Madoff was connected to numerous so-called "non-profits," tax-exempt charities, and family foundations either as outright investors, or through hedge funds.
The landscape is littered with these "foundations and charities." Apparently Brooklyn, NY residents registered some 800 Non-Profits in Lakewood-----a small flea-bitten central New Jersey town. SOURCE http://www.taxexemptworld.com/organizations/lakewood_nj_08701.asp
The IRS has asserted that tax-exempt non-profits ("foundations and charities") are the locus classicus for IRS fraud.
Investigators may be looking at the legal parameters of prosecutable crimes including making false statements to state and federal officials, filing falsified documents, obstruction of proceedings before state and federal agencies, fiduciary negligence, and obstruction of US justice.
N/P charities and foundations might have facilitated fraud by integrating:
1. Secret control over N/P fund-raising committees.
2. Requiring only one signature on tax-exempt N/P bank checks.
3. Utilizing pre-signed tax-exempt N/P bank checks.
4. Using secret bank accounts to keep secret the actual financial position of tax-exempt N/P's.
5. Assigning bank deposit and account reconciliation functions of tax-exempt N/P's to one person.
6. Conspiring to hide oversight of expenses and supporting vouchers from public view.
7. Having no outside auditor to review tax-exempt N/P's statements.
8. Cashing unusually large amounts of tax-exempt N/P checks.
9. Having no official tax-exempt N/P deposit and withdrawal control system.
Authorities should investigate the Madoff-invested N/P’s US Postal Service mailings, wire transfers, computer transfers, electronic submissions, and unregulated money transfers, and all bank transfers connected to secret tax-exempt non-profits’ bank accounts.
Fraudulent tax-exempt non-profit activities might have involved using checks passed from one account to another in multiple conspiracies to launder monies.
The stratagem could have been international in its scope due Madoff's worldwide connections.
Authorities need to determine the extent to which donors to Madoff-invested N/P's colluded in schemes that may have included misusing reserve bank accounts, concealing transfers, inflating asset values and improperly accounting for transactions.
A formal inquiry should be conducted into the Madoff-invested N/P's and their financial activities with officers of publicly-held companies) including:
(1) Enron-style accounting frauds by manipulating N/P records,
(2) bundling contributions into the pockets of politicians,
(3) the extent to which networks of companies are financing political candidates in the names of business partners without their knowledge or consent,
(4) the extent to which officers of publicly-held companies used accounting fraud to hide illegal campaign contributions, and,
(5) the extent to which campaign donations exceeded campaign-finance limits.
Charges might include Madoff-invested N/P's accounting managers misappropriating funds to cover personal expenses, fraudulently overcharging for management services, diverting non-profit funds, then converting them to campaign accounts, or in the style of WorldCom greed spending thousands of non-profit dollars on organization credit cards for personal expenses.
A formal inquiry should be undertaken with respect to the Madoff-invested N/P's relatives, associates, co-conspirators or subsets of them, and donors (particularly officers of publicly-held companies), the business dealings between recipients, employees and elected and appointed officials and the extent to which influence-peddling is taking place.
More specifically we need to know the extent to which relatives, associates, and principles of the Madoff-invested N/P's and co-conspirators or subsets of them, directed political activities from tax-free non-profit organizations in illegal arrangements.
Authorities need to determine the extent to which the Madoff-invested N/P's manipulated philanthropic transactions, such as:
(1) loans, the (2) sale, (3) exchange or (4) leasing of property to related organizations, and donors, and the extent to which organizations reported (5) "excess benefit transactions" on Form 990, and, (6) the extent to which executive pay properly accounted for with the IRS.
The Madoff-invested N/P's need to reveal the dimension of contributions these organizations that may have been illegally redirected to political activity and be requested to explain:
(1) how the Madoff-invested N/P's solicit non-profit contributions,
(2) how non-profit donations are made, and,
(3) the manner in which donors to the Madoff-invested N/P's (particularly officers of publicly-held companies allocated company assets).
The Madoff-invested N/P's should be asked for details about who inside, and outside, these organizations is soliciting contributions, how the various subcommittees are funded, and the extent to which the Madoff-invested N/P's their donors (particularly officers of publicly-held companies) are colluding to perhaps finance political campaigns surreptitiously, and are engaging in other illegal transactions.