As more and more details emerge of Bernie Madoff’s alleged $US50 billion scam, it become increasing hard to understand how so many of the world’s financial blue bloods were fooled.

Stupidity, greed, cupidity, you name it, from the confected rage of Nicola Horlick, the high profile London fund manager who accused the US regulators of not doing their job, to others who blamed Bernie for losing their money, very few have owned up to reality.

Why would you invest with someone whose auditor was a man in a room in a far flung New York borough, whose principal is now reported to be aged in his 70s, retired and reportedly ill?

Ms Horlick’s spray at the US Securities And Exchange Commission makes no reference to her failure to check on the bona fides of Mr Madoff and talk to at least one big hedge fund manager who checked and shied away from investing.

The Financial Times, Bloomberg and New York Times have all reported hedge fund investment adviser Aksia LLC as warning clients last year not to put their money with Madoff after learning of “red flags” at his company, including that its books were audited by a three-person accounting firm.

According to the Times, Aksia told clients last year that Bernie’s firm’s auditor was Friehling & Horowitz which included one partner in his late 70s who lives in Florida, a secretary, and one active accountant, Aksia said.

According to this posting on FT Alphaville, the tally of exposures is up to $US24.1 billion. This story fleshes out the detail.

Not content with stuffing up the world’s financial system, many of the same people at banks like HSBC, BNP and a fleet of hedge funds and wealthy private investors stand accused of being dopes and dummies.

The legal action against some of these giants of finance looms large in 2009: lawyering on behalf of people with a grudge looks like being the only growth industry next year. It has been said that the legal actions over the subprime collapse, Lehman Brothers etc will reach a crescendo next year.

That judgment will probably have to be rethought; I reckon legal action on behalf of Bernie’s clients will be the Number one with a bullet in 2009: not just against Bernie, but against the likes of HSBC, Nataxis, Santander and other financial blue-bloods.

Bernie’s auditor reportedly operates from a storefront office in the Georgetown Office Plaza in New City, in the north of New York, sandwiched between a pediatrician’s office and another medical office.

Other reports suggested that the firm comprised a retired accountant, a secretary and a licensed CPA, with a strip-mall office that probably isn’t the size of the shoe closet of some of Mr. Madoff’s Palm Beach investors.

The Financial Times remarked that this seteup was “hardly the type of independent scrutiny we’ve come to expect after the Sarbanes-Oxley Act, but few investors stopped to ask such questions because you can trust a guy like Bernie.”

It actually sounds too incredible to believe, a script in development for another sequel to Weekend at Bernies, where a dead guy is carted around by two losers scared of revealing the stiff is in indeed, stiff. Actually the storyline for Weekend At Bernies 2 is that the losers use a voodoo zombie to chase down lost money. Is that another example of art being stranger than life?