Madoff: An Insider's View. {Excerpt} Part I

From the Daily Beast. by Lucinda Franks. Part I

.... An employee of Bernard Madoff’s legitmate brokerage operations, which were described by the fraudster in his plea agreement as being “successful and profitable,” has told The Daily Beast that they were in fact money-losers that acted as a front for his Ponzi scheme.
He said that these businesses, the proprietary and market-making arms on the 18th and 19th floors of Madoff Securities, were designed to lure investors in, especially highly placed figures in society, and to fool the SEC into thinking that he had a large and impressive galaxy of businesses.
But behind the façade, these businesses were a shambles. They were excessively staffed with grossly overpaid people, and run with marked inefficiency, he said.....
....The employee....was a member of an elite group that designed sophisticated computer-trading programs....His description of how the legitimate arms of Madoff Securities were run sounds like a skit out of Monty Python. “The three managers who ran parts of the businesses were getting $500,000 to $750,000 a year and they didn’t even know anything about modern computerized trading,” the employee said. They knew only the antiquated methods of talking to clients and trading in the stock market by phone. They mostly socialized, read the news. They would have been unemployable on the outside.”....“A senior computer programmer would make $350,000, where in most comparable firms they would be getting $200,000 to $250,000. The customer-relations people, who just handled complaints from clients, were making six figures. There wasn’t anyone who wasn’t paid in the hundreds of thousands,” he said, adding: “There were twice as many people as were needed and there was rampant inefficiency.
"The company could have been profitable but the Madoffs didn’t seem to care. The business model made no sense,” said the employee. "In actuality the trading groups were generating profits and the company had enormous potential."....Sources in the Madoff investigation confirm the losses that the employee described to me....
....ANDREW AND MARK MADOFF’S ROLE: In contrast to most Wall Street trading firms, where traders work hard and the atmosphere is intense, tumultuous, and fast-paced, Andrew and Mark Madoff, Bernie’s sons, ran the operation “like a peaceful valley,” he said...."The sons were not around a lot,...but when they were, they were nice guys, good to their staff.”
....The day after Bernie was arrested, Andrew and Mark came to work, surprising everyone. Staffers who had lost money complained to him and Mark said, according to a friend of the employee: "I’ve been advised by my lawyer not to make any statements." Then he added "You're not the only victim here." (Noteworthy, as it suggests the brothers must have gotten a lawyer right away.)
Regulations require a company to preserve all emails and firms normally archive them in the hard drives of their computers. But Madoff, the employee said, had ordered that all emails be printed out and then deleted.

Link: http://www.thedailybeast.com/blogs-and-stories/2009-03-19/madoff-employee-breaks-silence/full/