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The multibillion-dollar Madoff mess proves one thing: Even the most sophisticated of investors are susceptible to fraud. It also proves that relying on highly paid financial advisers or the Securities and Exchange Commission won't protect you from getting ripped off.

Madoff's alleged $50 billion Ponzi scheme had the appearance of being a legitimate operation. Until recently, Madoff was paying dividends, sending out monthly statements and fulfilling withdrawal requests. It wasn't until early December when he admitted to having requests from clients for approximately $7 billion in redemptions that the Ponzi scheme started to collapse. Madoff simply didn't have the funds to meet those obligations. The jig was up.

In the case of Madoff, investors turned a blind eye to due diligence that could have been done. "Sometimes the bigger someone is, the less vetting people do," says fraud expert S. Gregory Hays, managing principal, Hays Financial Consulting. "Investors sometimes assume that someone else did their homework." And in the case of Madoff's scheme, the multitude of seemingly sophisticated investors and accomplished business people--from Mortimer Zuckerman to HSBC (nyse: HBC - news - people ) and Groupo Santander--no doubt lent credibility as Madoff expanded his ponzi.

For most investors the best way to keep a Ponzi out of your portfolio is to follow the common sense rule of "if something sounds too good to be true, it probably is." It also is best to ask lots of questions and beware of any potential investment or adviser that is overly secretive in terms of explaining investment strategy.

In Pictures: 10 Fraud Red Flags

In the case of Madoff, it was difficult to rely on publicly available information to discover that a fraud might have been taking place, since little was available. "There were no lawsuits or claims that he was defrauding people," says Kenneth S. Springer, former special agent of the Federal Bureau of Investigation who is now a certified fraud examiner and president and founder of New York-based Corporate Resolutions.

The one red flag that might have raised suspicions was the fact that Madoff used a tiny accounting firm in New City, N.Y., Friehling &

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Horowitz, to do his accounting. "Someone who claims to have billions in assets under management would normally use a bigger accounting firm like Ernst & Young, PricewaterhouseCoopers, Deloitte Touche or Grant Thornton," says Springer.

Of course the best way to discover a sophisticated scheme would be to hire someone to do on-site financial due diligence. Sometimes, large, institutional investors are even allowed to do surprise audits. "You would want to look at the trading and see what kind of transparency was there to see where the money was really being invested, too," says Springer. "Had people done that, many wouldn't have been satisfied with what they would have found out, and they would have walked away." Investors could have also hired an investigator to examine and interview the prime broker and administrators, he adds.

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Watch your back, Monkey Boy. You may have messed with the wrong bunch of PC builders.

A court filing unsealed Thursday as part of a class-action lawsuit against Microsoft (nasdaq: MSFT - news - people ) revealed that Hewlett-Packard (nyse: HPQ - news - people ) Chief Executive Mark Hurd e-mailed Microsoft Chief Executive Steve Ballmer to complain about HP's "call lines being overrun," with customers struggling to upgrade to Vista. "I'm sure you're aware of this," Hurd added.

The full text of the e-mail has not yet been released, but Hurd's complaints to Ballmer are the latest signs of escalating tensions between HP and Microsoft caused by the launch of Windows Vista in 2007.

The lawsuit accuses Microsoft of slapping labels on PCs that said the machines were Vista-capable when they didn't have the processing power needed to run some of the operating system's most touted features.

E-mails released Nov. 14 as part of the case show Richard Walker, the head of HP's PC business, hinting at the customer trouble to come in a Feb, 1, 2006, e-mail to Ballmer and other members of Microsoft's management team.

I hope this incident isn't a foretaste of the relationship I will have with Microsoft going forward, but I can tell you that it's left a very bad taste," Walker wrote. "The decision you have made has taken away an investment we made consciously for competitive advantage knowing that some players would choose not to."

That e-mail triggered panic at Microsoft. Jim Allchin, then co-president of Microsoft's platforms and services division, quickly sent a follow-up note to Ballmer. "I am beyond being upset here," he wrote.