WSJ said the NY U.S. Atty’s office has uncovered documents suggesting big Madoff investors knew their returns were fraudulent. Some players got specific percentage returns that were agreed to in advance. That would suggest investors realized Madoff was running a scam. Prosecutors are continuing to probe Madoff family members and employees, but the investigation now includes investors who have claimed to be among the hardest-hit victims of the fraud, both directly and through their foundations. Aiding investigators is their discovery that Mr. Madoff was a "meticulous" record keeper who kept correspondence between some clients and the firm, said people familiar with the probe.
HOW'D HE DO THAT? To pull off a $65 billion scheme, the Madoff cabal would have had to involve investors, relatives, associates, co-conspirators (and/or subsets of them), businesses and tax-exempt organizations........all with similar goals. HUGE RED FLAG Some investors were writing personal checks to Madoff.
Madoff may have routed his scheme through telephone lines with a maze of complex telecommunications' systems equipped with call-forwarding and voice mail systems, and numerous postal and commercial mail boxes..........and perhaps money-transfer systems that operate in ethnic enclaves and places like NYC's Diamond District.
The "investment" monies could have been disguised (to evade the IRS) by routing through a network of domestic and international bank accounts using counterfeit checks.....opening commercial bank accounts in the name of bogus businesses and wire-transferring and/or depositing "investment" checks into those accounts.
Madoff's phony checks could have had invalid bank routing numbers, forged endorsements, or been drawn on the proceeds of other counterfeit checks deposited in other bank accounts. Before banks discovered the fraud, the funds might have been transferred out of the accounts……probably offshore----leaving banks unable to recoup their losses.
State and federal tax authorities could have been swindled, if the scheme involved filing hundreds of phony tax returns in real or fictitious names, falsely claiming federal EITC credits (meant to benefit low-income earners).
In an international scheme with offshore ties, the Madoff co-conspirators or subsets of them might have obtained hundreds of taxpayer identification numbers for phantom citizens with worldwide addresses, and used the information, along with phony passports, to claim hundreds of bogus tax refunds.
Investigators poring over Madoff's books have discovered he routinely falsified documents in a fraud that could take months to unravel. In a classic fraud MO, Madoff kept two (or more) sets of books. One set keeps track of losses at Bernard L. Madoff Investment Securities LLC's (his investment advisory arm), while the other set consisted of "investors" writing Madoff personal checks.
Madoff's methods may have included limited-recourse loans to artificially inflate "asset value," so that he could fraudulently borrow real money based on “assets” that didn’t really exist.
Madoff's Web site claimed the firm was technologically-advanced, however investigations found the firm sent paper confirmations of trades via US mail at the end of each day, rather than providing electronic access to this important information. Paper copies provide a hedge-fund manager with the end-of-the-day ability to manufacture trade tickets that confirm the investment results.
It could be postulated that most of his investors figured Madoff was doing something illegal---Wall Street was whispering Madoff was laundering proceeds from Russian mob activities.
If Madoff was helping gangsters steal, some investors might have figured they could make a profit on the deal.
THIS IS HOW DO-GOODER LIBERALS AVOID PAYING TAXES Madoff's operation included many tax-exempt "charities and foundations." The IRS has pinpointed foundations as the locus classicus of tax evasion. There's a zillion ways one can evade taxes within a foundation or charity---and live the high life---tax-free. People running them pull money out as salaries, expenses, travel, employ relatives, etc. Checks one foundation or charity wrote to another foundation or charity should be scrutinized..... could involve the biggest frauds, in the form of tax evasion, money laundering, etc. Phony line items might include PR, maintenance, admin, legal fees, etc. This is how do-gooder liberals evade taxes.