Bernard Madoff arrested over alleged $50 billion fraud

[Judge Roy Bean]

Monday, January 05, 2009
US govt to NY judge: Jail Madoff without bail
By LARRY NEUMEISTER, Associated Press writer

NEW YORK (AP) — A prosecutor says disgraced financier Bernard Madoff violated bail conditions by mailing about $1 million worth of jewelry and other assets to relatives. The prosecutor wants him jailed without bail.
Assistant U.S. Attorney Marc Litt made the request to revoke Madoff's bail at a hearing in federal court on Monday. Madoff has been under house arrest.
There was no immediate decision on the government's request.
Madoff's lawyer, Ira Sorkin, described the items as heirlooms that included cufflinks and antique watches. Sorkin said they were not significant assets.
The 70-year-old former Nasdaq stock market chairman, who was arrested Dec. 11 on securites fraud charges, is accused of duping investors out of as much as $50 billion in a giant Ponzi scheme.

The scope of this thing and the arrogance being displayed by Sorkin is astounding. They will never find all of "his" assets. Hey, that's what friends and family are all about, eh?

[Red Cedar PM]

Accounting
Madoff FOF Litigation Evolves as Plaintiffs
Reject First Offer, Sue Auditors Over Losses
Suits involving funds of funds entangled in Bernard L. Madoff's alleged fraud scheme continued to evolve as investors Jan. 30 rebuffed a settlement offer by Banco Santander as inadequate and misleading, and a MAXAM Capital Management LLC fund of fund sued its auditors for relying on false account statements from Madoff's firm.
Santander proposed terms Jan. 27 for settling claims by private banking clients that invested in its Optimal Strategic U.S. Equity Fund. A day earlier, a class of investors—including Santander's institutional and private clients—filed a complaint in the U.S. District Court for the Southern District of Florida charging Santander with failing to conduct reasonable and adequate due diligence before reinvesting Optimal's assets with Madoff. As a result of Santander's wrongdoing, the plaintiffs claimed to have lost nearly $3.1 billion (Inversiones Mar Octava Limitada v. Banco Santander S.A., S.D. Fla., 09-20215, 1/30/09).
Rejecting the proposed settlement terms as misleading and inadequate, the investors moved the court for an emergency order to preempt Santander from communicating with them about their Madoff-related claims.
Also Jan. 30, MAXAM Absolute Return Fund LP sued McGladrey & Pullen LLP and Goldstein Golub Kessler LLP for negligently relying on information from Madoff, instead of independently confirming trades and assets, when auditing the fund's financial statements (MAXAM Absolute Return Fund LP v. McGladrey & Pullen LLP, Conn. Super. Ct., 1/30/09).
Illusory Offer
In the Santander case, investors said the entity is the principal banking subsidiary through which a large number of investors in North and Latin America invested indirectly with Madoff and his firm. They estimated that approximately $1 billion of the funds invested with Madoff originated from Santander accounts. According to the Securities and Exchange Commission's Dec. 11 charges, Madoff told the agency that total loss of all investors connected to his activities could reach $50 billion.
In its Jan. 27 release, Santander stated that it had “decided to offer a solution to its private banking clients” that invested in Optimal. The solution would grant these investors the right to exchange their investments in the fund for Santander shares. However, the offer did not refer to institutional investors of Optimal.
In their emergency motion, the investors contended that by failing to mention the pending class action, Santander's settlement offer violated the Federal Rules of Civil Procedure. Moreover, the face value of the shares would equal only the original amount invested, and would not include appreciation, commissions paid, or accrued interest. As such, the settlement offer is “illusory.”
The motion further contended that the offer is “coercive” because it allegedly requires investors to maintain their current level of assets at Santander “for as long as Santander chooses.” As such, the “offer is not a settlement offer but a heavy-handed attempt to prevent a stampede of its private clients' deposits, which would circumvent and threaten the integrity of the Class Action process.”
Deficient Audits
MAXAM, meanwhile, sought to recover for the accounting firms' allegedly deficient auditing procedures and testing. As a result of deficient audits of the fund's 2006 and 2007 financial statements, according to the complaint, McGladrey and Goldstein failed to identify certain indicia of fraud in connection with the fund's investment with Madoff. Auditors are “uniquely positioned … indeed hired, to spot” such indicia, the fund contended.
All of the fund's assets were invested with Madoff, but the auditors “did nothing” to verify that those assets existed. The auditors also allegedly failed to test the veracity of the returns that Madoff reported to the fund, or whether Madoff's auditor actually audited the firm. The SEC indicated in its Dec. 11 action that Madoff's auditor had no other clients and was too small relative to the size of Madoff's advisory business.
As relief, the fund sought compensatory damages and reimbursement of all management fees.

