06/18/2009 05:12 am ET Updated May 25, 2011

Spaghetti a la Madoff

• 1 part promise and 12 percent earnings, year in, year out

• 3 vats of baloney

• plenty of pork

• a yacht named "Bull," and other accouterments of great wealth a la marinara (Italian phrase meaning "sailor-style")

• 4 or 5 cups of feeder funds

• oodles of noodles, and

• a dash of 950 percent returns


In a large broker-dealer, mix all ingredients and simmer for thirty years or so. Stir slowly, drink fine red wine, and deliver the tangled plate to Irving Picard when the recipe sours from a bad economy. Let him figure out who eats what.

The sauce keeps getting thicker. The criminal investigation into the Madoff affair, according to The Wall Street Journal, now includes three high-profile investors: Picower, Chais, and Shapiro. All I can say:

What a mess.

Two of the three investors received outrageous returns: 300 percent in one year and 950 percent in another. It's hard to believe they didn't have some knowledge of Madoff's chicanery.

One of the investors, however, wired $250 million to Madoff just ten days before the Ponzi scheme collapsed. Talk about bad timing. It's hard to believe he had prior knowledge about Madoff's confession on Thursday, December 11, 2008. And if the investor knew about the scam, as the Federal investigators suspect, what would he say about the $250 million loss:


I'll exercise some self restraint here and say, "It's too early to judge the three investors." The facts need to play out. It's that $250 million wire that gets me.

Why turn good money into bad?

Plus, there's the whole clawback strategy. The trustee is on a mission to recover funds. He has his agenda, and we're watching a game of hardball between the courts and some extremely wealthy investors.

A criminal investigation, it seems to me, will shake free plenty of capital. The trustee is already suing Picower for the return of $5.1 billion. There's nothing like the threat of a criminal investigation to scare investors. Here's the complaint for your reading pleasure.

One billion in recovered assets and counting.