When did Bernie Madoff initiate his fraud?

The main question I have about the Madoff scandal is when did Bernie Madoff initiate his fraud? Has he been doing it all along, or was he on the up-and-up originally and only decide to "go Ponzi" when he started having trouble achieving decent returns in recent years? In other words, what was the real turning point? Was he always a crook, or did he just get into a bind and pride and ego led him to "cheat"?

Given that he has been reporting smooth results for many years, I suspect that he engaged in a fraudulent variant of "earnings management" a long time ago, shifting results between years to show a smooth return, but eventually he got to a point where the net return was too slow to be easily smoothed up to his trend rate. At that stage he may have headed down the slippery slope of "borrowing" from imagined future returns. In other words, maybe his returns at that stage were largely or significantly fictitious.

It may only have been when the credit crisis began in 2007 and investors began taking money out of investments that he was suddenly faced with converting imagined returns over the years into hard cash by using incoming investments.

So, maybe he was not a true Ponzi scheme until that point where incoming investments were directly paid out to old investors.

This might explain why he was not discovered earlier -- his cheating may have been too modest until quite recently.

-- Jack Krupansky