In the end, Bernard Madoff was sentenced to 150 years in prison.
Two years after his arrest, his eldest son hanged himself. A few years later, the younger son died of lymphoma, blaming the relapse on the stress of living with the consequences of his father’s crimes. After Madoff’s incarceration, his wife Ruth continued to visit him in prison. After the suicide of their son, she stopped visiting.
All of Madoff’s five grandchildren have since changed their last name. In one interview, his daughter-in-law said, “I hate Bernie Madoff… I’d spit in his face.”
And most of us had found pleasure watching these misfortunes befell the Madoffs.
Schadenfreude is a German word derived from schaden (damage, harm) and freude (joy). It is the pleasure one experiences in knowing about the misfortune of others. In 2000, Ben-Ze’ev and Portmann argued that this emotion was permissible and not immoral. The pleasure is not derived from the suffering of others. Rather, it stems from the assumption that the other person deserves his misfortune, that justice is being served.
By the time of his arrest in 2008, Madoff reportedly had run his Ponzi scheme for decades. However, as early as 1999, the United Stated Securities and Exchanges Commission (SEC) had been informed of the impossibility of the gains that Madoff claimed to deliver. This was ignored. Even when further pieces of evidences were presented subsequently in 2000, 2001, 2005 and 2007, such information went unheeded.
In “Ponzi Supernova,” journalist Steve Fishman made public his hours of previously unheard interviews with Madoff. According to him, Madoff “profited from the way financial systems work, which is a point most people don’t really grasp. He wasn’t a freak. He was sustained by the system, embraced by it, because it profited from him.”
Despite Madoff’s refusal to give any details about his operations, banks and investors were calm and nonchalant. These institutions were either guilty of incompetence, or they were “wilfully blind” because of the profits.
Appointed as trustee of assets seized by the court from Madoff, Irving Picard claimed that financial institutions were aware of the red flags. Yet they chose to do nothing. He sought to recover $19 billion from JP Morgan alone, whom he alleged was at the center of Madoff’s schemes and had earned nearly half-a-billion dollars in fees.
Madoff’s largest clients were banks and asset management firms. Hundreds and thousands of investors were not even aware that their money had been invested by these firms with Madoff.
Three conditions commonly predict schadenfreude. One, when the misfortune seems deserved. Two, when the misfortune benefits the observers. And three, when the misfortune befalls an envied target.
According to Nietzsche, schadenfreude has its origins in envy. The “harm that befalls another man makes him our equal; it appeases our envy.”
Madoff had “a mansion in the Hamptons, a villa on the French Riviera, and yachts moored in various places.” He is often dressed in bespoke suits from Saville Row and has a fondness for expensive watches. His fund had an appeal of exclusivity. Joining his fund required special introduction. In The Wizard of Lies, a bio-documentary on Madoff, an investor was shown greedily begging to be accepted as a client.
Madoff never got caught, well, almost; his scheme unraveled only when the 2008 financial crisis triggered a mass pullout of his clients’ investments. There was no specific face to blame for the market collapse. A villain was needed. His admission came at the most needed and convenient time.
Everybody couldn’t be happier.
Real Carpio So lectures on strategy and human resource management at the Management and Organization Department of the Ramon V. del Rosario College of Business of De La Salle University. He is also an entrepreneur and a management consultant. He welcomes comments at firstname.lastname@example.org. Archives can be accessed at realwalksonwater.wordpress.com. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty and its administrators.