Bernard Madofff Scandal

[John Peterson]

Hey Guys,

The Bernard Madoff scandal is growing exponentially. It now includes European Banks as well as some of the richest people in the world. I think it's going to go way beyond the $50 Billion that Mr. Madoff, himself had admitted to his sons. Time will tell.

---John Peterson

[Andy62]

CNBC has just had the story on of number of the smaller investors that have been effected. The stories are tragic. Not only have many lost their life savings,but their faith in human nature as well. Madoff belonged to a country club in Miami where people chased him trying to get into his fund. Some he turned down - possibly just to build the mystique.

[gruntbrain]

I'm reminded of the ol' saying that going to a broker will make ya broke

[Andy62]

Bernie Madoff on Youtube

http://www.youtube.com/watch?v=auSfaavHDXQ

[John Peterson]

Hey Gordon,

Thanks for posting that clip. I watched just a few minutes of it and could clearly see how it was that so many people were enamored with Mr. Madoff. The man comes across just great when he was asked questions and was totally calm, cool, and collected and seemed to have an answer for almost everything. Seeing that clip I am not surprised that he was able to do what he did. But I am curious Gordon, is this an isolated event or do you think are there others that have not yet come to light?

On another note, can you imagine how bad it would be to believe that you are set for life only to discover that you are totally and completely broke? I'm sure that some of Mr. Madoff's former clients are learning just that.


---John Peterson

[Andy62]

John,I believe that there are currently more going on and there always will be. The regulators are always behing the scoundrels. There is an old Intelligence saying that ,"Any system set up by one human being can be penetrated by another human being." There will always be people in all walks of life who feel they are smarter that other people and want to prove it by trying to beat the system [ the superman complex].

[HE LIVES IN MY HEART]

Some he turned down - possibly just to build the mystique.

Andy:

Bernie did indeed turn people way.

Most of the people I know that invested with him rarely pulled any money out, which is why the scam went on for so long.

Perhaps the reason he turned people away is that he only wanted the type of investors that he believed were in for there for the long haul and wouldn't be making large redemption requests.

[Andy62]

That may very well be true- every predator targets it's prey.

[Andy62]

He conned the smartest of the smart and the richest of the rich.


http://www.cnbc.com/id/28235916

[Andy62]

http://www.cnbc.com/id/28240438

[MikeNY]

Who I feel sorry for is the small investors that this guy took. CNBC Business channel has a retired couple in thier 70's or early 80's on, all they have is social security and have lost thier life savings, everything was invested with this thief. Thank God that the SPIC will be covering investors up to $500,000.

This guy was a regulated and registered Broker-dealer and part of SPIC and the SEC Investigated him nine years ago when a insider informed on him; how he escaped then is a mystery! He has always been regulated by the SEC, and passed inspection; looks the SEC have been asleep at the switch for nine years and also since this guy started stealing 25 years ago!

[Andy62]

This guy was really smart and had to expoit every vulnerabilty in additon to being very smooth and manipulative. A lot of his activity was through funds of funds. Apparently he didn't trade through his own brokerage company,but through foreign companies which lessened the regulatory oversight..

[gruntbrain]

More evidence to be "diversificated"

[Andy62]

I'm sitting here listening to all of these reports on Bernie Madoff and listening to all of the cliches and thinking of all of the scams that I came across during my business career and they are all the same. When I was wIth a company that was acquired by a bank I remember saying to one of the more experienced bankers that this stuff isn't going to work and he said."There is nothing that you can do about it because in a bureaucracy that has momentum behind it you just have to wait for it to blow up." THERE ARE TOO MANY PEOPLE AT ALL LEVELS FEEDING AT THE TROUGH. No where was that more true than in the subprime friasco where the government politicians and business and eveybody along the food chain were benefiting from it and anybody who tried to stop it was going to get "trampled by the herd." It was also true of Enron, Fannie Mae - Freddie Mac and other scandles before that. Everyone of these schemes that get to that level also have politicians in critical positions on their side that help to give them credibility and influence. All of the multi billion dollar funds of funds that invested with Madoff had national accounting firms who were doing their auditing and many of them had their own staffs of auditors. One feeder fund alone got $70 million dollars in fees from investing with Madoff and had it's own staff of auditors and investment analysts. I remember during the Savings and Loan Crisis of the 1980s that "word would come down from some strategic political contact that key players "had in their pocket"; to back off of certain things. That is why the less government that we have the better. We cannot make it through this crisis without heavy government involvement,but hopefully we can shed it as quickly as possible because individual players contributing to the campaigns of various members of Congress can put pressure on the regulatory authorities,whoever they are, and even neutralize the President.

