Id never heard of Bernie Madoff before his arrest by FBI agents, after he revealed to his sons that, for decades, hed been running a giant Ponzi scheme, paying investors profits out of the money given him by subsequent investors rather than from any actual capital gain or income. Madoff, reportedly modest both in demeanor and lifestyle, received and lost $50 billion given him by amateurs, professionals and investment funds not one of whom asked how he managed 12 and 13 percent returns year after year with nary a down quarter.If his sons, both of whom work for their father, hadnt turned him in, Madoff might be reporting a 12 or 13 percent return for 2008. The government regulatory folks wouldnt have caught him, nor would have his peers in the investment community, who were recommending Madoff to their clients. How can we know if there are other Madoffs? For every Madoff defrauding many for much, how many mini-Madoffs, how many Scoop Daniels are in the investment community? Ten? Twenty? One hundred? Tens of thousands wouldnt surprise me, taking money from clients, money from friends, never caught, or never doing time. Obviously, the financial community cant or wont police itself. Madoff needed help to create a fictional paper trail leading to 12 and 13 percent returns, and he needed cooperation in selling the fiction as fact. Separately, while no one at AIG, Washington Mutual, Lehman Brothers or any of the hundreds of other companies who collectively have driven the economy into recession has been accused of fraud, none of them felt the slightest fiduciary responsibility to their clients, customers, shareholders or government regulators. A stronger grip by Uncle Sam is a popular solution, even though increasing either regulation or funding to hire more regulators would be fruitless; after all, Madoff had his best years after the Feds did both in the wake of the collapse of Worldcom, Global Crossing and the rest in the 1990s.But there is another option. We rationalize capital punishment by claiming that the fear of death is an excellent deterrent and a fitting punishment for cases of extreme harm to an individual (murder) or a community (sex offenders). Rarely has the fear of the death penalty deterred a single crime of passion or the flawed anti-social criminal. To be a deterrent, potential criminals need time to weigh the crime against the penalty and some level of native intelligence to understand that death by lethal injection or the electric chair is very likely if they commit the crime. Ethical and religious considerations aside, perhaps the death penalty should not be reserved only for violent physical crime but as punishment for extreme economic harm, to white-collar crime such as embezzlement, fraud, or the conspiracies of silence that made so many accessories to Madoffs Ponzi scheme, and the corporate collapses that have cost us nearly a trillion dollars so far. I tend to think that Madoff would never have stolen so much money from so many people if the penalty was death. At present, Madoff is under house arrest in his Manhattan apartment having posted a $10 million bond, and he maintains control of his remaining assets and the relative pennies left from $50 billion. The judge handling his arraignment seems to believe that Madoff should be held without bail like a physically violent criminal, since Madoff is a threat to the community for the economic harm he has done and can still do. The judge might agree that lives can be destroyed as completely by economic ruin as by loss of life, but where government and peer review have failed and will fail, an electric chair, installed at Wall and Church Streets, may succeed.Marc Carlisle writes a Thursday column. He can be reached at email@example.com.
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