RAT IN THE HAT; BERNIE A NEW YEAR'S SKEEVE (swindler hid behind role of kindly uncle)

Portrait of a con artist--complete with winsome, crinkly smile, and doe-eyed demeanor.

" I'm Uncle Bernie. Trust me"

THE RELIGIOUS, SOCIAL, AND BUSINESS LABYRINTH MADOFF USED TO RAKE IN BILLIONS.

MAP IS INTERACTIVE AT WEB SITE

WEB SITE http://news.muckety.com/2008/12/28/madoff-used-social-family-networks-to-rake-in-billions/9031

Bernie is just the tip of the iceberg in regards to the rampant fraud on Wall St. Harry Markopolos had very tangible evidence on Madoff and the SEC did nothing. Why? Because the SEC was on the take, imho. It’s why you are hearing absolutely NOTHING about the investigation. No leaks, nada. As well, Harry mentioned that NO big Wall St firms invested with Madoff. Why? Because they knew he was running a ponzi scheme. When Harry was asked by Steve Kroft of CBS why these big firms didn’t do anything to expose Madoff, Harry said point blank, “Those in glass houses do not throw stones.” Tells you all you need to know. And having worked in the industry, I know all too well just how corrupt the industry is.

Markopolos on 60 Minutes begins the deconstruction on how Madoff got away with the fraud. His book should be a blockbuster.

I wish somebody would tackle the fact that Madoff used his status and position to ward off investigations. Markopolis reported Madoff to the SEC several times, raising fraud issues and yet the SEC "turned a blind eye."

It must be considered that the SEC backed-off investigating Madoff NOT because they are incompetent, but because SEC investigators risked losing their jobs if they zeroed in on Madoff.

CAREER KILLER In the ranks of L/E, it is NOT advisable to imply people of Jewish heritage are doing something illegal---even moreso, it is a career killer to suggest it. FBI agents have been lacerated and condemned----even losing their jobs.

In fact, the cunning Madoff seemed to know L/E dared not suggest he was doing something illegal and he may have colluded to use scary charges of anti-Semitism to forestall investigations into his operation.

Madoff had a lot to lose if he was investigated. He knew he was operating a fraud----a fraud that subsidized his lavish lifestyle; posh homes all over the world, several yachts, private planes, country club memberships, and purchases that included pricey watches and jewelry.

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Dec 26, 2008
The Bernie Madoff I Knew
BY Laura Goldman (her first-person account)
http://pajamasmedia.com/blog/the-bernie-madoff-i-knew/

When I heard the news of Bernard Madoff’s arrest, I breathed a sigh of relief. “Thank God, I dodged that bullet” was my first thought. For sure, there was no gloating on my part. Anyone, who has been in the brokerage business for a long time, has been preyed on by con artists more than once. As a broker, you try your best to avoid them, but there is always one that slips through where your guard is down.

Madoff and my paths crossed in Palm Beach over 10 years ago. We were both scouring for clients there, albeit on different rungs of the social and economic ladder. My office was the lunch counter at Green’s Pharmacy while Bernard’s was the much grander Palm Beach Country Club.

Hearing whispers of his investment prowess, I approached “Uncle Bernie” one day and asked to meet him to discuss referring clients to him. Madoff’s clients bragged that he showed consistent returns of 10-18% each year and rarely had a down month.

At the meeting, Bernie, known as the Jewish T-bill, was very charming and low key. Bernard, the former chairman of the NASDAQ stock exchange, did not want to answer questions about his investment business and strategy.

He only grudgingly admitted that he employed a split conversion strategy that used both put and call options. I did not know what to make of his opacity.

I was discomfited by his saying how lucky that I was that he allowed me to invest with him.

The structure of Madoff’s investment also concerned me. Similar investments would have been established as a hedge fund with a separate custodian of the assets. The general partner of a hedge fund takes a management fee and a percent of the profits. Mr. Madoff insisted on keeping the assets in house at his own brokerage firm, but only charged commissions, which meant a lower payout for him.

Madoff, always the salesman, assuaged my doubts about the investment structure. “I make up for the lower fees with the additional volume of investments that my fee structure attracts.”

The consistency in returns, the small size of the auditing firm, and the structure of the investment were troubling, but they were not the deal breaker for me. Since my office had previously been in the same building as the Philadelphia Stock and Options Exchange, I knew many of the employees of the exchange and leading market makers.

