Risk Management, PRMIA

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January 07, 2009

On Madoff and Dangerfield

In mid-December, I was in DC talking with a pal who, like me, specializes in the conduct of due diligence on behalf of potential investors. We swapped stories about Drier and Madoff. The careful ones who did a bit of due diligence, chose to pass and survived.

I recall a conversation back to a year previous, when I watched a bit of tennis in Queens with a CRO of a major pension fund. Things were unraveling in autumn 2007 and the CRO was reviewing risk management strategies of top tier managers in which the fund had invested. High profile names. Yet there had been no previous due diligence in the many years the hard sweat and labor of a respected and humble working class had been injected into these purportedly luminous funds. The reason why? We are lucky they are taking our money to earn us these returns. We do not want to upset anybody by asking tough questions.

Another note from the front. Also in December in NYC I was speaking with a group of CROs and amidst a crescendo of cries that CROs get no respect one CRO at the table stated he knew many of the complex structured financial instruments his institution was working with into 2008 were deadly toxic but what was he going to do, quit as a matter of principal?

All of this would be so very Caddyshack if you did not have to read the cries for help from Madoff investors and their families that Bloomberg was posting the day after his arrest.

Thank heavens Itzhak Stern, accountant with Oskar Schindler, was not doing Rodney Dangerfield impersonations.

Those are my principles, and if you dont like them... well, I have others. - Groucho Marx

The only thing necessary for the triumph of evil is for good men to do nothing. - Edmund Burke

Posted by jtunkey at January 7, 2009 02:48 PM

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