Good for them that they are suing the auditors. If you are auditing a company whose only asset is an investment in something else, you had damn well better do some thorough testing of the underlying assets and the transactions at that level, or at least do some due diligence on the audit firm doing the lower-tier work so that you can rely on their report. And I'm not just saying that because one of the firms named is a competitor of ours.

[fortinbras]

The Madoff scandal has brought the anti-semites out from under their flat rocks:

E.g.:
http://www.texemarrs.com/wealth_plundered_by_jews.htm

And this notwithstanding it turns out that many, perhaps most, of Madoff's victims were Jews and Jewish institutions, include several Jewish charities that now find themselves facing bankruptcy and ruin because of his scam.

My own expectation is that many similar scams will surface - some of them of other ethnicities - because the general Wall Street meltdown has made it impossible to keep the schemes going.

[cdj1122]

" ....... the general Wall Street meltdown has made it impossible to keep the schemes going. ..."

Don't ya jes' hate it when that happens.

[Chrisfs]

So the guy made millions for himself and family, while losing billions of other people's money.
I'm going to be easy on him. He has to sell every single thing he owns and then he can make what I make. I make $40,000/yr working for a nonprofit. It provides me with a decent but not extravagant lifestyle. I live in a decent studio apartment in an nice enough neighborhood in N California. He has to sell every single thing he owns and give away every single dollar he gets from any source above 40,000/yr until each and every person is paid back in full. I don't care about people whining about how that doesn't give him any incentive, he had plenty of incentive and blew it. I think I'm being really generous to the guy.

I think I would also apply this to a bunch of banking executives. $500,00 my

[Mr. Mephistopheles]

A 'sorry and ashamed' Bernard Madoff pleads guilty
By LARRY NEUMEISTER and TOM HAYS, Associated Press Writers Larry Neumeister And Tom Hays, Associated Press Writers 22 mins ago

NEW YORK – Saying he was "deeply sorry and ashamed," Bernard Madoff pleaded guilty Thursday to pulling off perhaps the biggest swindle in Wall Street history and was immediately led off to jail in handcuffs to the applause of his seething victims in the courtroom.

U.S. District Judge Denny Chin denied bail for Madoff, 70, and ordered him to jail, noting that he had the means to flee and an incentive to do so because of his age.

Madoff earlier spoke softly but firmly to the judge as he pleaded guilty to 11 charges in his first public comments about his crimes since the scandal broke in early December.

"I am actually grateful for this opportunity to publicly comment about my crimes, for which I am deeply sorry and ashamed," he said.

"As the years went by, I realized my risk and this day would inevitably come. I cannot adequately express how sorry I am for my crimes."

Madoff did not look at any of the three investors who spoke at the hearing, even when one turned in his direction and tried to address him.

The fraud, which prosecutors say may have totaled nearly $65 billion, turned a revered money man into an overnight global disgrace whose name became synonymous with the current economic meltdown.

Madoff described his crimes after he entered a guilty plea to all 11 counts he was charged with, including fraud, perjury, theft from an employee benefit plan, and two counts of international money laundering.

He told the judge that he believed the fraud would be short-term and that he could extricate himself.

