I have more sympathy for Bernie Madoff than most people. I see what happened.
Bernie was managing money for several nonprofits that he fervently supported and believed in. In a few years in the early 1990’s when he earned a good return for these angel organizations, they were very grateful and probably showered Bernie with appreciation and praise.
Over time two things happened. These organizations sent their friends, other organizations and their families to enjoy the largess of Bernie’s brilliant investing genius.
Bernie was faced with a growing number of adoring clients.
Second. He did what many people in that situation would do. He started paying out high yields on a regular basis. It was apparently 10% every year, come hell or high water.
That just brought him more and more adoring clients.
It wasn’t hard to keep paying the 10%. He was using the money coming in to make payments to all his old clients. Who kept sending him more people.
Bernie was the victim of a ‘Ponzi temptation’ (a term I made up). Dishonesty came into play when he made up fictional explanations of the reasons for his success and fictional investments that created such an anomalous high yield.
What made me think of this? A friend of mine had expected a high tax bill for last year. When he got his tax return back from his accountant, the amount my friend owed was trivial, State and Federal. When my friend went through the return, which was about 40 pages of computer generated sheets of numbers, he was baffled. He sent in his trivial taxes and went about his business.
I started wondering if my friend’s accountant hadn’t pulled a Bernie Madoff. Maybe the accountant, knowing how impossibly complex the tax laws are and knowing how few tax auditors are capable of understanding the laws, just set his tax calculating computer to yield low tax bills for his friends.
Considering the complexity of the income taxes, state and federal, it probably wouldn’t be hard to help your friends on their taxes a little here and there.
Does that make sense?