Nod, nod. Wink, wink.

I have been reading Adam LeBor's absorbing, chilling book about Bernard Madoff's fraud, The Believers: How America Fell For Bernard Madoff's $65 billion Investment Scam, published a few months ago in the UK, but not yet in the US. The book fills us in on some of the details we otherwise only imagine about Madoff's affinity scam: the way he worked his Jewish network, cultivating the seemingly impeccable Ezra Merkin, for example; the importance of maintaining his facade, from Nasdaq to Palm Beach. Too often, the word "sordid" comes along with the word "details" in such books. In this case, the modifier seems about right.

LeBor makes much of (but cannot really explain) Madoff's personality. You have to have something like the numbed nerves of a professional killer to be mishpocha to Mr. and Mrs. Simon Levy for thirty years, share bouillabaisse with them every few months, and knowingly position them to lose their life's savings just when they are growing old. ("What interests me," LeBor wrote me recently, "is how he lived with it for so many years, knowing that he could be blown open literally at any moment.") LeBor believes Madoff may have been warped somewhat by class animosity, the century old hatred of insurgent, immigrant Polish and Russian Jewish shtarkers for the well-heeled snobs, the Yekkes, who had come from Germany before them and dominated Jewish social life in midtown. Perhaps.

The gullibility of investors like the Levys is easier to explain. Most of business is following up with people who come highly recommended, precisely because most of us are so risk averse. Recently, in Tel Aviv, dozens of Chinese temporary workers lost tens of thousands of dollars to a scam artist who promised to save them the trouble of sending wages home to their families. I'll take care of everything, he said. One worker brought in another.

Nor can you assume greed among the victims. If a deadly sin must be attributed, it is more reasonable to attribute sloth, the desire not to have to think about something too much. One of Madoff's most conspicuous British victims, Lord Anthony Jacobs, put is this way: "The first thing to recognise," he said, "is that the description of Madoff investors as rather greedy and going for a high return is the opposite of the truth. When I started investing ten years ago, the return was about ten or 11 per cent. Ten per cent was relatively modest." He was looking "for consistency, not fireworks."

OF COURSE, THIS is a "relatively modest" return only if you assume that some years you will make much less, or even lose something. Professional fund managers know that to make 10 or 11 per cent every year for a generation is an absurdly handsome return. Which raises the really interesting question of the book: not why investors were taken in, but why professional investment fund managers and bankers could believe that something like Madoff's fund was not a scam. After all, the fellow who eventually exposed Madoff, Harry Markopolis, was nothing but a Boston fund manager who knew his business. Why didn't more brokers and fund managers smell a rat right away, the way a Las Vegas casino's sharks home-in on the card counters at blackjack tables?

The answer, LeBor's insiders think, suggests what it really means to be, well, inside. Madoff's company, BLMIS, had two arms: a trading arm, buying and selling equities, and an investment and advisory arm, taking other people's money and (ostensibly) holding positions for them and managing their money more generally--the latter being the home of the now exposed Ponzi scheme. What enough Wall Street people told LeBor to be statistically significant is that they assumed the trading arm of BMLIS was subsidizing the investment arm in some way: that Madoff was benefiting from his vast network of connections--not only Jewish connections, but all the aforementioned social connections from Nasdaq to his country clubs--to gain insider information for stock trades; that trading in insider knowledge, itself illegal, was so profitable BLMIS could afford to keep its investment clients happy.

Why, you may ask, did not Wall Street pros then blow the whistle on trading irregularities? Here is where the nods and winks come in. You have to believe that insider trading is, to some extent, so ingrained in the culture of Wall Street that to have suspicions about it is itself unremarkable. Who wants to look pathetically naive?

LeBor notes that there is something of a contradiction here, for if you did believe Madoff could make so much from insider trades, what would be the point of his running an investment house at all? He might just as well have used only his own money, or borrowed money, and saved himself the trouble of maintaining thousands of accounts at his Potemkin village in the Lipstick Building. Then again, how would you maintain your information network if you did not run an investment fund? Which about exhausts my ability to see what's fishy, and what's just water, the way a Wall Street swell might.