February 17, 2011
Posted by Joan V. Gallos
In his first prison interview, Bernie Madoff dropped a bomb. He was sure a number of banks and hedge funds were “complicit” in his fraud – “willfully blind” to the discrepancies in the information available to them and living a version of I’m not going to ask and please don’t tell. Madoff’s admission to the author of an upcoming book on his 16 year long Ponzi scheme – the fancy shell game that cost investors $20 billion in cash and another $65 billion in lost paper wealth – is different from his earlier claims that no one knew of his illegal shenanigans.
It’s easy to look at the “complicit” and wag a judgmental finger. We’d all like to believe that, if we had been in the shoes of the “willfully blind,” we’d have blown the whistle. The $64,000 question is, what would we have done? What would you have done?
How many times have you had real questions about someone or some situation and let it ride? Decided not to get involved? Worried about being wrong? Passed the buck – figured that someone else would notice the problem if it really exists and take corrective action?
It’s easy to conclude that the complicit bankers and hedge fund executives just wanted money. But stop there, and you’ll miss an important leadership lesson.
Those bankers and financial managers feared loss – loss to their clients, companies, loved ones, and selves.
Loss of the ability to provide good returns to their clients which could lead to loss of those clients. Loss of their seats at the bountiful Madoff table that others in their business would gladly take and use to bring good returns to clients – maybe the very clients they had just lost.
Loss of clients could mean loss of a job, reputation, career trajectory. A job loss brings income loss and inability to sustain a current lifestyle. That might mean loss of a home, community, good schools for the kids, maybe even loss of a marriage under the strain. And the list goes on.
And as their fears mounted, those bankers and hedge fund managers faced the ultimate loss: their ability to make sound executive judgments and to see life beyond the fear of loss.
How are you going to prepare yourself for the next time you need to stand up for what’s right? Will you be ready?
 Diana Henriques (2011). The Wizard of Lies: Bernie Madoff and the Death of Trust. New York: Times Books.