Deviance: The Case of Bernard Madoff

Like individuals who commit acts of deviance, white-collar criminals are also subject to scrutiny because they represent their company and industry as a whole. With Bernard Madoff’s indictment in 2009, the financial sector realized that an industry magnate and billionaire was scamming billions of dollars from investors, institutions and the public at large. Madoff’s deviance reflected a long history of hiding the truth in order to retain honor and dignity. His Ponzi scheme is one of the largest financial scandals in history and also reflects years of deviant and malicious behavior. Neutralization and conflict theory are relevant theories that explain why and how Madoff engaged in stealing; moreover, Madoff’s internal acceptance of deviant behavior allowed him to continue his scheme for decades. 

Characteristics of deviance. Madoff’s apathetic behavior towards stealing large sums of money and the institution of Wall Street that praised his success allowed for his deviant behavior to persist. While engaging in securities fraud to swindle investors, Madoff also kept strong relations with regulators and other prominent people in his industry. However, it was found that Madoff was simply taking his investors’ funds and then using it for illegal investments through other business entities: “In June 2009, Bernard Madoff was sentenced to 150 years in prison for his confessed securities fraud.' Linked to losses exceeding $30 billion, the extreme sentence was largely non-controversial” (Colesanti, 523). His deviance reflected an elaborate scheme of fooling regulators while manipulating future investors to supply him with even more capital. According to Richard Quinney in Conflict Theory of Crime, “structured opportunities, learning experiences, interpersonal associations and identifications” allowed him to utilize the financial system in order to steal large sums of money from investors while going unnoticed (Quinney, 39). Indeed, Madoff’s long history with Wall Street and his perceived success was instrumental in shaping his deviant behavior. Investors and the public genuinely trusted him to invest their funds. 

Social conditions. Because ethics surrounding the financial sector is largely determined by regulatory policies and the federal government, Wall Street enabled Madoff to commit many acts of deviance over the course of his career. According to Quinney, the threshold of what is legal and illegal (socially accepted) in the financial industry is wholly determined by those in power. Since powerful Wall Street firms like Madoff’s had the capacity to influence these regulatory policies, conditions were ripe for him to commit such acts. Also, Madoff’s prominent and enduring relationship with the NASDAQ allowed him to exercise power that many other investors would not have access to. Ultimately, social and regulatory conditions allowed Madoff to carry out his Ponzi scheme while going undetected. 

Social norms. Madoff broke social norms by lying to investors, employees and the public while undermining the ethical boundaries of a trusted financial advisor in a position of power. Cited from Andrew Kirtzman’s detailed account of Madoff’s life,  Madoff reportedly once told a new hire in 1987 that “you’ll never have to worry about your job here…as long as you don’t steal” (Kirtzman, 123). Such a statement indicated that Madoff himself was an upstanding individual who held honesty and integrity at the forefront of his personal virtues. However, Madoff’s clear actions against those who were involved him with showed that he engaged in manipulative deception. Also, members of the financial community are bound to specific codes of conduct with respect to differentiating their personal financial affairs from their clients’. Madoff broke this code of conduct and a social norm of integrity while having power by intentionally mixing his personal and professional livelihood: “both the SEC and FINRA (the industry's largest self-regulator) concluded studies affirming that no securities transactions took place at the broker-dealer—for years, the man with the famous investment firm and his employees had simply spent the cash” (Colesanti, 521). Madoff’s careless and destructive behavior was a breach of social norms in the sense that his position implied a higher level of integrity. 

