Why You Shouldn't Be Stunned By Madoff
CNBC "On-Air Stocks" Editor
Stunned by Bernie Madoff? There’s plenty like him in the long history of Wall Street.
This is one in a long string of scams. These scams are an integral part of the history of Wall Street, but are particularly prevalent during periods of great bull markets.
One of the most famous and widely talked about scandals was the case of Richard Whitney, the President of the New York Stock Exchange from 1930-1935, who was widely hailed as a Titan of Wall Street during the Depression but was sent to Sing Sing Prison in 1938 for embezzlement!
Whitney ran a successful bond brokerage firm in the mid-1910s, becoming a Vice President of the NYSE a few years later.
What was not known, as Whitney climbed to the top of the financial elite of New York, was that he was involved with all sorts of speculative investments and was racking up big losses even when he was the NYSE President. He successfully concealed these losses by borrowing heavily to cover the losses, then turned to embezzlement, even going so far as to steal funds from the NYSE Gratuity Fund and the New York Yacht Club (he was the Treasurer!)
He was caught only after he retired from the NYSE, when the comptroller of the NYSE exposed him. He declared bankruptcy, pled guilty, and went to Sing Sing prison for three years, where he was released in 1941. He lived quietly until he died in 1974.
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