Sean O'Grady: When it seems too good to be true...

How did Madoff's victims ever allow themselves to be taken in?

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"I would like him to be in a solitary cell with a screen and on that screen for at least five years of his life, every day and every night, there should be pictures of his victims, one after the other after the other, always saying, 'Look, look what you have done to this poor lady, look what you have done to this child, look what you have done."

Could there be a more fitting punishment for the crimes of Bernie Madoff? The suggestion came, this week, from Elie Wiesel, Holocaust survivor and Nobel Peace laureate, who lost $15.2m (£11m) in charitable funds and his life savings to Madoff's scam – a giant Ponzi scheme. Named after Charles Ponzi, a particularly successful practitioner of this now famous and quite venerable swindle, it seems an apt way of extracting justice because, in a Ponzi scheme, a never-ending stream of "investors" is required for the fraud to work. The subscriptions of the newest members of the scheme pay for the fantastical reruns offered, and often paid, to earlier recruits.

That's how the original Mr Ponzi made his vast fortune in about 1920, before he was caught. In fact, rather than being subjected to incessant stream of hard luck tales from his victims – say by means of gramophone recordings or silent movies – Ponzi was merely incarcerated in conventional circumstances in US jails for 14 years.

Ponzi was deported back to his native Italy after serving his sentence where, remarkably, he was given a job by Benito Mussolini running Italy's new national airline. After that he ran an airline in Brazil, where he died in 1949.Bernie Madoff seems set for a longer sentence and is unlikely to make an eventual transition into the travel business. His prosecutors are looking to put this 70 year old man away for 150 years and seem disinclined to exercise any leniency. Thus he will get about three years for every $1bn stolen. As Lev Dassin, the federal prosecutor, explained, it is "mandatory restitution to the victims of his crimes, forfeiture of his ill-gotten gains and criminal fines."

Quite right. And there is an interesting twist here, one that suggests Mr Wiesel's wish may come true, at least in part. Madoff is reported to be planning to plead guilty, thus avoiding a long, drawn-out trial. However, in those circumstances, each of his unfortunate clients willneed to make Madoff squirm,appealing to the courtabout the damage Madoff has done to them. The ones that are still alive, that is. René-Thierry Magon de la Villehuchet, who lost $1.4bn, killed himself in December, so won't have his day in court.

But you have to wonder how it was that Madoff's victims, including Mr Wiesel and his fine charity, ever found themselves in the position that they did. What went through their minds when this admittedly reputable financier ushered them into his salon in the "Lipstick Building" in Manhattan.

The oldest maxim in investment should have suggested itself – if it seems to good to be true, then it probably is. Then again, let's face it, you would - wouldn't you?

That's how people such as Ponzi and Madoff are able to get away with it. I don't think we have heard the last of the Ponzi scheme.

s.ogrady@independent.co.uk

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