On June 18, 1991, a balmy late spring day on the North Shore of New York's Long Island, stockbroker Pamela Martens sat on the patio of an exclusive local country club, meeting with a client for the first time. Martens would be taking over management of the customer's municipal-bond portfolio, but was alarmed when she heard how the man had invested the rest of his nest egg. "He told me that the bulk of his money was with Bernie Madoff, and that Madoff guarantees a 13 percent a year return," Martens recalls. "I said, 'First of all, that's impossible, and second of all, that's illegal.'" Not to worry, the investor assured her. He and many other members of the country club had happily stashed money away with Madoff for years, pocketing regular monthly checks. Martens, a whistleblower who five years later launched the unrelated "Boom Boom Room" sex-discrimination lawsuit against Smith Barney, got copies of the man's brokerage statements and phoned Madoff. "I said, 'I'm looking at Mr. X's statements, and it's clear you're not doing anything here that generated 13% a year,'" she recalls. "He said, 'No one has ever dared question what I'm doing.'" And, happily for Madoff, any time someone did question him, the probes were all but ignored. It took a first-person confession by Madoff to his employees before law enforcement officials swept in with an arrest and charges of a scam. Madoff's arrest last week for an alleged $50 billion Ponzi scheme is but the latest example of how financial players in high places can go for years fudging the rules and getting by without paying the price. His case is also a classic example of the stubborn life cycle of investment scams: they can persist for years until the chill of a bear market reveals that chicanery, not ability, was behind the operation. Don't be surprised to see more in the months ahead. Madoff didn't just have a giddy bull market on his side; he also had the padding of unquestioning acceptance by the financial community. His company Web site describes him as "a major figure in the National Association of Securities Dealers," the regulatory agency now known as Finra. He was board chairman of the Nasdaq Stock Market; was on the board of governors of the NASD; sat on an advisory committee for the Securities and Exchange Commission; and was chairman of the trading committee of Sifma, formerly the Securities Industry Association. All that clout spilled over to the world outside of Wall Street, too. Until December 12, he was a trustee of Hofstra University and Yeshiva University. In its December 11 memorandum of law in the Madoff case, the SEC accused Madoff and his firm, Bernard L. Madoff Investment Securities LLC, of conducting a Ponzi scheme "since at least 2005." The SEC should have known better. In 1992, just a year after Martens had that lavish country club lunch, the SEC itself brought a case against two Florida accountants who had been operating an illegal investment pool that had failed to register with the agency. On December 16, 1992, the Wall Street Journal reported that Bernard Madoff was managing the money for the accountants. Madoff told the newspaper that he didn't know that the money had been raised illegally. Considering his broad involvement in things regulatory, it's a stretch to think Madoff wouldn't have a compliance officer vet an outfit he'd be doing so much business with. Isn't this the guy who gives advice to the stock cops? He wasn't charged in the case, which resulted in $350,000 in penalties to the accountants for selling unregistered securities between 1962 and 1992. The case was sealed by court order. You would think the case would have been a red flag for regulators and law enforcement to keep an eye on Madoff's operation, but it took nine years before his investment strategies got public attention again. In the meantime, the SEC was getting private tips that something was amiss. The Wall Street Journal reported two days ago that money manager Harry Markopolos wrote to the agency in 1999 to say that Madoff securities was "the world's largest Ponzi scheme." Mar/Hedge, a newsletter about hedge funds, published an article "Madoff tops charts; skeptics ask how" in May 2001. If nothing else, the securities industry remains a predictable animal. In the end, when Madoff was owning up to his alleged fraud during a conversation with employees, he said he would be surrendering in a week or so. He first wanted to dole out bonuses to "employees and preferred customers, i.e. friends and family," according to the SEC, using the last $200m. or so that was left. Susan Antilla is a Bloomberg News columnist. The opinions expressed are her own.