When I called them, all of them said that they knew Bernie but did not trade with him. Even though he said that he traded his options over the counter, it still seemed strange to me that none of the giants in the tight-knit options world traded with him. After 45 minutes of detective work, I passed on the investment.

Even with the red flags raised on the investment, I struggled with turning down the investment opportunity. I was worried that my cautiousness was causing me to miss a great opportunity to earn lots of money. The product that Bernie Madoff had “created” would have been as easy to sell as ice water on a hot summer day.

After turning down the opportunity, I frequently encountered clients of Bernard Madoff. Most had the lion’s share of their assets invested with him.

My suggestions to diversify their assets fell on deaf ears. Sadly, many Jews believed in Bernie Madoff more than they believed in God and were just as unlikely to forsake him.

Even though the drumbeat of rumors about Bernie’s business eventually grew louder in the financial community, there was nothing that I could do about it. I could not take on someone with the stature of Bernie without proof in black and white.

I wasn’t the only one with doubts. In 2001, Barrons and MAR Hedge Fund Report wrote scathing reviews of Bernie’s investment business.

The title of the MAR article did not pull any punches — “Madoff tops the charts; Skeptics ask how.” Barron’s was also hard-hitting. “The recent MAR Hedge report, for example, cited more than a dozen hedge fund professionals, including current and former Madoff traders, who questioned why no one had been able to duplicate Madoff’s returns using this strategy.

Likewise, three option strategists at major investment banks told Barron’s they couldn’t understand how Madoff churns out such numbers. Adds a former Madoff investor: “Anybody who’s a seasoned hedge-fund investor knows the split-strike conversion is not the whole story. To take it at face value is a bit naïve.”

These articles gave me an excuse to contact Madoff’s clients again.

Instead of being thanked for sending them the articles, I was attacked. “How dare you say anything bad about Bernie.” Some dismissed the attacks on Bernie as anti-Semitism.

Several of those who received my mailing asked me questions. Still, even though I planted the seeds of suspicion, they did not grow. Most decided to continue investing with Bernie. They told me that they did not want to give up a good thing. They did not believe that the music would stop and they would be left without a chair.

Now that the music has stopped, many of Madoff’s clients are finally singing my name. Unfortunately, there is nothing that I can do for them now. I wish that I could say that this type of fraud would not happen again, but unfortunately I can’t. Now that Bernie has proved how easy is to do, one can be sure that con artists will be falling over themselves to imitate him. END

The Ponzian parties.

New Year's Eve pic of smirking Madoff, lounging on his friend
Norman Levy's yacht, while he was stealing millions from Levy.

Madoff's lawyer Ira Sorkin released an e-mail he received (apparently from
one of Bernie's victims) that said, "As one Jew to another, I deeply regret
that the Sorkin family did not perish in the Nazi death camps."

Yikes----did Sorkin turn in this rank hater to be judged by Big Abe?

Madoff's lawyer Ira Sorkin released an e-mail he received (apparently from one of Bernie's victims) that said, "As one Jew to another, I deeply regret that the Sorkin family did not perish in the Nazi death camps."
Yikes----did Sorkin turn in this rank hater to be judged by Big Abe?

I haven't checked Abe's ADL website lately. The last time there was still the old antisemitism warning (threat) from Abe on criticizing Madoff. I'm suuuuuure this will change now.

Madoff's lawyer, Ira Sorkin, released an e-mail he received (apparently from one of Bernie's victims) that said, "As one Jew to another, I deeply regret that the Sorkin family did not perish in the Nazi death camps."

I sure hope Big Abe factors in the “tolerant and compassionate” way the gentleman hater said, "As one Jew to another, I deeply regret that the Sorkin family did not perish in the Nazi death camps."

That should be held in this hater's favor.

Not like those disgusting anti-Semites who do not even pretend to be gentlemen.

When Markopolos was asked by 60 Minutes' Steve Kroft why big Wall Street firms didn’t do anything to expose Madoff (since they apparently smelled a fraud and did not put any money with him), Markopolos said, “Those in glass houses do not throw stones.” ............... Tells you all you need to know. And having worked in the industry, I know all too well just how corrupt the industry is.

Remembering the rallying cry of investors when the market was galloping to new heights: "Where are the investors' yachts?"

Bernie was living the high life with the Wall Street crowd in the Hamptons, Palm Beach, the Riviera.....while investors were getting screwed.

