Securities and Exchange Commission inspectors have been working overtime to go through the records of Bernard Madoff and his investment firm. Bloomberg News reports that investigators "found evidence he ran an unregistered money-management business alongside his firm’s brokerage and investment-advisory subsidiaries." Also, "Investigators are still trying to figure out where customers’ money went," as Madoff's estimate of $50 billion in losses may be "roughly accurate."I hear all the time from recent law graduates who have $100,000 or $150,000 or $200,000 in educational debt, and who are either working in jobs, legal and non-legal, that barely pay their modest living expenses, or who don't have jobs at all. Many if not most of these people are never going to find work that allows them to pay more than a nominal amount on what they owe on their loans.
Madoff, the 70-year-old former chairman of Nasdaq, confessed to employees—including his sons—that his well-performing investment firm was actually a Ponzi scheme, as the returns to earlier investors were taken from money of new investors. Madoff allegedly oversaw the entire operation from the 17th floor of the Lipstick Building on Third Avenue (pictured), two floors from his company's trading floor. The NY Times calls the floor" Where Wealth Went to Vanish," and notes another big question is "how one person could have pulled off such a far-reaching, long-running fraud, carrying out all the simple practical chores the scheme required, like producing monthly statements, annual tax statements, trade confirmations and bank transfers."
The head of Seabreeze Partners, a Palm Beach and NY hedge fund, told the BBC, "It appears that at least $15bn of wealth, much of which was concentrated in southern Florida and New York City, has gone to money heaven." In Palm Beach, where many of Madoff's clients were recruited, one woman explained to the Times how to pronounce the scamming investor's name: "Made off. You know, like he made off with all our money.”
I got together recently with one of my oldest friends in this business, a guy I worked with at Latham more than 20 years ago. He was in the original associate class that got Lathamed in the early 90s, and he was amused to learn from me that Latham had become a verb. Since then he has worked almost continuously as a lawyer, and currently holds a government job that most people in the legal world right now would probably consider in about the 95th percentile of desirability in terms of legal work (decent salary, reasonable lifestyle, good job security).
He graduated at the top of his class from a pretty good private law school in the late 80s with about $55K in debt. I asked him if he still owed anything on his law school loans, and he laughed and told me that the balance on them was almost exactly the same today as it was the day he graduated. He's worked as a lawyer for 20+ years, he's in his late 50s, and he can't possibly retire any time in the foreseeable future. He's never been in default on a loan and is currently trying to move his balance into the federal government's ten-year loan forgiveness program for government and public interest work.
Over the next few years, a lot of politicians are going to slowly come to the realization that when Cameron and Abigail "borrow" $150,000 of taxpayer money and give it to an institution of higher learning, that money is going to money heaven. Sure, it's technically a "loan," but it's the special kind of loan that we know in advance is not going to get paid back, because to pay back a loan of that size you need a high-paying job, and they're never going to have that kind of job. It would be far more efficient for the government to simply give money to these institutions themselves (a good deal less money of course, subject to all sorts of appropriate restrictions on what the institutions can spend it on) than to "give" it to Cameron and Abigail first, so they can spend the rest of their lives in debt servitude. But that would be socialism and make the ghosts of Ronald Reagan and J.P. Morgan and John Calvin very sad so we can't do that.
Right now Sen. Dick Durbin of Illinois is trying to do something about this. He isn't hearing from many law grads, and given his general remarks on the topic, he like almost everyone else of his generation needs to be brought up to speed on what's been happening to legal education and the legal profession in the years since he went to law school and began his own career.
People can go here to tell him their stories. Please do.