Jim (cont'd):     

From the beginning of 2000 to October of 2008, almost 9 years of data… If you would have actually followed the strategy Madoff said he was using.. You would have been down about 2.66%.. That is right, down 2.66%… Of course, from the clients statements, Bernie claimed to be up 80% over that period. At best, if you follow the Madoff strategy from the beginning of 2000, you would have been up 23% in November of 2007... I loped of the bad year… That’s 23% total, over 8 years. Not compounded. Over and over again, we have heard that this is really great strategy if Bernie had actually used it. Now we know that it is BS of the first order… It is better than investing in Zimbabwe, maybe… But not the first national bank of Seeley.. Now I have a new Stearns & Foster mattress, that set me back about $2000... And if I had bought the Duxianas from Fuji’s, I would have done better that if I followed Madoff’s strategy. His clients should be banking at 1-800-MATTRESS, and leave the “s” off for savings… In fact they would have done better banking with Castro… of the convertible nature of course… Now wonder the guy was allegedly running a Ponzi scheme… Hey I got this, this is another way to invest better than Madoff.. Look at this, do the rich get richer. Of course, it also said “This ticket for entertainment purposes only. Thanks for being a good sport”...

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Long term, anybody who actually tried to duplicate what Bernie was doing…. Something that I think the SEC should have been given…. They would have known what I found out. They would have known the guys results were fabricated. All the SEC had to do was to look up the performance of the options Bernie said he was trading, and see what returns they could have generated to figure this out. So the next time someone from the SEC or one of these Feeder funds… that invested in Madoff, claim that they had no way of knowing… that they were defrauded too… that is me raising an eyebrow, that is what they tell you to do when you go to TV class, they say don’t say someone is lying, say it raises eyebrows…

You know that is completely bogus. All they had to do was look at the strategy, because the strategy stunk… two raised eyebrows… Seriously, they just had to get the numbers from Bloomberg, and then use the Microsoft excel mate… Maybe they were excel challenged… But in all of there investigations, the SEC never did anything like that. The examinations always took the form of trying to see if Madoff was running the head of the orders from the brokerage arm of his business… something that would have given the investment arm an edge, but zapped the brokerage side of profits. They were worried that he was ripping off his brokerage customers… when in fact, the guy was robbing his investment clients. I used to trade with him all the time when I was at the hedge fund… they were fine.

It should have been enough that SEC’s Boston office got letters complaining about a potential Ponzi scheme. But even that didn’t get them to actually examine the strategy Madoff was claiming to use, as we did. According to the journal the SEC did compare 4 whole days with the customers statements with the strategy Madoff described… and it all checked out. Why didn’t they compare it with the performance of the actual options that the guy traded… I have no idea. We looked at close to 9 years worth of data. The SEC looked at 4 days worth, and even then not even…. How about this? … Anecdotal evidence… When I set up my little dinky hedge fund in 1982 out of my law school dorm, and registered as an investment advisor with the SEC, they called me in.. Jack boots to the Boston SEC office almost immediately. And they grilled me.. I kept waiting for the rubber trench or hose, whatever they call it… about how I intended to make money. And what kind of record keeping I had… Mister Cramer we will get you to talk. Looks like what they did was they cracked down on the Cramers of the world… the USS Minnow… but gave the Titanic a free pass… they tried to bring down the professor, perhaps with Mary Ann… but they looked askance at the millionaire and his wife.

Now if the SEC was bad, some of the Feeder funds that invested with Madoff look even worse. Now I have never liked these kind of fund guys, with the exception of Poshner Alexander, because they always inquired thoughtfully about what I was doing… that was the only good kind of fund to fund in. The other guys, they seem like parasites, like cockroaches… These funds invested their clients money with Madoff, they had all the time in the world to figure out what he was doing, just like we did. They didn’t even try. One of the funds, Tremont, actually included this clause in the documents they sent to their clients. I want you to write this one down cause it is just too outrageous. “In addition information supplied by the investment advisor may be inaccurate or even fraudulent. The co-managers are entitled to rely on such information, provided they do so in good faith. And are not required to undertake any due diligence to confirm the accuracy thereof.” .. Not required to undertake any due diligence… They are basically saying that we got no responsibility, we don’t have to do a darn thing… we got no responsibility at all. It’s not our job. You have to wonder if they knew Madoff was full of it, given that they threw that clause in… And to think that they were paid fortunes for this, I find it hilarious… they ought to be drummed out of the business… Well, can you call it they are doing a business..

Here’s the bottom line...

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The Bottom Line!:     The SEC, the Feeder funds that gave Madoff the money. They have no excuses. They could have adopted a "Duxiana" (hide all your money away in a mattress) strategy… They knew his alleged strategy, they could have just tired to replicate it like we did…. And known he was a fraudster. Instead, the SEC the repeatedly failed to notice one of the allegedly biggest Ponzi schemes in history, and the theatre funds who gave him money washed their hands of any and all responsibility… bravo guys…. Truly outrageous.

No excuses...  If I can do the math, then the SEC can, Madoff should have been charged long ago.