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A taste of Bernie's high life.

The office rented by Madoff's firm in the Israeli-owned famous Lipstick Building, where rents command about $3-5 million annually is also "the epitome of luxury."

Madoff's Mellon bank accounts are under investigation and show signs of offshore activity. Accounts in family members' names are a possibility. "A lot of people have doubts about the family," said a Garden City, NY, attorney representing 10 Madoff investors. "We don't know to what extent his wife benefited. She certainly benefited. She lived a Gatsby-style life."

Ruth Madoff mailed $1 million in watches and jewelry, including jewel-encrusted Tiffany and Cartier watches, a diamond necklace, and other pieces of precious gems to relatives in December after a court prohibited dispersal of assets. In 2006, Ruth Madoff took steps to protect their Florida property from seizure under homestead laws. A 2006 homestead application was denied by the Palm Beach Property Appraiser's office. She reapplied September 2007 and was granted an exemption on Jan. 12, CBS reported.

An Atlanta law firm that has represented clients in previous Ponzi scheme cases, noted that a good portion of Madoff's business was done internationally, and said some of the money could have been moved there. "The auditors will have a field day with this, trying to trace the bank accounts."

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Madoff's Lifestyles of the Rich and Infamous (all with other people's money)

Bernard Madoff, the man behind an alleged $50 billion fraud, has a yacht named 'Bull,' owns several luxurious homes and may even have had two private planes on call.

Upper East Side apartment---Out on bail, Bernard Madoff is under house arrest at his co-op apartment on Manhattan's Upper East Side where he lives with his wife, Ruth. Apartments in the building, just blocks away from his firm's offices, usually go for upwards of $5 million. One neighbor: CBS' Matt Lauer, who scooped up a unit for $5.9 million in 2004.

A yacht named 'Bull' Madoff's 55.5-foot yacht was built in 1969 by Rybovich and Sons, an 80-year-old Florida boatyard whose client roster includes Ernest Hemingway and Chicago mobster Anthony "Big Tuna" Accardo. A Rybovich employee confirmed Madoff was a customer but declined to comment. The yacht was docked on the Riviera in Cap D'Antibes, France, outside Madoff's Riviera estate, when news broke of the fraud.

Madoff may have had two private planes on call through BLM Air Charter, a company registered at the same address as his Bernard Madoff Investment Securities firm. According to federal aviation records, BLM Air Charter is one of seven owners of a Cessna Citation X with NetJets, the Berkshire Hathaway company that sells shares of private planes. (NetJets spokesperson Maryann Aarseth declined to comment, saying only that "Part of flying with NetJets is flying privately, so we don't talk about who our NetJet owners are.") BLM Air Charter's second plane, a 2008 Embraer business jet, is co-owned with a Long Island company.

Bump.

Thanks for the ping.

March 4, 2009
NEW YORK (Reuters) - A court appearance on Wednesday by accused swindler Bernard Madoff for a hearing over a potential conflict of interest involving his lawyer, Ira Sorkin has been postponed, a judge’s clerk said on Tuesday.

The clerk for the judge in U.S. District Court in Manhattan said no new date had been scheduled for the hearing, which was announced earlier on Tuesday. No reason was given for the change but both U.S. prosecutors and Sorkin consented to it, the clerk said.

The hearing before Judge Leonard Sand had been called at the request of U.S. prosecutors over a potential conflict of interest for Sorkin in his representation of two accountants in a 1992 case brought by the U.S. Securities and Exchange Commission (SEC).

The accountants, Frank Avellino and a partner, Michael Bienes, invested with Madoff, court documents in the case showed. In a deal with the SEC, Avellino shut down his firm, returned money to investors and paid a $350,000 fine.

Madoff was not sued by the SEC in the 1992 case.

Sorkin said earlier that the hearing would also address his father having had a retirement account with Madoff before he died in 2001.

The U.S. Attorney’s office in New York declined comment.

Sorkin said he never invested with Madoff. He said his father had a retirement account that was passed to his mother when the father died in 2001. Sorkin said he received her mail for several years before her death in 2007.

Thanks for the update.

It must be considered that the SEC backed-off investigating Madoff NOT because they are incompetent, but because SEC investigators risked losing their jobs if they zeroed in on Madoff.