[John Peterson]

Hey Andy62,

I'm tracking with you. And when I think of someone like the governor of Illinois that is as blatantly crooked as they come being in a position where he could literally destroy the new President it makes me sick that prosecutors would even remotely be willing to take his word on anything.

---John Peterson

[Andy62]

This guy really scares me. He has to be relatively intelligent as he graduated from Northwestern and got his law degree from Pepperdine which is a very good law school. He could be playing out some kind of ego game and have stuff on all kinds of people or he just could be the product of an environment that is so corrupt that he doesn't know the difference. Management consultants refer to a corrupt commercial environment as a "shark tank" where everybody has some dirt on everybody else and that certainly describes Chicago Politics.

[HE LIVES IN MY HEART]

From today's WSJ.

SEC to Probe Its Ties to Madoffs

http://online.wsj.com/article/SB122947343148212337.html

[Andy62]

http://www.cnbc.com/id/28244160/

[MikeNY]

CNBC was saying this morning that madoff Insider's had flipped and informed on Madoff 10 years ago and the SEC did not investigate or follow up; that Madoff's neice was bonking the head SEC Investigator and later married him. Looks like the SEC was asleep at the switch! The amazing thing is Madoff had Auditor's and the SEC was Auditing him too and he got away with it so long.

[Andy62]

Apparently much of this comes down to human nature and people just didn't want to believe that he wasn't a miracle worker even when faced with evidence. Chris Cox, Chairman of The SEC in a statement this morning said that it was reported to the SEC,but never got into the right channels. Based on my experience with bureaucracies I can readily believe this. Communication within bureaucracies can be limited and controlled for a variety of reasons either interntionally or accidentally. I will always remember when the ayatollah over threw the Shah Of Iran that it was later found out that the CIA had information that the event was coming and that the information was fed into the system,but it didn't move up the CIA organization because the lower level operatives thought that their bosses didn't want to hear it and it might hurt their careers.

[HE LIVES IN MY HEART]

Mike:

Madoff's "auditors" were a tiny firm named Friehling & Horowitz that according to the news reports operated out of a 13' x 18' foot office in New City (Rockland County), NY. There's no way a firm that size could have performed a proper audit on an operation such as Madoff's.

As far what the SEC was doing, that's anybody's guess.

[Andy62]

The guy obviously knew how to paper over every opening and exploit every vulnerability. I just saw a video of him leaving court and he had that "I got you -you SOB" smirk. At some level he thinks that he has pulled it off and won.


http://www.cnbc.com/id/15840232?video=968968964&play=1

[MikeNY]

The guy in the video is right, had to be many people helping madoff, one guy couldn't have done it. Looks like a lot more will go to jail with Madoff.

[John Peterson]

Hey Gordon,

May I quote you? "I got you- you SOB smirk." I did not know what you meant until I watched the clips with my business partner. And when I did, I was amazed. There is not a more appropriate way to state it. That's exactly what it was.

But now let me ask you a very serious question. Does this idiot have a Super Man complex? I can't believe he's walking around in public without an armed escort. He looks like he's proud of what he did. I hope the Feds make an example of this guy and send him off to some prison in Siberia that doesn't have any heat. And while they're at it, throw away the key.


---John Peterson

[Andy62]

It will be interesting to see,but as this whole thing has developed it becomes obvious to me that people who work in the same industry get very comfortable with eachother and move around- they move from government regulator roles to industry roles and visa versa. Much of this may have less to do with fraud and incompetence than it does with incestuesness in the markets.It reminds me of a quote by financial consultant Martin Mayer,"In the end all markets become insider markets."

