Madoff - A Peculiar Irony

[Bill E. Branscum]

Like most things, there are two sides to this coin. It looks to me like Madoff was the best possible place to lose your money in the stock market.

You may find my commentary entitled, "Madoff Investment - A Peculiar Irony" to be of interest.

http://www.fraudsandscams.com/cases.htm

[Demosthenes]

Welcome back, Mr. B!

[Bill E. Branscum]

Hi Darlin,

I missed ya!

[Demosthenes]

Be a good boy and I'll dig up that old blue-eyed alien avatar...

[Bill E. Branscum]

That was just too hot!

[Bill E. Branscum]

Turns out even Madoff was surprised his scheme lasted as long as it did.

The SEC can be very effective. I have been involved in some cases where the SEC people were very sharp.

On the other hand, when you look at the evidence they had in this case, the fact that this went on and on is absurd.

[Bill E. Branscum]

Bill, I believe the correct technical term for the SEC's actions vis-a-vis Bernie Madoff, is "they screwed the pooch."

What I find interesting is the various smaller firms and organizations that invested with Madoff and did little or nothing in the way of due diligence. Lots of lawyers are going to be busy just on the fallout of the Madoff matter.

Think about the "Funds of Funds" that served as feeder funds for Madoff. There is going to be a lot of damage to a lot of souls by the time this thing is done.

Still, if I had invested $1M in Crocs, and watched my money go right down the toilet, I'd sure wish I had given it to Madoff.

[Demosthenes]

Anyone who invests their entire net worth in a single stock takes an easily identifiable risk.

The people who invested their entire net worth believing that their investments were being diversified by a professional money manager, or who invested with Madoff without even knowing they were investing with Madoff (the most common scenario) had no way of knowing they were being subjected to such a huge risk.

My inlaw's neighborhood in Palm Springs looks like a war zone with dozens of for-sale signs. 75 to 85 year-olds who have nothing left, and nothing to live on while they wait for the years it will take for any settlement to come through, all because they trusted an investment advisor. They didn't gamble their nest egg in a single stock issue. They weren't the feeder clients who made out like bandits. They placed their savings with a long-term, respected, and fully licensed advisor who pooled their money and placed it with Madoff.

The SEC should be investigated by an outside agency to determine why they ignored the financial analyst whistleblower, Harry Markopolis, who handed them their proof on a silver platter.

[Pottapaug1938]

Anyone who invests their entire net worth in a single stock takes an easily identifiable risk.

The people who invested their entire net worth believing that their investments were being diversified by a professional money manager, or who invested with Madoff without even knowing they were investing with Madoff (the most common scenario) had no way of knowing they were being subjected to such a huge risk.

My inlaw's neighborhood in Palm Springs looks like a war zone with dozens of for-sale signs. 75 to 85 year-olds who have nothing left, and nothing to live on while they wait for the years it will take for any settlement to come through, all because they trusted an investment advisor. They didn't gamble their nest egg in a single stock issue. They weren't the feeder clients who made out like bandits. They placed their savings with a long-term, respected, and fully licensed advisor who pooled their money and placed it with Madoff.

The SEC should be investigated by an outside agency to determine why they ignored the financial analyst whistleblower, Harry Markopolis, who handed them their proof on a silver platter.

I would take that advice a step further and suggest that no one entrust all of their money to a single financial adviser. As to why the SEC didn't listen to Harry Markopolis, I'll bet that it had to do with the "right" people being put in charge, who would do as they were told and not interfere with the money-making by the well-connected, while lobbyists whispered sweet nothing$ in many an ear.

[Mr. Mephistopheles]

Anyone who invests their entire net worth in a single stock takes an easily identifiable risk.

The people who invested their entire net worth believing that their investments were being diversified by a professional money manager, or who invested with Madoff without even knowing they were investing with Madoff (the most common scenario) had no way of knowing they were being subjected to such a huge risk.

My inlaw's neighborhood in Palm Springs looks like a war zone with dozens of for-sale signs. 75 to 85 year-olds who have nothing left, and nothing to live on while they wait for the years it will take for any settlement to come through, all because they trusted an investment advisor. They didn't gamble their nest egg in a single stock issue. They weren't the feeder clients who made out like bandits. They placed their savings with a long-term, respected, and fully licensed advisor who pooled their money and placed it with Madoff.

The SEC should be investigated by an outside agency to determine why they ignored the financial analyst whistleblower, Harry Markopolis, who handed them their proof on a silver platter.

I would take that advice a step further and suggest that no one entrust all of their money to a single financial adviser. As to why the SEC didn't listen to Harry Markopolis, I'll bet that it had to do with the "right" people being put in charge, who would do as they were told and not interfere with the money-making by the well-connected, while lobbyists whispered sweet nothing$ in many an ear.

Surely not! I recall reading too that the SEC's inaction was due in large part to a gigantic p*ssing match between the NYC and DC offices.

[Demosthenes]

As to why the SEC didn't listen to Harry Markopolis, I'll bet that it had to do with the "right" people being put in charge, who would do as they were told and not interfere with the money-making by the well-connected, while lobbyists whispered sweet nothing$ in many an ear.

Too complicated. The rule of thumb in DC is two people with a secret = 1 book deal.

I do wonder if bribes were involved, though.

[Demosthenes]

Markopolos' story is fascinating, for those unfamiliar with this attempts to get the SEC off their sorry asses.

From wikipedia:

Markopolos had originally concealed his identity from SEC regulators in May 1999, although he did meet face-to-face with SEC officials in Boston in 2000 and 2001. After the SEC did not respond, Markopolos was fearful of taking his complaints to the industry's self-regulatory authority, Financial Industry Regulatory Authority (FINRA), because of the power Bernie Madoff's brother, Peter, had in that organization (he is a former Vice Chairman). Markopolos believed the Federal Bureau of Investigation would reject his allegations without the SEC staff's endorsement. He believed only one SEC staff member, Ed Manion, understood Madoff’s scheme and “the threat it posed to the public.” “My experiences with other SEC officials proved to be a systemic disappointment and lead me to conclude that the SEC securities' lawyers, if only through their investigative ineptitude and financial illiteracy, colluded to maintain large frauds such as the one to which Madoff later confessed."

He also added that in 2005 it was Meaghan Cheung, a branch chief in the SEC’s New York office, to whom he gave his 21-page report alleging that Madoff was paying off old investors with money from fresh recruits. “Ms. Cheung never expressed even the slightest interest in asking me questions,” Markopolos said. Cheung approved an internal memo in November, 2007 to close an SEC investigation of Madoff without bringing any claim. Subsequently, she left the agency. Markopolos also testified he gave details about the case in 2005 to John Wilke, a Wall Street Journal investigative reporter, but that it was never pursued. Markopolos testified he (anonymously) sent a package of documents concerning Madoff to former New York Attorney General Eliot Spitzer, who had successfully prosecuted a number of securities fraud cases, but that Spitzer took no apparent action, either. Spitzer's family trust had invested in Madoff.

[Mr. Mephistopheles]

It would be interesting to find out if the Spitzer family trust divested of its interest in Madoff's funds.