Posted on 12/20/2008 9:13:43 PM PST by Ernest_at_the_Beach
nvestigators are unearthing more irregularities in the financial affairs of Bernard Madoff, the man who stunned America's wealthy elite when he allegedly admitted running the biggest investment scam in history.
Initially, it was thought he was running a simple pyramid scheme. But Steve Harbeck, head of the Securities Investor Protection Corporation and the receiver of Madoff's broker-dealer business, said the investigation had uncovered a trove of records stretching back at least 20 years. "We do not seem to be dealing with a traditional Ponzi scheme alone," said Harbeck. "Ponzi" frauds occur when the money from new investors is used to pay existing ones. "This seems to be something of a hybrid," Harbeck said, adding that the potential losses could be far greater than anyone first thought.
He was unable to elaborate on the types of fraud that were emerging. But sources close to the Madoff investigations suggested the trader may also have falsified tax documents and other records to show fake profits to his investors. Harbeck would only say: "It is just too early to say exactly what else was going on here."
The new allegations are understood to revolve around two sets of books that Madoff kept for his investment advisory business. Investigators have discovered records on thousands of trades in shares and bonds and other securities in seven binders stored on the private 17th floor of the Lipstick Building on Manhattan's Third Avenue. The investigators believe the positions detailed in the binders may be fake, used only to compile fraudulent statements of account to clients.
(Excerpt) Read more at guardian.co.uk ...
BUMP!
it will be interesting to learn what they find...thanks
How did so many smart people get suckered by Bernard Madoff?
“In the US, all those who have made profits from a fraudulent scheme must pay back their gains to the receiver seeking to compensate the victims who have lost money.”
Can you imagine...
Going back 20 years demanding the money back...
There must be some statute of limitations on these things...
I’m wondering why they are so surprised that it could last so long or that it wasn’t a straight ponzi scheme.
The original and then subsequent investors would have no reason to pull out their original principal if they thought were consistently getting 10-17% returns. Most were most likely only taking out the “fake interest” profits, if even that.
More money was probably going in consistently than was being taken out. That would cover the people who actually wanted to take the FULL principal + “fake interest” out. Only after the credit crisis occurred were people pulling money out in large quantities did it become impossible for him to cover.
He’s going to plea this out and all the gory details will soon be forgotten.
And the millionaires just keep on getting hit. ROTFL!
Bernie “Madoff” with the gold
However, they were stupid. Now they are stupid and poorer.
Saw a program on CNBC tonight about this scam..and one of the reporters made the observation that many people are going to suffer if the govt does not step in and do something...like what a BAILOUT for all these fromerly rich investors?
We got caught in a Ponzi scheme too in the 1980..it was just as the folks in the program said...the guy traded on his friendship with people...conning them in to investing and then it just starts to get way out of hand. In our case the guy was my husband’s XO when he was Sqdn CO. The retired LtCol started a business and in the end, he was found out and ended up well the death cert said “ Pilot vs Building”. No one bailed us out and the govt better not make us taxpayers foot this bill.
Bet George Soros is smiling tonight.
I remember a Jewish lawyer in NYC who warned me about this scam in 1995. If I were to post exactly what he said I’d be banned. I can say he said that, “when it unravels it will be monstrous.”
He said he was warning all his clients. I bet that now all his rich clients are lining up outside his office to suck-up to him.
When you start thinking about the mere mechanical and clerical magnitude of the work involved in dealing with $50B, you come to several conclusions very quickly about Madoff:
1. He didn’t do it alone. He had more than his sons in on the scam with him. There’s a whole contingent of people behind this deal.
2. There is more than just Madoff’s firm and the feeder hedge funds involved here.
3. Uncovering all this dirt is going to kick over other mounds of poop. The SEC, especially the SEC under Chris Cox, has been utterly asleep at the switch (what did we expect by putting a Harvard grad in charge of the SEC?) There is a host of dirty funds and bad actors out there in Wall Street, just waiting to be uncovered.
4. If we see a couple more funds or companies get ferreted out who have scammed billions, it is all over for Wall Street. The public will lose trust in the investment and finance industry for a generation, just as they did after the crash of ‘29.
The only thing that would restore public confidence would be handing down some huge penalties for this level of fraud and grift. And I don’t mean house arrest or six months at Club Fed.
What a nightmare.
Think I saw somewhere the Illegal Conveyance law (or whatever applies in this case) extends back 6 years.
Check out this quick vid. of Madoff, remarkable...
http://www.guardian.co.uk/business/video/2008/dec/16/bernard-madoff-video
One former SEC official defends...
http://media.bloomberg.com/bb/avfile/News/Surveillance/va_4JggLIhq8.mp3
Perhaps we can get a gubmint bailout as victims of S.S. ;)
Well that sort of depends on how compartmentalized things were.
If the traders only traded, and the senior traders only filed their gains and losses to the accountants, and the accountants only sent Madoff spreadsheets, well... it would be quite easy to delete losing trades, add numbers to winning trades, etc. As long as he was able to attract 10% more money each year than he claimed he had on hand, he could pay every investor a 10% dividend.
During good times he may have even made some money. I don’t think it was a straight Ponzi scheme. I tend to think his confession of “Ponzi Scheme” was more a reflection of not just his operation but the market in general. In good years these brokerages were paying out $10’s billions in bonuses and profits but in 1 bad year they go bust! It doesn’t make sense unless the entire place (Wall Street) is crooked beyond all imagination - which I tend to believe is highly probable.
The market makers (of which Madoff was one) get away with murder. They can sell fake shares all day long if they want to. Options market makers too. If they get lopsided on puts or calls they can sell into the market shares that don’t exist to hedge their position. This is entirely unfair to all other market participants.
And Madoff is not the only integrated investor/market maker. All the houses were integrated. They all had their own market making desks, their own investment advisors, their own trading desks. Madoff was no different in that regard than Lehman ($100’s of billions in profit over the decade, defunct in less than 1 year), Merril Lynch (sold out before they went bust) and Goldman Sachs (Paulson’s firm).
I think they are all looking to make Madoff, not just a fall guy, but a guy to pin “market corruption” on. “Hey - that guy was bad, but we’re honest!”. Bull pucky. I am 38 years old and if I don’t see structural reform of the markets I won’t invest another dime in them. I’ll put my IRA into CDs and other hard assets. Maybe eventually buy apartment buildings or something I can see, touch, feel, know the people I’m investing in, fix their sinks and kick them out if they don’t pay the dividend (rent).
“””Wall Street) is crooked beyond all imagination - which I tend to believe is highly probable.”””
All the old folks I have buried in the last ten years from the great depression......said do not trust anybody with your money.....Yeah, I have watched hundreds of stocks with spectacular news run in place for days until the investors lost when it was shorted to pennies...SEC, MM’s, hedge fund’s, gov. they are all crooks, maybe we need GD2 to clean house....
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.