[Andy62]

Madoff has to be an example of the "superman complex" and an extreme example of the sociopathic/narcissistic personality

[MikeNY]

I don't think Madoff will be smirking if the evidance leads to the arrest of both his son's that worked for him; then it might hit home he wrecked other lives.

I wouldn't be surpised to see this as a RICO Case for Organized Crime King Pins; if he was money laundrying and I suspect it couldgo RICO; but also suspect he has dirt on the Big Boys and and will slide at bit.

[Andy62]

I really doubt if he cares about the harm that he has done to his sons, his wife, or anyone else- that is the characteristic of the sociopath.

[MikeNY]

True Gordon! Other than wearing a suit and using a pen to steal this guy Madoff is no differnt than a mugger robbing the invilids and senor citizens in sleazy attacks.

AG takes himself out of Madoff probe: The Atty. General has recused himself since his son represents one of the Madoff gang.
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20081217&id=9452879

If there was Money Laundring or other illegal acts that can trigger the Federal laws I'd like to see Madoff get the RICO charges for Racketeering like any other Mafia Don; he just paper for his crimes and destroyed lives doing it.

The SEC needs to reform and clean house too, 10 years they have been getting tips on Madoff and the first tips were from Insider's that turned.

[MikeNY]

Racketeer Influenced and Corrupt Organizations Act can be triggered by Under the law, racketeering activity means: Any violation of state statutes against gambling, murder, kidnapping, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical (as defined in the Controlled Substances Act);
Any act of bribery, counterfeiting, theft, embezzlement, fraud, dealing in obscene matter, obstruction of justice, slavery, racketeering, gambling, money laundering, commission of murder-for-hire, and several other offenses covered under the Federal criminal code (Title 18);
Embezzlement of union funds;
Bankruptcy or securities fraud;
Drug trafficking;
Money laundering and related offenses;
Bringing in, aiding or assisting aliens in illegally entering the country (if the action was for financial gain);
Acts of terrorism.

http://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act

Looks like Madoff is covered, let's see if influence saves him.

[Andy62]

One of the concerns for Madoff is security as I am sure a lot of people would like to kill him. Think of all of those wealthy families who have lived in luxury all of their lives and never had to earn a living who now have no chance of recovering in any meaningful way. Several people slugged him as he left the courthouse.

[HE LIVES IN MY HEART]

I hope the Feds make an example of this guy and send him off to some prison in Siberia that doesn't have any heat. And while they're at it, throw away the key.


---John Peterson

Rikers Island right here NYC would be a good place to start.

[Max McKinley]

I fear he will not be the only one that did this. And because of the magnitude of his offense confidence will be shaken in the financial markets. The possible up side is that people may return to a more secure method of money management. I realize that it was thought that Madoff offered that security, and I am not making light of the tragedy and repulsiveness that he created. The down side is that this can be used as a catalyst for those with more global ambitions to institute greater control in realms of busines that maybe they should not.

[Andy62]

Be sure to check your local schedule for the time of CNBC Special tonight "Scam Of The Century"

http://www.cnbc.com/id/28256310

Madoff was unbelievable. Professionals in the industry say what he did was impossible based on regulations and controls in place.

[MikeNY]

My bet is Madoff vistis the Tombs soon (name for NY City Jail Detention Center in Manhattan) but he'd love Riker's Island lol! I'd like to see him charged under RICO!

Yeah Gordon, Madoff has been regulated and audited since the beginning by the SEC they are supposed to have controls and this guy skatted, now they are saying complaints where coming in since 1992 and not acted on.

The Rich client's Madoff had will also be forced to pay back profits and dividends, they are already broke and now they are done for. The Courts will recoup losses and track the who owes what, even though they were innocent victims. Your going to have some very rich folks now become poor, old and broke, thier lives are gone.

