Remember Bernard L. Madoff. He should be as well-known to investors as is Warren Buffett, but for different reasons.
Buffett is known for investment success and philanthropy. Madoff should be remembered as the embodiment of deceitfulness.
Five years ago, on Dec. 11, 2008, Madoff was arrested for running what has been labeled as one of this country's largest Ponzi schemes. Madoff, who had been a prominent member of the securities industry and the chairman of Nasdaq, has been serving a 150-year prison term for bilking investors out of billions of dollars.
In looking back at how Madoff could con so many people, even other investment professionals, we can learn from the things the investors didn't do to protect themselves, says securities attorney Andrew Stoltmann, the principal at the Stoltmann Law Offices in Chicago. Stoltmann represents investors in suing brokers and brokerage firms. He sees the mistakes.
Stoltmann is concerned that many investors won't remember how Madoff's victims were scammed. He's worried that the surging stock market may cause some people to let down their guard.
So what lessons should we learn from Madoff? The biggest one is to ask lots of questions.
-- (BEG ITAL)Where's my money being kept?(END ITAL) Make sure your assets are held with an independent custodian such as large investment firm or insured bank, Stoltmann recommends. Madoff was able to hide his scam for so long because investor funds were only accounted for by his firm. He created the client statements.
-- (BEG ITAL)How is my money being invested?(END ITAL) You need to understand how your investments will generate a return. After Madoff was caught, many of the stories from victims indicated they didn't really know how their money was invested. They couldn't explain how he supposedly achieved consistent returns. When people did ask him, Madoff wouldn't tell them or explain his strategy. If that happens to you, walk away. Fast.