The Madoff mystery

March 11, 2009 1:11:24 PM PDT
The blogosphere is alive with speculation and conjecture about Bernie Madoff, the alleged mastermind of the biggest investor rip-off in U.S. history -- a Ponzi scheme that authorities say defrauded his clients out of nearly $65 billion.

Why is Madoff pleading guilty when he knows he will likely spend the rest of his life in prison? Why not "fight" the government's charges, stay in his fancy schmancy penthouse on the Upper East Side and remain with his family during the legal battles, which could take years?

Is he trying to "fool" prosecutors and keep them away from the money? Or is he trying to leverage freedom for his wife and sons?

My experience is that in these Ponzi schemes investors who get ripped off harbor some deep-seeded belief that their money exists somewhere. Somehow, they think, our money exists.

The truth is that the money is gone -- used to pay the supposed interest due old investors.

It's a conundrum, legally and ethically. Let's say someone invested $10,000 with Madoff. And let's say that, over the years, when prosecutors say Madoff didn't even trade stock, these early investors made $20,000 in interest. So they lost their initial $10,000, but pocketed $20,000, which they spent, again for the sake of argument, on a new kitchen.

That's where the money went. Only add two or three or four zeroes to the dollar amounts and that more accurately reflects what's going on.

So - do these investors have a legal obligation to return the money? Sometimes, the bankruptcy trustee who is now in charge of Madoff's affairs will make that argument. And do they have an ethical obligation to return the money? What would you do?

We'd love to hear from you. CLICK HERE if you'd like to respond, and I'll use some of your answers in this space tomorrow.

We'll have the latest on the Madoff case, tonight at 11.

Also at 11, have you gotten the nasty stomach bug that's going around this season? I have it. It ain't pretty.

Anyway, our Phil Lipof tonight takes a look at what turns out to be a fairly common misconception -- that what ails your stomach isn't a virus or a bug. Instead, it's likely food poisoning. And by the time it passes, it's too late to diagnose it. It's an interesting theory, and an interesting story.

We'll also have any breaking news of the night, plus Lee Goldberg's AccuWeather forecast, and Scott Clark with the night's sports. I hope you can join Sade Baderinwa (in for Liz Cho) and me, tonight at 11.