Issue of the week: How did Madoff get away with it?

The Madoff scandal keeps getting worse, said Zachary Goldfarb in The Washington Post. A month after financier Bernard Madoff confessed to running the largest financial Ponzi scheme in history, questions are multiplying about the extent of his fraud and the failure of regulators to detect it. Madoff has told investigators that he stole as much as

$50 billion during the scheme’s three-decade run, which preyed on wealthy individuals, charitable foundations, and college endowments. David Kotz, inspector general of the Securities and Exchange Commission, told Congress this week that he was looking “to identify the officials who failed to uncover Madoff’s activities.” He also acknowledged that, in light of the Madoff case, it was reasonable to wonder whether the agency is able “to respond appropriately and effectively to complaints and detect fraud.” Kotz admitted that the SEC had received “multiple warnings” about Madoff starting in 1999, “but failed to uncover the alleged fraud.”

Even with Madoff now confined to his Manhattan apartment, federal prosecutors worry that the fraud may be continuing, said Chad Bray in The Wall Street Journal. Prosecutors asked federal Judge Ronald Ellis to revoke Madoff’s bail, after he mailed several packages containing jewelry, watches, and personal items to friends and relatives, including his two sons. Madoff’s lawyers said the packages were sent “innocently” and did not violate the terms of Madoff’s bail agreement. But prosecutors urged Ellis to send Madoff to jail, to prevent him from fleeing or transferring “valuables that could be used to pay restitution to victims.”

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Madoff’s victims, meanwhile, still don’t know what hit them, said Daniel Gross in Slate.com. “Ground zero of the Madoff affair” appears to be Palm Beach, Fla., home to many of the ultra-rich who believed their “high fabulousness quotient entitled them to Madoff’s too-good-to-be-true services.” One reason that Madoff managed to elude detection for so long is that the Palm Beach in-crowd “knew Madoff personally and played golf with him.” That familiarity bred complacency. So they didn’t bother “to ask or find out” how Madoff racked up steady returns of 11 percent or 12 percent a year, in good markets and bad.

Only outsiders dared ask those uncomfortable questions, said David Weidner in Marketwatch.com. Harry Markopolos, a Boston money manager, “carried on a one-man crusade against Madoff” for years after trying—and failing—to duplicate Madoff’s results using Madoff’s purported strategy. In 1999, he warned the SEC that Madoff was likely running a Ponzi scheme, in which money from new investors is used to pay fraudulent returns to longstanding investors. The SEC waved Markopolos away, preferring to believe Madoff’s own accounts of his investing prowess. He was, after all, a pillar of the Wall Street establishment. The lesson was clear: Your concerns don’t matter all that much, unless, of course, you’re “part of the system that got us into this mess.”