There are many ethical issues and failings in this case. For the love of profit, Bernie Madoff and his accomplices created and participated in what can be considered the greatest ponzi scheme in history. After several years in the securities and exchange industry, Bernie Madoff broke the law and deceived clients and investors in order to amass millions of dollars. It was unethical for him and others to prey on and betray the trust of investors. When he was repeatedly questioned by investigators, he consistently lied to evade criminal charges or suspicion. What started as an honest way to make a living became a fraudulent, calculated method of stealing money from others.
Bernie Madoff, his brother Peter and several employees were involved in this scheme. Some of the individuals that perpetrated the ponzi scheme are denying any knowledge of the fraudulent activity. Bernie Madoff could not carry out the scheme on his own because it required many different people with their own relevant expertise. The reason that the scheme was conducted for so long is because the participants were financially rewarded for their silence. Preferred employees were paid well. Even as the fraud was about to be exposed, Madoff and his cohorts were trying to give money to select employees and family members. The money they received bought their silence. The corporate culture reinforced this behavior. There was a low tolerance and appreciation for honesty and professional business ethics. The company was running on several layers of lies that if exposed would cause the entire operation to crumble.
If I was working for Bernie Madoff and discovered the ethical issue involved, I would think carefully about who this issue involved and how to handle the situation using my moral imagination. First I would relay my concerns to my manager or supervisor. I would consider the affect on stakeholders and also try to assess my own involvement in the scheme and determine my own guilt. This may be caused by change blindness, where overtime actual people involved in the scheme may not have noticed the unethical practices that were going on around them or that they had a hand in. During or after this assessment I would consider it my duty to report the fraudulent activity to the SEC and or other law enforcement entities providing them with as many facts as possible and offering the details of how I and others may have played a role. In doing so I would seek whistle blower protection and try to secure immunity and another job. From that point I would use the experience as a learning opportunity and try to identify ethical issues from the onset.
This situation could have prevented if the key players behaved ethically. Bernie Madoff decided to break the law, lie to clients and steel their money because of greed, peer pressure and a general disregard for others. His dominant business model was inconsistent with basic ethics and the law. If he decided to abide by the laws and be honest with investors, this would not have happened. He promised high returns, knowing that he could not produce it and vehemently denied any wrongdoing up until he was arrested. He and the other scheme participants could have volunteered the truth at any point but chose not to. Those involved in the scheme made a choice to side-step the law and fatten their wallets. They could have decided not to participate or to tell the truth after the lying began.