Prosecutors say the disgraced financier, who has spent three months under house arrest in his $7 million in Manhattan penthouse, could face a maximum sentence of 150 years in prison at sentencing.

The plea came three months after the FBI claimed Madoff admitted to his sons that his once-revered investment fund was all a big lie — a Ponzi scheme that was in the billions of dollars. Since his arrest in December, the scandal has turned the 70-year-old former Nasdaq chairman into a pariah who has worn a bulletproof vest to court.

The scheme evaporated life fortunes, wiped out charities and apparently pushed at least two investors to commit suicide. Victims big and small were swindled by Madoff, from elderly Florida retirees to actors Kevin Bacon and Kyra Sedgwick and Nobel Peace Prize winner Elie Wiesel.

After arguments began on whether Madoff should remain free on bail, his lawyer Ira Sorkin described the bail conditions and how Madoff had, "at his wife's own expense," paid for private security at his $7 million penthouse.

Loud laughter erupted among some of the more than 100 spectators crammed into the large courtroom on the 24th floor of the federal courthouse in lower Manhattan. The judge warned the spectators to remain silent.

George Nierenberg, the first of the three investors to speak, approached the podium glaring at Madoff, then said in the financier's direction: "I don't know if you had a chance to turn around and look at the victims."

At the hint of a confrontation, a marshal sitting behind Madoff stood up, and the judge directed Nierenberg to speak directly to the bench.

The plea does not end the Madoff saga: Investigators are still undertaking the daunting task of unraveling how he pulled off the fraud for decades without being caught. They suspect that his family and top lieutenants who helped run his operation from its midtown Manhattan headquarters may have been involved.

Madoff's plea was absent a cooperation agreement that would have required him to name potential co-conspirators. But in court documents, prosecutors have indicated that low-level employees were in on the scam and may be cooperating.

Court papers say Madoff hired many people with little or no training or experience in the securities industry to serve as a secretive "back office" for his investment advisory business. He generated or had employees generate "tens of thousands of account statements and other documents through the U.S. Postal Service, operating a massive Ponzi scheme," prosecutors said.

The money was never invested, but was used by Madoff, his business and others, prosecutors said.

Authorities said he confessed to his family that he had carried out a $50 billion fraud. In court documents filed Tuesday, prosecutors raised the size of the fraud to $64.8 billion.

Experts say the actual loss was more likely much less and that higher numbers reflect false profits he promised investors. So far, authorities have located about $1 billion for jilted investors.

In addition to prison time, he said Madoff faces mandatory restitution to victims, forfeiture of ill-gotten gains and criminal fines.

(bolding added)

http://news.yahoo.com/s/ap/20090312/ap_ ... ff_scandal

[Judge Roy Bean]

The real question is, how many more Madoffs and Stanfords are out there?

[Mr. Mephistopheles]

There may not be as many as you think, or at least no large, readily noticeable ones. The market in the past 6 to 9 months should have shaken out all the Ponzi schemers, as peoplesuddenly wanted their cash.

Madoff and Stanford stand out because of the huge size of the scheme.

Even more galling is that the SEC had received letters a number of years before the Madoff collapse telling them that Madoff could not possible be telling the truth about his performance and that there was insufficient trading activity to support his trading philosophy. It appears that while the SEC is a bulldog about making sure paperwork is filled out properly, they lack the mental acumen, training and wherewithall to dig into a company's numbers.

No one who did any sort of due diligence work on Madoff's hedge fund lost a dime on it, because they figured out something was hinkey and avoided it.

I heard a report that the reason Madoff wasn't investigated was because of a pissing contest between the NYC and D.C. SEC bureaus. As far as I'm concerned those who ignored the reports of Madoff's scheming should be facing some severe consequences as well.

This doesn't even take into account the fact that his niece married one of the wheels in the SEC compliance department.

EDIT: I found the report, it was on 60 Minutes.

