First of all, let’s start with the obvious. He violated the law and stole lots of money from innocent people. That’s bad. No doubt there are a lot of good hard working folks who have already suffered a lot and will continue to suffer. And he stole from charities and schools. That’s pretty low. And the quantity of money stolen is staggering.
But, how much money did he really steal? I heard today that he only took in 22 billion dollars and pretended it was worth 50 billion. So if that’s true, he’s only 22 billion awful, not 50 billion awful.
And, he paid out a lot of money to his earlier investors. Now that’s also pretty bad, robbing from Peter to pay Paul, but maybe not as bad as just keeping the stolen money. So how much of the investors’ money went to the other investors? And how much did he keep for himself?
And shouldn’t the early investors who collected their earnings have to give it back? It sounds like stolen property to me. I wouldn’t want to add additional penalties to anyone who innocently cashed out, but I think they should have to pay it back.
Also, what about the people who paid taxes on the money they thought they earned? Should they get a refund? I think so, but I have a feeling they won’t.
You ask questions for which I don’t have the answers.
What was Madoff’s cut? If he took only 1% of $22 billion for expenses, that’s still (if I still remember how to move decimal places) $220 million. That may not be $50 billion awful, but it’s awful enough for one person.
And did any investor get 100% of its money back, much less make a profit? If no one did, then they all lost – some more than others, perhaps, but they all lost. (And don’t forget that an early investor may have also been a later investor, basically giving Madoff money to pay back the earlier money they had given Madoff, minus Madoff’s management fee.)
This should answer a few of your question. I can’t seem to find the article about the Madoff fraud and taxes right now. The short answer is the people may be able to get refunds since they were paying taxes on phantom earnings. The IRS hasn’t made a official statement about this yet.
It will take a long time to sort out the bookkeeping and work through all the lawsuits and such so I don’t think investors will be seeing any money for a while. My heart goes out to all the retirees who lost their entire life savings and all the charities which had to close down.
Already discussed in an earlier thread on the subject – the distributions in a fraudulently-managed investment do not have the legal standing of “stolen property”. As for the taxes, the investors now can seek to write off their losses, within the parameters of the tax law.