The  Madoff mystery gets bigger and bigger. The intrigue now includes the possibility that for all the money invested with Madoff--$50 billion by his own estimate--he may not have traded it any of it. Beth Healey has focused on this new aspect in the great Ponzi scheme in an intriguing article in Thursday's Boston Globe

She writes, "A federal agency that regulates brokerage firms says there is no record of Madoff's investment funds placing trades through his brokerage operation. That leaves only two options--either he was placing trades only through other firms, which would be highly unusual, or he was not placing any trades."

The alternatives are not pretty, and they are especially not pretty for the accounting firms that audited his reports to clients and sub-clients, feeder funds, and others who were lucky enough to do business with Madoff and the racketeers who pimped for him. 

I happen to have been a fiduciary of a (relatively) small trust that had put some money through, not a feeder fund, but as a partner with someone else's investment in Madoff. When I came on board as a trustee, the trust had already been a beneficiary of Madoff's genius for several years: more than decent steady repatriated earnings on investments and a prompt return of part of capital when requested. This is how Madoff lulled his investors into a restful sleep. The trust I serve lost a couple of million dollars, a sizeable percentage of its assets.

Another intriguing aspect of the Madoff affair, according to Healey, is that one of Bernie's Boston-area clients reported that its November 2008 statement was "six pages long and shows a dizzying list of trades," including buy and sell orders for shares in Fidelity Spartan US Treasury Money Market. Fidelity says Madoff is not one of its clients. Moreover, the fund had changed its name in 2005. Oops.

In my Christmas eve posting on Madoff, I told of seeing an April 2008 statement for a U.S.-based Israeli cultural charity that had some $13 million in his fund. But he had done $82 million worth of trading in that month. Whoa, there!

Now, Healy details more prima facie chicanery. The charitable foundations of two Boston families I know, unusually generous people, by the way, had similar monkey business done to them.

The Carl & Ruth Shapiro Family Foundation had 2007 tax filings showing $452 million of trading and $324 million in assets. The 2006 returns of the Sidney R. Rabb Charitable Trust reveal $102 million of trading with $20 million of assets.

So how did such brazen chicanery pass muster? From many postings on The Spine, you know what I thought of MBIA and Ambac, both of which engaged in relentless insurance fraud and which the entire financial press tried to ignore until it was no longer possible. The market had itself rendered the most severe of judgments. Likewise, the rating agencies (Moody's, Standard and Poor's, Fitch) on which I also fixated. Doubtless, the feds will in due course, but the sooner the better, take an intimate look at these high class culprits.

Which brings us to the auditing firms. Madoff apparently feared the big ones. So he employed a tiny mom-and-pop shop in far away Far Rockaway, as I recall, to monitor his deceitful affairs. Madoff  needn't have worried about the huge and highly certified accountants. They take up much time, charge a lot but do not find anything. So it was with Enron, whose CPA, Arthur Andersen, no longer exists. And so it is today: Madoff's criminality, including reporting zillions of dollars in trades he never made, slipped past every single big auditor in the business, bar none. This is a chore for Barney Frank, Chris Dodd, and the executive branch.   When will justice be done?