RELEVANT THEORIES ON DEVIANCE

Neutralization and conflict theory are both applicable to Madoff since he carried his scheme for so long. According to Cromwell and Thurman, neutralization theory is the act of justifying deviant behavior by displacing blame through “rationalizations [in order to] protect the individual from self-blame and the blame of others” (Cromwell and Thurman, 308). The main two types of neutralization that apply to Madoff are related to the appeal to higher authority and defense of necessity. In these instances, the deviant person justifies their actions by claiming that they did it for the sake of others and could not stop, given the severity of their crime (Cromwell and Thurman). Conflict theory as described by Quinney relates to “how criminal law fits in capitalist society” and how “the social reality of crime is constructed on conflict in our society” (Quinney, 37). In this theory, Madoff’s deviance is dependent on how authority figures define his crime with respect to society. This theory also posits that there is a potential for policy bias based on the personal interest of authority figures. The case of Madoff reflects the notion that there is going to be conflict over personal financial interests versus what is best for society. 

Role of power. With respect to the theories mentioned, power plays an important role in shaping how and why Madoff participated in deviant behavior. On one hand, Madoff neutralized his own deviance by justifying that his actions were intended to be in favor of his clients. This suggests that the investor is in power and Madoff merely satisfied what Cromwell and Thurman regarded as being an “appeal to higher loyalties” (309). However, while his investors had power in terms of providing the capital required to carry out his Ponzi scheme, it was Madoff who also had the power, and capacity, to make investment decisions. This power enabled him to make value-based decisions on what would be best for his clients. It is also worthy to note that Wall Street regulators like the SEC were a figure of power that Madoff sought to undermine because of their intrusion into the financial industry. This instance would reflect neutralization theory’s example of a shoplifter justifying stealing by claiming that the store’s clothing is overpriced. Similarly, formidable regulatory threats on behalf of the SEC and the federal government may have influenced Madoff to undermine this overwhelming power. 

Impact of social status. Madoff’s elevated social status within the Wall Street community enabled him to carry out his Ponzi scheme. Despite financial hardship during his youth and having his father’s business fail, Madoff’s newly found social status in the investment community caused others to perceive favorably rather than a broke con man. Moreover, Madoff’s relationship with the NASDAQ influenced others to think of him as a pioneer and key leader in the industry. His elevated social status allowed him to perpetuate his scheme by having a track record of success. However, his success was fabricated because he was simply using newly received funds to compensate earlier investors. Consequently, the more money he swindled, the more investors would give him money and trust his investment strategies. 

DEVIANCE ANALYSIS

Stage of deviance and justification. By the time he was indicted, Madoff was in the tertiary stage of deviance because he had internalized his behavior as not being deviant. The way in which Madoff continued his track record of scamming others was internalized by the fact that he felt as though his investments were still better than market conditions: “people who were with me will make out better than if they’d been in the market during the meltdown of 2008” (Henriques, xxii). Clearly, this justification falls in line with Adler and Adler’s assessment that deviance is internalized when the person no longer feels as though they are committing a wrong (Adler and Adler). Madoff further justified his deviance by the fact that his inclusion in pioneering a computerized NASDAQ only further enabled him to take an easy way out (Henriques, xxxiv). By the time that Madoff was indicted in 2009, he had already internalized his behavior as a better option for investors that Wall Street enabled him to exercise in the first place. 

Stigma associated with deviance. While reactions to Madoff’s case were indicative of a permanent social stigma against him, he dealt with it by absorbing as much blame as possible. Surely, society felt as though Madoff and all of Wall Street acted in malice through a breach of trust. While Madoff’s justification for his crimes was true to neutralization theory’s notion of protecting one’s self “from any residual guilt following the crime,” he dealt with it by absorbing much of the blame (Cromwell and Thurman 309). Indeed, reports indicated that Madoff was silent about the involvement of others as much as possible and refused to implicate people close to him. 

