Was Madoff Jewel Ploy Another Fraud To Save Sons?

Given Bernie Madoff’s skill at hiding a massive Ponzi scheme for decades, plus his reported obsessive-compulsive attention to details, we need to ask the same question that several readers have asked. Was Madoff’s mailing of $1 million-worth of jewels and other valuables to his sons, his brother, and some friends just another fraud?

Specifically, was this ploy designed to give Madoff’s sons, Mark and Andrew, yet another chance to show prosecutors and the public how quick they are to report their father’s wrongdoing, thus bolstering their contention that they knew nothing about the Ponzi scheme?

We are big believers in innocent-until-proven-guilty, and we do think it is possible that Madoff never brought Mark and Andrew (or his niece Shana) in on the Ponzi.  That said, we find it hard to believe that Madoff’s sons didn’t occasionally wonder why Madoff was so secretive about the investment business and why all Madoff Investments trades were made in Europe, instead of at the US broker dealer. We also wonder why they didn’t have their personal money managed by Madoff.

And given Madoff’s ability to hide the Ponzi for so long, we also wonder whether he has now staged not one but two opportunities for his sons to look innocent and curry favor with the government.  Specifically:

• Madoff allegedly "confessed" the scam to his sons, who promptly turned him in.
• Madoff just transferred jewels and other assets to his sons, who promptly turned him in.

Here’s Alex Berenson’s writeup of the mailed-jewelry news in the NYT:

Last week, Mr. Madoff’s sons, Andrew and Mark, received three packages, containing valuable jewelry and watches, as well as inexpensive items like cuff links and mittens, according to a person briefed on the contents of the packages. Within minutes of receiving the packages, Mr. Madoff’s sons called the law firm of Paul, Weiss, Rifkind, Wharton & Garrison, which is representing them, to tell them about the packages, this person said.

Lawyers for Paul, Weiss then informed prosecutors of the packages and offered to pass them to the government. Prosecutors accepted the offer.

The "within minutes" language is striking. The "person briefed on the contents of the packages" is almost certainly a lawyer or PR rep representing Mark and Andrew who wanted to make sure the NYT knew how quickly they reported the packages to the Feds (a prosecutor would never supply this detail).

If Mark and Andrew are innocent, they would have behaved just this way: They would have called their lawyers in a panic and said "Holy shit, Dad just sent us stolen goods." But if Mark and Andrew were trying to show that they were innocent–or if Madoff was just intentionally giving them another chance to demonstrate innocence–they would have done just the same thing.

So the rapid reaction doesn’t really tell us much.  And given Madoff’s obvious genius at conning people, nothing can be ruled out.

See Also: Clever Madoffs Mail $1 Million Of Jewels To Friends, Family