The Daily Beast
In a Daily Beast exclusive, one of the fraudster’s employees tells Lucinda Franks that the supposedly legitimate brokerage operations were in fact just money-losing fronts for the fraudster's scheme. Plus, what Madoff’s sons told staff the day after Bernie’s arrest, trips to the company’s secretive 17th floor, Bernie’s obsession with the color black and employee neatness, the roles of other family members, and visits to the founder’s Montauk home.
An employee of Bernard Madoff’s legitmate brokerage operations, which were described by the fraudster in his plea agreement as being “successful and profitable,” has told The Daily Beast that they were in fact money-losers that acted as a front for his Ponzi scheme.
He said that these businesses, the proprietary and market-making arms on the 18th and 19th floors of Madoff Securities, were designed to lure investors in, especially highly placed figures in society, and to fool the SEC into thinking that he had a large and impressive galaxy of businesses.
But behind the façade, these businesses were a shambles. They were excessively staffed with grossly overpaid people, and run with marked inefficiency, he said.
Program Note: Watch Randi Kaye’s full report tonight on AC360 at 10 p.m. ET.
[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/03/23/art.aig.media.mongrel.jpg caption="The pack of media at the home of AIG executive Douglas Poling as the group tries to deliver the letter."]
[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/03/23/art.aig.tour.media.mob.jpg caption="Outside of Poling's house."]
Randi Kaye | Bio
This was not your everyday guided bus tour. On board with me were a few dozen people who were either struggling financially or had lost their jobs or their homes. This tour took us through affluent areas of Connecticut so those less fortunate could see how some of the executives from AIG are living.
The tour was organized by the group, Connecticut Working Families, and dubbed the “Lifestyles of the Rich and Infamous” bus tour. It took us past two of the executives homes who had received big bonus checks from AIG even after the government had bailed out the company with about $170 billion in taxpayer dollars.
For the Wall Street Journal
The American economy and much of the world now face extraordinary challenges, and confronting these challenges will continue to require extraordinary actions.
No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk. Those decisions have caused enormous suffering, and much of the damage has fallen on ordinary Americans and small-business owners who were careful and responsible. This is fundamentally unfair, and Americans are justifiably angry and frustrated.
The depth of public anger and the gravity of this crisis require that every policy we take be held to the most serious test: whether it gets our financial system back to the business of providing credit to working families and viable businesses, and helps prevent future crises.
Julian E. Zelizer
Special to CNN
In the explosion of outrage over the AIG executive bonus scandal, each party has hurled charges at the other. Both parties are blaming each other for rejecting measures that would have limited executive bonuses.
A few Republicans have called for the resignation of Treasury Secretary Tim Geithner - with efforts to paint him as the Michael Brown of this administration - and President Obama is promising that this week he will outline more stringent requirements for the financial world.
These partisan accusations miss a bigger factor behind last's week's revelations - America's middle-way in dealing with business-government relations. In many ways, the bonus scandal was utterly predictable and would likely have happened regardless of which party was in power. And if history is a guide, the populist outrage over the bonuses may not fundamentally change the federal government's relationship to private business.
Special to CNN
The stories about the outrageous $160 million bonus payments at AIG have all omitted the most important names.
They are the members of AIG's Board of Directors Compensation Committee.
These people should have been on the hot seat before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, alongside CEO Ed Liddy. Although there is a lot of blame to go around, ultimately the buck stops - or, I should say, the bucks should have stopped - with them.
Ian Bremmer and Sean West
The Wall Street Journal
After quietly tolerating $170 billion in bailout money for AIG, why have the public, Congress and the administration suddenly blown up about a tiny fraction of that amount that is being paid out in retention payments and bonuses? After all, the AIG bailout channels U.S. taxpayer dollars to foreign banks and even potentially covers hedge-fund profits.
The reason is one of political expediency: The bonuses represent greed in the face of dire circumstances, which resonates with Joe the TARP-funder. The public now has an Enron-like target on which to unload its collective frustration about the financial meltdown. While public outrage is understandable, pandering to it jeopardizes the administration's credentials in a sloppy attempt to score populist points. This raises the political risk for all investors in the U.S. (both domestic and foreign) significantly.
The financial-sector rescue necessitates unpopular actions that will only be politically worth it if the administration actually solves the crisis. Until recently, the Obama administration had taken pragmatic if slow actions that it deemed necessary to fend off disaster, as opposed to pursuing an ideological agenda in how it implements the bailout.
Special to CNN
In getting the nation's economy back on its feet and pursuing an agenda aimed at keeping it there for the next 40 years, the White House has to do two things at once: implement effective policies and keep the public behind the president long enough to keep implementing them until they work.
As the president learned in the stimulus debate, even the best policies don't sell themselves, especially when the other side is aggressively attacking them. President Obama's inspiration, Abraham Lincoln, noted that without public opinion behind you, good governance is impossible.
In this sense, the AIG debacle, in which the government has handed nearly $200 billion of taxpayers' money to one of the corporate Leviathans whose misadventures have cost many taxpayers their jobs, homes and savings, is both instructive and destructive.
David Gewirtz | BIO
Editor-in-Chief, ZATZ Publishing
Yesterday's article, AIG needs to be taught who's boss resulted in a flurry of reader comments. One, by reader Val Beakley caught my eye.
He complains that AIG hasn't reimbursed his wife for her medical insurance expenses. Obviously, there's likely more to the story, but that got me thinking. How responsive has AIG been to its insurance customers? In return for all the bailout billions we've given them, have they actually been supporting their customers and honoring claims?
If you're an AIG customer, please post a comment and let us know. To be fair, if you've had a good experience with them, let us know that as well.
Editor’s note: David Gewirtz is Editor-in-Chief, ZATZ Magazines, including OutlookPower Magazine. He is a leading Presidential scholar specializing in White House email. He is a member of FBI InfraGard, the Cyberterrorism Advisor for the International Association for Counterterrorism & Security Professionals, a columnist for The Journal of Counterterrorism and Homeland Security, and has been a guest commentator for the Nieman Watchdog of the Nieman Foundation for Journalism at Harvard University. He is a faculty member at the University of California, Berkeley extension, a recipient of the Sigma Xi Research Award in Engineering and was a candidate for the 2008 Pulitzer Prize in Letters.
Joe Johns and Justine Redman
Officials in Connecticut reacted swiftly and angrily Tuesday to reports by CNN that American International Group is using a quirk in Connecticut law to defend giving $165 million in bonuses to top managers in its Financial Products division.
Unlike other sectors of AIG based elsewhere, AIG Financial Products is headquartered in Wilton, Connecticut.
CNN reported first Monday night on "AC 360" that AIG would be subject to "double damages" under Connecticut law in the event it is sued for not fulfilling its contract to pay $165 million dollars in retention bonuses to workers in its Financial Products division.