Bernie Madoff and the Unfortunate Consequences of Celebrity Bias
Celebrity is intoxicating. We have long been willing to play the fool to the rich and powerful, even if that means turning a blind eye to signs of trickery. In the late 1980s, a 37-year-old con artist convinced Duke University administrators and students that he hailed from the wealthy Rothschild family of France despite the fact that he spoke no French, drove a run-down car, and offered clipped out magazine articles to show his family’s homes. During a two-year charade, the imposter borrowed (stole) thousands of dollars from Duke and joined a fraternity. (I was an Duke undergraduate at the time, but alas did not know him). More recently, Christopher Chichester tricked many into believing that he was a Rockefeller despite his gauche manners and outrageous claims (e.g, that he owned “the key to Rockefeller Center”). As Clark Rockefeller, he gained admission to exclusive clubs and married a partner at McKinsey Consulting. Only after Mr. Chichester kidnapped his daughter from his ex-wife did the police discover his true identity and connection to unsolved murders.
Perhaps such celebrity bias had some role in the SEC’s bungling of the Bernie Madoff fiasco. On Thursday, the S.E.C.’s Inspector General’s Report explored why the agency missed so many “red flags” about Madoff since 1992. The report discussed missed leads, bureaucratic snafus, and investigators’ inexperience. Investigators were far too believing because they were simply awed by him. One investigator described Madoff as “a wonderful storyteller” and a “captivating speaker.” As with the faux Rockefeller and Rothschild incidents, Madoff’s ruse worked for so long despite the clues of foul play perhaps because investigators and investors could not shake their sense of Madoff as a rich, powerful, and trusted financial guru. Madoff’s celebrity reputation anchored their thinking, permitting Madoff to get away with his scheme for far longer than it should have. As Madoff’s victims’ stories attest, celebrity bias had profoundly destructive consequences.
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