I had lunch on Saturday with a couple, two longtime friends from the east coast. We hadn't gotten together in over five years but at one point in our lives, we had been very close. It's the kind of friendship where even after five years, no subject is taboo. So after catching up, we started talking finances. She works in fashion; he's a research physician. Both of them were caught up in the Bernie Madoff scandal, and both of them were furious at the havoc wrecked upon their finances by Madoff.
The last time we got together, five years ago, we had laughed hysterically at the small town city council in my state who had actually used city funds to participate in what turned out to be a Nigerian scam. We marveled at idiots who were foolish enough to put their faith in an e-mail that promised them millions.
But my friends weren't laughing about Madoff. They "lost" over $600,000 in Bernie's New York version of Nigeria. I put quotations around the words "lost" because they didn't actually invest that much, but they understood that the investments they HAD made were increasing rapidly. Sadly, when the dust cleared, they were out $600,000 they thought they could count on, plus the hit that their other funds took during the current recession.
They just could not believe that people of their caliber could be scammed. The physician acknowledged that the most successful large-scale cons were usually aimed at doctors, actors, and Mormons. But though he is a physician, he's in research. Plus, he's not a member of the Latter Day Saints; he's Jewish. Plus, he's really, really smart, as is his wife.
Somehow, he expected that all of those traits would protect him from the Madoffs of this world.
I have to wonder if those attributes actually made him more vulnerable--that he felt so protected by his intelligence that he didn't question where his wonderful returns were coming from. Why was everyone else hurting as the economy slid into recession but Bernie kept their money coming?
My friends are hardly out on the street though neither one will be retiring quite as soon as they had hoped. They got rid of their Manhattan co-op (bringing a check for $22,000 to the table to do so) and moved to Park Slope. For folks familiar with NYC real estate, Park Slope is not exactly the poor side of town.
But the greatest damage was done to their sense of their innate ability to manage their money. They would never have fallen prey to the e-mail plea of a Nigerian general's widow but when the scammer comes clothed in your own religion, speaks your language and projects an air of financial sophistication?
Then, almost everyone is capable of playing the fool.