[Andy62]

Mike, I totally agree. The more protected the environment - the weaker the person. Those of us that have been out here struggling and surviving in the environment have been made stronger by the struggle and the failures that we have survived have given us emotional strength and forced us to deal with reality. The Madoffs of the world are part of that reality and anyone who has taken risks and tried new things has met several smaller incarnations of Madoff along the way. Nobody is more overprotected and isolated than the rich -partiuclarly in the second and third generations and beyond. I have come across a number of very wealthy people over the years and in a way I have felt sorry for them. The wealth isolates them because they think everyone they meet is after their money and in many cases they are. The protective environment of the elite schools and country clubs is protective in some ways,but they are also limiting - it is a golden prison. I wouldn't trade some of the adventureous experiences that I have had in life and the risks that I have taken for all of the money in the world. In a way the rich are like the over protected declawed lap cat that has not met the challenges and over come them like the strong cats existing on their own have done and therefore are helpless without their artificial support systems and protective environment. Swoboda was right. - adapting to stress makes you stronger. The world is not fair and we have to develop our strength to deal with it by accepting the reality of it.

[Max McKinley]

Swoboda was right. - adapting to stress makes you stronger. The world is not fair and we have to develop our strength to deal with it by accepting the reality of it.

Your whole response is spot on, but I like this last quote. Well said.

[MikeNY]

Madoff investors may be out in the cold
Time is running out for many who lost money in the alleged Ponzi scheme: article



http://www.msnbc.msn.com/id/28300488

[MikeNY]

Mass. investor saw inside Madoff scam:article. Quote " Markopolos complained to the SEC's Boston office in May 1999, saying it was impossible for the kind of profit Madoff was reporting to have been gained legally. "

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20081219&id=9464424

[Andy62]

That is unfortunate,but not unusual for a bureaucracy. Watching the reports coming out on Madoff it is obvious that he was very powerful, had numerous influential friends who believed in him, and great momentum going for him. It was much easier for some lower level manager in an isolated department to just not deal with the situation than to stir up a hornets nest and go against that power and if he had been wrong he was toast.

[Andy62]

Madoff's marketing MO is starting to become apparent. He used the "Fund Of Funds" format. These were funds that invested in other funds where the over manager receved a fee for it. The end fund was supposed to investigate and evaluate the funds that they invested in,but it is obvious that few did. The main advantage of this type of marketing approach is "access". All they had to do was find some rich and well connected socialite to refer them into her network of friends and contacts. Regardless of the group people tend to trust people in their group so they didn't do much investigation on their own. The scam that started in the US with the Jewish community is spreading worldwide with recent victimized groups in Switzerland and Brazil. The original "Fund Of Funds " was Investors Overseas Services [IOS] which was founded by Bernie Cornfeld in the 1960s. His format was to invest in US mutual funds only he did his recruiting through advertisements that read "Do You Sincerely Want To Be Rich." Cornfeld was convicted of fraud and eventually went to jail. There is a great book about this scam entitled "Do You Sincerely Want to Be Rich."

http://www.scripophily.net/inovserios.html

[Andy62]

Back by popular demand. The Bernie Madoff story "Scam Of The Century" will be replayed tonight on CNBC at 9:00 PM ET.

http://www.cnbc.com/id/28256310

[John Peterson]

Hey Andy62,

I'm amazed that this man is still alive. And from what I understand, It may be far beyond 50 Billion when all is said and done.

And of course when one considers that if the money had just been invested in gold a year ago it would be up a full 8 percent it becomes clear that it isn't just the money that he actually stole but also the amount of return that the investors could have had through honest investment that he has also stolen from them. I would not be surprised to read about his murder(make that execution) in the near future.

---John Peterson

[MikeNY]

John your right, plus on CNBC they announced today that those that withdrew money from Madoff's Fund in the last 6 years will face the Court recouping that money in full ;since it was a fraudulent conveyance; and they will be forced by the Court to repay all that money in full to the Offical Bankruptsy so others can recoup some losses. plus as Goprdon has pointed out the Feeder Funds and Hedge Funds face lawsuits too.

[gruntbrain]

Yet more pain for Madoff investors : paying taxes on phantom income

[Andy62]

The "clawback" has apparently been exercised in the past-brutal. The latest estimates say that the scam may have been going on for 30 years.

[HE LIVES IN MY HEART]

The Federal clawback statute is two years. However, the clawback under NYS law, which would apply here, is 6 years.

The government will be subsidizing the Madoff fiasco indirectly, through lost tax revenue.