NATURE OF DEVIANCE 

Madoff’s deviance was organized in a complicated network of employees, investors, business entities and regulatory agencies. According to numerous reports, his whole family was connected to his scheme by working for him. In light of this family affair, “Madoff was arrested; his sons, who served as lieutenants to various of his enterprises, claimed ignorance of the fraud” (Colesanti, 531). However, many people in his core network, including programmers that worked at his office were also arrested. The complex nature of investment groups and regulatory agencies also contributed to Madoff’s group involvement in his scam. Colesanti argued that regulatory agencies contributed to Madoff’s ability to pull off his scheme: “in short, some vagaries in the federal laws were used to make good on a scam perpetrated by a mascot on behalf of his fans” (Colesanti, 559). Not only that, but Madoff’s investors were supportive of his decisions and clearly kept trusting his firm with their money. In this sense, Madoff did not act alone; instead, his family and all others involved contributed to his deviance. 

AFTERMATH

Roots of Madoff’s deviance stem back to his childhood up through the point when it was too late. Early childhood friends of Madoff cited that he was raised underprivileged and was always looking for an edge in order to be successful: “They remembered thinking that he seemed like a young man on the make, who had felt the sting of doing without and dreamed of doing better” (Henriques, 33). While his ambitions can easily be labeled as malicious in hindsight, Madoff’s failed investments at an early age set the stage for his future deviant acts. While starting out and carrying over into the 1990s, Madoff has a long history of falsifying profits and losses to his investors, in light of his bad performance (Henriques). Because Madoff appealed to the loyalty of his clients, he perpetuated his behavior until it was truly too late for him to escape. 

In the final analysis, Madoff felt as though he had no other option other than to continue. In handling billions of his investor’s dollars, he wanted to avoid having to go back to his youth in terms of financial instability and hardship for his family. Part of this stemmed from the fact that he employed most of his family members and used his appeal to loyalty to neutralize his blame (Cromwell and Thurman). Even after Madoff was caught and indicted, he still felt as though there was no other alternative. In an exclusive interview while behind bars, the aged Madoff lamented that “by 1998, I realized that I was never going to get out of this” (Henriques, xxiii). His need for continuing his scheme reflected the necessity he felt for doing his job. Even if there was an option to escaping the debt and blame, he knew that the lives of his family members and investors were at stake. 

Ultimately, Madoff’s behavior reflected neutralization theory and a conflict perspective. His behavioral patterns were oriented towards using available opportunities in order to gain social status by returning profits for investors. This culminated into his involvement with the NASDAQ and his own investment firm. These social conditions allowed Madoff to carry out his Ponzi scheme. Moreover, Madoff breached social norms by intentionally lying to investors and employees while fabricating his own ethical standpoint. Because Madoff eventually internalized his own deviance as a characteristic trait, he personally felt as though he did not wrong his investors as badly as society did. In the wake of the social stigma against him, Madoff’s family members, employees, and other parties were implicated as well for the blame. The nature of his deviance reflected a conflict approach because he was undermining the institutions that made him wealthy in the first place while justifying his actions. The aftermath of the indictment exemplified Madoff’s affinity for appealing to the loyalty of his investors and family members. Finally, Madoff felt as though he could not escape the elaborate mess that he had created many years ago.

Works Cited

Adler, Patricia A., and Peter Adler. Constructions of deviance: social power, context, and interaction. 7th ed. Belmont, Calif.: Wadsworth, 2011. Print.

Colesanti, J. Scott. "Another Madoff Masquerade?: Questioning "Securities Fraud" In The Crime And Its Cleanup." Saint Louis University Law Journal 56 (2012): 521-565. Print.

Cromwell, Paul, and Quint Thurman. "The Devil Made Me Do It: Use of Neutralizations by Shoplifters." Constructions of deviance: social power, context and interaction. 7th ed. Belmont, Calif.: Wadsworth, 2011. 308-316. Print.

Henriques, Diana B. The wizard of lies: Bernie Madoff and the death of trust. New York: Times Books/Henry Holt, 2011. Print.

Kirtzman, Andrew. Betrayal: the life and lies of Bernie Madoff. New York, NY: Harper, 2009. Print.

Quinney, Richard. "Conflict Theory in Crime." Criminology 1 (1975): 37-41. Print.