Case Study
Bernie Madoff’s Ponzi Scheme: Reliable Returns from a Trustworthy Financial Adviser
By Denis Collins Denis Collins is a professor of management in the School of
Business at Edgewood College in Madison, Wisconsin. His research interests include business ethics, management, and organizational change. Contact: dcollins@ edgewood.edu
A [person] is incapable of comprehending any argument that interferes with his revenue. Rene Descartes

Overview
This case study is a chronology of the largest Ponzi scheme in history. Bernie Madoff began his brokerage firm in 1960 and grew it into one of the largest on Wall Street. While doing so, he began investing money as a favor to family and friends, though he was not licensed to do so. Over a period of fifty years, these side investments became an investment fund that mushroomed into a $50 billion Ponzi scheme. Bernie1 pled guilty without a trial on March 12, 2009, and was sentenced to 150 years in prison. Thousands of wealthy clients, philanthropic organizations, and middle-class people whose pension funds found their way into Bernie’s investment fund lost their life savings.

What to Do?
Bernie Madoff, at age 69, owned three very successful financial companies—a brokerage firm, a proprietary trading firm, and an investment advisory firm. On December 10, 2008, the brokerage and proprietary trading firms, managed by his brother and two sons, were performing as well as could be expected in the middle of a deep recession. His investment advisory firm, however, was on the verge of collapse. Investors in Bernie’s investment fund had requested $7 billion in withdrawals, and he did not have the cash to pay them. Known only to Bernie and a close circle of loyal employees, the investment fund was a $50 billion Ponzi scheme in operation for at least twenty years. Bernie met with his sons—Mark, age 44, and Andrew, age 42—in his