personal charisma and a following that can only be described as adulatory. Madoff
"was <a href="http://www.newyorksocialdiary.com/node/139183"><strong>a legend</strong></a> in his social and financial circles, a giant;
like a rock-star in that world, that financial realm. His clients thought he
was a genius. People literally begged him to take their money."</P>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
Like the movements described in <em>The Culture of Critique</em>, Madoff's
scheme began within the Jewish community and then spread like a virus to the surrounding
society. The analogy with a Jewish intellectual guru like Freud is striking
(including the fact that both may be labeled charlatans). Like all of Madoff's original investors,
all of the original psychoanalysts were Jews<SPAN class=style38>. Like
Madoff, Freud was idolized by Jews generally. Historian
<a href="http://www.amazon.com/Jewish-Origins-Psychoanalytic-Movement-Dennis/dp/0226439607/ref=sr_1_1?ie=UTF8&s=books&qid=1230942240&sr=1-1">
<strong>Dennis B. Klein</strong></a> notes that Jews "treated [Freud] as if
he were ‘a God-fearing Chief Rabbi,’ or ‘a national hero.’
<span style="font-size:8.0pt;mso-bidi-font-size:10.0pt"> </span>” And, as noted above, Madoff was a pillar of the Jewish
community. There is more than one way to become a pillar of the Jewish
community, but without doubt the main one is to be a major donor to Jewish
causes, and Madoff certainly fit that profile. </SPAN> </P>
<P class=style362 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
Madoff got his start as a
<a href="http://www.andykessler.com/andy_kessler/2008/12/forbescom-the-bernard-madoff-morality-tale.html">
<strong>macher</strong></a> (big shot) within the Jewish community, but he certainly went well beyond
that. Just as Freud recruited non-Jews like Ernest Jones to front the
psychoanalytic movement, Madoff formed relationships with non-Jews who
operated feeder funds that attracted largely non-Jewish money. Indeed, the <em>New York Times </em><strong>
<a href="http://www.nytimes.com/2008/12/20/business/20madoff.html?pagewanted=4&em">
notes </a></strong>that "if the wealthy Jewish world he occupied was his
launch pad, the wealthy promoters he cultivated at Fairfield Greenwich were
his booster rocket." </P>
<P class=style362 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
The Fairfield Sentry fund, headed by Walter Noel
(who is not Jewish), was the largest feeder fund
for Madoff, with a total value of $7.5 billion before the collapse — a sum that dwarfs the reported losses from
individual Jews and from Jewish charities. 95% of its money was from foreign
investors, mostly from Europe. <SPAN class=style38>And the bulk of the rest of the<a href="http://s.wsj.net/public/resources/documents/st_madoff_victims_20081215.html"><strong>
major losers</strong> </a>were European and Asian banks.
</SPAN> </P>
<P class=style362 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
Another large conduit for non-Jewish money from Europe was
<a href="http://www.nytimes.com/2009/01/02/business/02madoff.html?_r=1&scp=1&sq=Villehuchet&st=cse">
<strong>Rene-Thierry Magon de la Villehuchet</strong></a> whose Access
International Advisors lost $1.4 billion. Mr. de la Villehuchet committed
suicide because of guilt over his role in losing so much of other people's
money: “If you ruin your friends, your clients, you have to face the
consequences,” as his brother framed it. I can't help quoting the <em>
<a href="http://www.nytimes.com/2009/01/02/business/02madoff.html?_r=2&scp=1&sq=Villehuchet&st=cse">
<strong>New York Times</strong></a> </em>on Mr. Villehuchet's death because
his suicide seems to be the only shred of nobility in all of this. </P>
<p class="style64">Mr. de la Villehuchet’s attitude appears to be rare. So
far, the leading players in Mr. Madoff’s case have maintained a stony
silence, studiously avoiding apologies or statements of responsibility.</p>
<p class="style64">Mr. Madoff’s sons have said nothing about how they could
have worked at their father’s firm for decades without noticing that the
money he supposedly managed did not exist. The accountants and regulators
who were supposed to protect investors have not explained their failure to
do so. And the hedge funds that invested tens of billions of dollars with
Mr. Madoff despite obvious red flags have said the fraud was his fault, not
theirs.</p>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
Assigning the precise role of Jewishess in this scandal will take some time.
As in all Ponzi schemes, the early investors are the winners, and in this
case we know that Jews were the early investors and that
<a href="http://dealbook.blogs.nytimes.com/2008/12/19/even-winners-may-lose-out-with-madoff/?scp=2&sq=Berenson%20%20Madoff%20winners&st=cse">
<strong>at least some of them made money overall</strong></a>. (However,
there is
<a href="http://dealbook.blogs.nytimes.com/2008/12/19/even-winners-may-lose-out-with-madoff/?scp=2&sq=Berenson%20%20Madoff%20winners&st=cse">
<strong>legal precedent</strong></a> for the winners being required to
forfeit their gains, at least from the last 6 years, so some of these
ill-gotten gains may be forfeited.) And we know that the really big money came
from non-Jews who invested later in the scheme. (See James Murray's
<a href="http://www.theoccidentalobserver.net/authors/Murray-Madoff.html">
<em><strong>TOO </strong></em><strong>article</strong></a>.)</P>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
We are still unclear on the
role of Jewishness in the lax oversight of the fund. We do know that
<a href="http://groups.google.com/group/alt.true-crime/msg/bca0bd9073b4ae06?">
<strong>Jonathan Sokobin</strong></a>, whose job was to monitor market risks
for the SEC, did not respond to the critique of Madoff made by Harry
Marcopolos, a former employee of a firm that competed with Madoff. We also
know that Madoff
<a href="http://abcnews.go.com/Blotter/WallStreet/story?id=6471863&page=1">
<strong>boasted</strong></a> that his niece, who was a compliance officer
for Madoff's firm, had married a former SEC regulator. And we know that in 2006 Madoff sailed through an examination by the SEC based on
Markopolos's allegations, being required only to register with the SEC as an
investment advisor. </P>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
An adequate account would be based on interviews of all the participants
in the oversight process in order to shed light on their motivation. These motivations may range from unconscious biases in favor
of Madoff because of ethnic ties to active collusion. </P>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
Biases resulting from Madoff's status as a<em> macher</em> in the Jewish
community are a likely possibility. It would be a bit like having a Jewish psychologist in charge of deciding
the scientific status of Freud. The psychologist might consciously attempt
to be objective, but the status of Freud as a Jewish folk hero might well
get in the way of an unbiased appraisal. It is like questioning the
truthfulness of God. In the end, that may be what we are
dealing with here.</P>
<P class=style364 style="mso-add-space: auto; mso-line-height-alt: 11.25pt">
<b style="mso-bidi-font-weight: normal">
<a href="http://www.kevinmacdonald.net/"><span class="style365">Kevin MacDonald</span></a></b><span class="style365"> is a professor
=of psychology at California State University–Long Beach.</span> <o:p> </o:p></P>
<P class=style52><STRONG>Permanent URL:<a href="http://www.theoccidentalobserver.net/articles/MacDonald-Madoff.html">http://www.theoccidentalobserver.net/articles/MacDonald-Madoff.html</a></STRONG></P>
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