New settlement comes out of Madoff Ponzi scandal

Stationary from Bernard L. Madoff's estate are seen on display before they are auctioned off on Saturday at the Miami Beach Convention Center on June 2, 2011 in Miami Beach, Fla.

Jeremy Hobson: There's a new settlement related to the Bernie Madoff Ponzi scheme. But this one doesn't involve people who invested with Madoff directly. It's about a money manager named Ezra Merkin, who has agreed to pay more than $400 million dollars to his former customers who lost billions when he invested their money with Madoff.

Marketplace's John Dimsdale reports.

John Dimsdale: Merkin claimed he was an investing guru who was actively managing his clients money.  But New York's Attorney General accused Merkin of simply putting two and a half billion dollars of their money into Madoff's Ponzi scheme.  Many investors including charities, nonprofits and universities, didn't know Merkin was sending their money to Madoff.

Finance lawyer Bill Singer says they should have asked more questions.

Bill Singer: The average American will spend days if not weeks looking into buying a used car and test driving that car.  But they will without a second thought write out a check to someone they know nothing about to put in an investment that they haven't confirmed and then whine and complain and cry when they find out they've been defrauded.

With this settlement, Merkin's customers will receive an average 40 percent of the money they lost.  Other suits involving money lost to Madoff are pending.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.
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I am a 30 year Wall Street veteran who has been a regulator, in-house lawyer, and frequently counsel to public customers and whistleblowers, as well as industry participants. As such, I have a pretty decent idea about what I speak and write about.
Without question, Americans are naive investors who believe the crap that they see on television commercials about brokers showing up at their weddings, who allow themselves to be lead around like sheep into one bogus investment after another, and who routinely fail to maintain high levels of skepticism before blindly investing. Americans spend more time investigating a used car than an investment into which they will pour their life savings and that is shameful.

If you had bothered to read my published body of work, you would have seen that in addition to being a long-time, prominent advocate for meaningful Wall Street reform that I also have incredibly high levels of disdain for both Republicans and Democrats who have failed to implement effective Wall Street reform and are little more than lap dogs for Wall Street.

All that being said, you are misguided if you think that what you call a "crescendo of complaints" will alter anything -- as if all the bang drumming of OWS resulted in a single meaningful change? I will not delude the American investor by pretending that Congress delivers reform or that Wall Street should be trusted. In the end, far too many investors failed to engage in any due diligence (not some or a bit BUT any), and it infuriates me to see life savings stolen by con artists who should never have been trusted in the first place.

What I read in your comments, and I say this with the most respect for your opinions, is little more than equivocation and dangerous delusion. Our political system has failed us and investors must be self reliant. If you don't understand the investment, don't make it. If you can't confirm the pedigree of your stockbroker or adviser, don't risk your money. Any mind-set short of that is economic suicide.

Bill Singer

Mr Singer says that we Americans invest money naively and then whine when we are defrauded. Yes, we tend to invest in financial instruments without really knowing much about them. However, the constant message from Wall Street, and secondarily from Republicans, is trust the market, the market knows best, don't regulate the market, the consumer doesn't need protections. Most financial instruments are described in such legal, technical language that anyone without a financial degree would have difficulty deciphering it. And, when it comes to being critical of those who invested in Madoff's company, granted returns were too high to be realistic, but even federal regulators were not adequately able to figure what he was doing until one of his sons told people something was wrong. How is an average investor possibly supposed to have the ability to be well informed about that? If whining is what he's complaining about it ought to become so loud that it builds into a crescendo of complaints until Congress does something to offer better protections for the American people.

Very well said Lander. I totally agree with everything you so eloquently said.

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