[Burzmali]

Out of curiosity, how does his confession affect the amount of resources being used to investigate his activities? Not to sound conspiratorial, but that Madoff seemed to be in an awful hurry to jump on his sword.

[Mr. Mephistopheles]

Methinks Bernie is trying to protect his wife and sons by falling on his sword.

That tactic may have been in vain...

Prosecutors will seek Madoff's wife's money too
By LARRY NEUMEISTER, Associated Press Writer Larry Neumeister, Associated Press Writer 13 mins ago

NEW YORK – Federal prosecutors have notified a New York court that they also want the assets of Bernard Madoff's wife. In a court filing, the government said it will seek the $7 million Manhattan penthouse as well as another $62 million that Ruth Madoff had sought to keep.

The 70-year-old Bernard Madoff pleaded guilty last week to securities fraud and perjury, among other charges.

Madoff's lawyers had indicated earlier that they planned to claim Ruth Madoff was entitled to keep as much as $69 million in assets.

They said the assets were not part of Madoff's fraud and that they were in her name.

[Burzmali]

Methinks Bernie is trying to protect his wife and sons by falling on his sword.

Well, the ins and outs from his accounts should be easy enough to follow. I'm surprised that we haven't seen an actual number for the amount of money "missing" from the system, i.e. the amount Madoff kept for himself. A poorly run Ponzi scheme doesn't net the operator a cent.

[fortinbras]

I am not sure how much protection Madoff's guilty plea can provide his wife & kids, in terms of their possessions.

Madoff already admitted his frauds to his business associates. His conviction was a certainty. Frankly, he was in considerable physical danger by being out and apparently unrepentent. By sparing the govt the effort and expense of a trial he may obtain some minimizing of the penalty or at least some congenial conditions of incarceration, such as proximity to his family. It is possible that, by pleading guilty so early, he hopes that the federal investigation of his activities might be allowed to stop, which may permit his family to hang on to some assets that have not yet been identified.

[Mr. Mephistopheles]

Prosecutors charge Madoff's accountant with fraud
By LARRY NEUMEISTER, Associated Press Writer Larry Neumeister, Associated Press Writer 3 mins ago

NEW YORK – Prosecutors have brought fraud charges against Bernard Madoff's longtime accountant.

The charges against David Friehling expand the case against Madoff as prosecutors go after other people who may have been involved in Madoff's sprawling fraud.

Friehling ran an accounting office in a nondescript suburban building north of New York City, and quickly drew scrutiny after the Madfoff scandal broke. He had served as Madoff's auditor for several years. He faces up to 105 years in prison if convicted of the fraud charges.

Madoff pleaded guilty last week to what could be the largest fraud in history.

http://news.yahoo.com/s/ap/20090318/ap_ ... ff_scandal


SURPRISE SURPRISE!

[fortinbras]

He faces up to 105 years in prison if convicted of the fraud charges.

But he hopes they'll knock off ten years for good behavior.

[Mr. Mephistopheles]

He faces up to 105 years in prison if convicted of the fraud charges.

But he hopes they'll knock off ten years for good behavior.

I'm surprised that these people didn't disappear into a new persona and life. They certainly had the cash. If I was a ponzi scheme scumbag who was facing a life prison sentence and had the money to "disappear", I wouldn't stick around. Then again, maybe they're so @#$%& arrogant they figured they were above all this "messiness".

[fortinbras]

I have to agree. With several million - perhaps more than half a billion - in loot, I would have already set up an alias with a foreign passport and a doggy bag in a Swiss bank.

[BBFlatt]

Maybe he had his bail-out fund invested with Stanford

[Mr. Mephistopheles]

I figured it out! Madoff is already on the lam somewhere sunny, while his strawman sits in jail.

[Mr. Mephistopheles]

Maybe he had his bail-out fund invested with Stanford

[Dezcad]

He faces up to 105 years in prison if convicted of the fraud charges.

But he hopes they'll knock off ten years for good behavior.

The first ten.......