Madoff Was Equal Opportunity Scammer

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[Genesis Of Financial Meltdown]

After Bernie Madoff gave himself up, most likely to forestall a Russian sniper from using him for target practice, I received several telephone calls from former American Stock Exchange members about some of the people whom I knew that had invested with him.

I am not joking about the Russian sniper. Madoff cheated the wrong people. Madoff is wearing a bullet-proof vest when he leaves his apartment. And those guards are to protect him- all paid for with the money of those whom he scammed. Yet, in addition to the Russian mob, there are other more sophisticated investors whom Madoff also scammed.

He was an equal opportunity thief.

The word was Gerald Berkman, my former employer at the American Stock Exchange in the 1980s, had invested millions of dollars with Madoff. I did some research and my fears were confirmed---Norman Leff, who was a very decent man and was also my former employer was also listed as one an investor with Madoff. His investments were listed under "Norman Leff," "Estate of Norman Leff," and the name of Norman's wife. He must have invested millions of dollars with Madoff.

Berkman and Leff were once partners in the AMEX specialist firm, Berkman-Leff. It was perhaps the only decent specialist unit at the AMEX- Norman and Gerry did not cheat investors. But I ask myself, why would Norman, who knew the vagaries of the stock market, invest in a scam like Madoff's. Why?

It was probably Gerry's close connections to Madoff. Both had homes in Nassau County and in Florida.

Norman always told me that he was lucky- that people, who were much smarter than he, had gone out of business. Furthermore, Norman knew that no one could guarantee a 10% profit per annum, as Madoff claimed he could, unless he were cheating, or held 20 year Treasury Bonds from the 1980s that yielded 10%. Norman knew that even specialists, both stock and option, had bad months- and that it was only specialists in Exchange Traded Funds, who were guaranteed enormous returns on capital, that had enjoyed risk free returns. (They had a monopoly in the market).

Norman knew people like Maurice "Sonny" Cohen and Alvin "Sonny" Delaire, former specialists at the AMEX. The pair owned a specialist unit, Cohen Delaire and Kaufman, one of the premier specialist units on the AMEX decades ago. Yet, even this firm, with the most active stocks, had dissolved due to bad business conditions. Cohen formed Cohmad Securities with Madoff-- a combination of Cohen and Madoff. Delaire left the AMEX in the 1980s to work for Cohmad.

Let me elaborate more on Norman Leff's sophistication.

Norman and Gerry had sold off their specialist unit to Merrill Lynch after the market crash of 1987- due to bad business conditions. Norman was also aware that specialist units were dying the death of a thousand lashes because specialist units could no longer control the flow of orders and the pricing of stocks and options.

So, I ask again, why would Norman invest?

The only answer could be: Norman believed that Madoff was cheating his public customers by "front running,"; that is, trading ahead of public customer orders. But that would be impossible given the tens of billions of dollars that Madoff was utilizing. Could another reason be tax fraud? Madoff was not reporting taxable gains to the Internal Revenue Service, as would have been required, because Madoff stated that at year's end, he had converted all his positions to cash.

Or, perhaps Norman believed that Madoff was laundering money, as some members of the Board of the American Stock Exchange had done in the 1980s and 1990s.

I cannot pinpoint the reason why Norman invested with Madoff; I can only hazard intelligible assessments.

But one thing I do know: Norman, with all his experience and sophistication, had to have known that Madoff could not be legitimately earning 10% per annum.

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