Losses incurred by Madoff investors will probably qualify as theft losses, which are treated as ordinary losses for tax purposes. What that means is that there is no annual limitation on the amount of the loss, as contrasted with net capital losses which are limited tax annual deduction of $3,000. If the theft loss is in excess of current year's income, the taxpayer will have a net operating loss which can be carried back 3 years (and thus obtain refunds) and if it is still not fully utilized, any unused loss can be carried forward for up to 20 years.

Investors that paid tax on phantom income for 2005, 2006 and 2007 should be able to file amended returns and get refunds for the tax they paid on that income. Unfortunately, the statute of limitations does not allow a taxpayer to go back prior to that.

Any phantom income for 2008 probably should not be taxed either.

The phantom income which investors paid tax on for years prior to 2005 poses an interesting question. Whether or not investors will be able to claim a theft loss for that phantom income is a question which tax professionals are now wrestling with. There is a district court decision that appears to say they cannot. What that would mean is that the amount eligible to be claimed as a theft loss would be the amount of the actual cash investments made with Madoff and nothing more.

[HE LIVES IN MY HEART]

A New York woman who lost nearly $2 million investing with Bernard Madoff has filed a claim against the Securities and Exchange Commission alleging the agency was negligent in failing to detect an alleged decades-long fraud

http://online.wsj.com/article/SB122999646876429063.html?mod=article-outset-box

[Andy62]

A French Fund manager who was based in New York was found dead this morning. Apparently of a suicide. His fund reportedly had $1.4 billion invested with Madoff all from the fund managers wealthy friends in French society

[Andy62]

http://www.cnbc.com/id/28367899

[John Peterson]

Hey 'He Lives in My Heart'.


I am amazed at how wide ranging and serious this whole mess truly is. Just think of the multiplied millions upon millions of dollars that will be spent just trying to figure it all out. And as far as the lady that lost the $2,000,000. 00 is concerned, I think she may have a great point though I doubt that she can win because if she did then, virtually all of those that have been 'ripped of' will be be able to do the same thing and ultimately it would be the American tax payer paying the bill. Or at least it would seem to me that that is the case.

---John Peterson

[MikeNY]

Not only did the women lose her $2 Million Dollar investment she might owe $300,000 for the money she took out of Madoff's fund in the clawback.

[Andy62]

The latest





http://www.foxnews.com/story/0,2933,471725,00.html

[Andy62]

The latest scamee Larry King for $1,000,000+

[John Peterson]

Hey Gordon,

It would have been wonderful if Madoff had pulled a stunt like this on John Gotti when Gotti was at the peak of his power. He(Madoff) certainly wouldn't be walking around with that smug smile on his face.

---John Peterson

[MikeNY]

John I think your 100% correct, I doubt Madoff would have burned someone like Gotti. That would not mean Justice delayed in that one case.

[Andy62]

On March 18, 1980, 12-year-old Frank Gotti, youngest son of John Gotti was run over and killed on his bicycle by neighbor John Favara whose children were friends with Frank Gotti.

Police found Favara was not to blame in the accident, which was officially ruled accidental and no charges were ever filed against him. However, in the months after the accident, the word "Murderer" was spray-painted onto Favara's car. On May 28, Victoria DiGiorgio Gotti, Frank's mother, attacked Favara with a metal baseball bat, sending him to the hospital. Favara decided not to press charges and was planning to move out of Howard Beach. In January 2009, prosecutors claimed Charles Carneglia, an alleged mob soldier awaiting trial on five murders, dissolved Favara's remains in a drum of acid kept in Carneglia's basement

[Andy62]

Only in America!


http://www.justtoiletpaper.com/bernardmadoff.shtml

[Andy62]

It's the old "power of scale" - if I owe the bank $1 millon and I can't pay it then I have a problem,but if I owe the bank $1 billion and I can't pay it then the bank has a problem.



http://money.aol.com/news/articles/_a/bbdp/sec-reaches-deal-with-bernard-madoff/321611

[Andy62]

Here is the latest





US Accuses Texas Firm of 'Massive' Financial Fraud Stopping what it called a “massive ongoing fraud,” the SEC accused Robert Allen Stanford, the chief of the Stanford Financial Group, of fraud in the sale of $8 billion of high-yielding certificates of deposit held in the firm’s bank in Antigua, the New York Times reports.