It is not known how many customers Madoff's firm had. A variety of investors have been identified: Spain's Grupo Santander SA, Britain's HSBC Holdings PLC and New York Mets owner Fred Wilpon. More victims emerged last Tuesday: Rye Investment Management, Rye, NY lost $3.1B, almost all of its clients' funds, and Austria's Bank Medici, which had two funds with $2.1B (1.5 billion euros) invested with Madoff.
Madoff's investors (savvy astute businessmen accustomed to analyzing and picking apart financial statements) were apparently pocketing 16% returns. One can reasonably conclude they calculatedly ignored the scam and probably even aided and abetted it.
It could be postulated that most of his investors figured Madoff was doing something illegal---frontrunning---and that's why they were getting big returns (16% even in down markets).
We should not believe these so-called "investors" sob stories for a nanosecond. Impossible to believe astute businessman who made fortunes in competitive businesses would allow themselves to be scammed.....unless......these privileged elites were in collusion with Madoff to engage in a massive tax evasion scheme. Tax evasion would explain why savvy, astute businessmen were giving this guy huge sums ---$100-500 million--- to “invest.” Keep in mind, at the end Madoff was left with some $300 million out of $50 billion. That much money does not just evaporate.
Apparently Madoff kept a cut of the “investment” and wire-transferred the bulk offshore to friendly money laundering havens-----out of sight of the IRS, SEC, and US banking laws.
Madoff lived the lavish lifestyle of a prince---mansions in the Hamptons, Palm Beach and a penthouse on the tony East Side of NYC. His yacht is docked at Cap D'Antibes, the French Riviera and he had two private planes at his disposal. Probably the whole scam crashed b/c Madoff needed a bigger cut but the "investors" refused.
It’s MIND-BOGGLING. Absolutely mind-boggling.
The tax-exempt dimension to this fraud is very fishy here. Madoff was connected to numerous so-called "non-profit," tax-exempt charities, and family foundations. The Robert I. Lappin Charitable Foundation, Yeshiva University and Steven Spielberg's tax-exempt Wunderkind Foundation----and more---have all fallen victim to Madoff. 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.
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.
The N/P's might have facilitated IRS 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, and more specifically 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.
The BIGGEST FRAUDS are between N/P and N/P.....writing checks to each other (which is the MO for laundering tax-exempt monies).
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.
Obvious since Day 1. The government doesn't want us to know how much *it* got cheated out of tax revenues, how it was allowed to continue for so long, and realize there are other scams out there like Bernie's.
Good point.