Exactly, corruption and political pressure or affinity are far more likely than incompetence in this case. It's unlikely that SEC auditors, even if inexperienced, would miss the Ponzi scheme if they seriously examined several relevant points in Markopolos November 2005 report and compared Madoff's alleged trading records with the records of the exchanges (e.g., options volumes etc.) So SEC incompetence is pretty much out of the question, it's more likely that political affinity and/or pressure (after all, Bernie was a VERY BIG and "good" Democrat) had a role in letting him continue with the scheme.

Markopolos openly denigrated SEC for lack of staff that supposedly had to have "mathematical background needed to manage these type of products" in order to investigate it - which in reality was not necessary to understand his Red Flags - math is quite simple and options are pretty simple forms of derivatives. He also implied incompetence on the part of SEC staff, or describing the fund managers who invested with Madoff as "naive men and women with a notable lack of derivatives expertise and possessing little or no quantitative finance ability."

This is not only off the mark and self-aggrandizing, but may have been counterproductive and could hardly help motivate the thorough investigation by SEC. Also, he apparently made arrangements for bounty in the case (in Scenario #1, front-running and insider-trading) - Section 21A(e) of the 1934 Act allows the SEC to pay up to 10% of the total fines levied for insider-trading. We have obtained approval from the SEC’s Office of General Counsel, the Chairman’s Office, and the bounty program administrator that the SEC is able and willing to pay Section 21A(e) rewards. This case should qualify if insider-trading is involved.

No problem with that, but it was not exactly all just doing it "for the flag" on his part, the way it was described. It also may have helped concentrate SEC's attention on looking for insider-trading violations aspects of the case, if any, lest be accused of skimming on a bounty for the tip.

2. Scenario # 2 (Highly likely) Madoff Securities is the world’s largest Ponzi Scheme. In this case there is no SEC reward payment due the whistle-blower so basically I’m turning this case in because it’s the right thing to do. Far better that the SEC is proactive in shutting down a Ponzi Scheme of this size rather than reactive.

Who: The politically powerful Madoff family owns and operates a New York City based broker-dealer, ECN, and what is effectively the world’s largest hedge fund. Bernard “Bernie” Madoff, the family patriarch started the firm.

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Re When Markopolos was asked by 60 Minutes' Steve Kroft why big Wall Street firms didn’t do anything to expose Madoff (since they apparently smelled a fraud and did not put any money with him), Markopolos said, “Those in glass houses do not throw stones.” ............... Tells you all you need to know. And having worked in the industry, I know all too well just how corrupt the industry is.

Unfortunately, I see a lot of typical 60 Minutes style innuendo here... Let's be real, Wall Street firms look at many deals every day. If a deal smelled fishy, they would simply move on; they didn't have to invest with Madoff, nor did they have to spend any effort to investigate every deal they didn't like and decided to walked away from. Certainly, they wouldn't and couldn't have any basis for reporting to SEC anything about Madoff Ponzi scheme based on feelings, without any proof - which would take time and effort to produce based only on what he told about his "strategy", which was a marketing ploy, anyway. Why would they invest themselves in trying to prove Madoff Ponzi, instead of putting him on their black list, stay away from the deal and warn their clients and firm they dealt with. They also may have subjected themselves to charges of jealousy and baseless maligning of the more successful competitor, who was a man of great stature and reputation on the Street.

Markopolos himself hired an accounting forensic when his own boss told him to justify his results not being as good relative to those Madoff claimed, and specify which objections he had to Madoff's stated "strategy". If Markopolos wasn't challenged into this, I doubt it would be any outside forensic research anywhere and there would be no letters to SEC. More likely, it would be just the way it was - everybody on the Street, who knew to stay away from dealing with Bernie Madoff, did it not because they "knew" Madoff ran a Ponzi scheme let alone could go about "proving" it to SEC, but because he was not "kosher".

N-i-c-e take. Good read.

Markopolos openly denigrating SEC staff for lack of math skills is off the mark and self-aggrandizing...

Even a high school student could have perused Bernie's amateurish monthly reports and concluded something was fishy.

Now Markopolos is entitled to a little self-adulation considering he found the fraud even when savvy investors were tripping over themselves to get in on the deal...... And Markopolis did turn Bernie in........ several times.

He also told Steve Kroft he began studying Madoff b/c he was Markopolos' competitor and he wanted to know how to duplicate Madoff's successful investment strategy.

......corruption and political pressure or affinity are far more likely than incompetence...... being a VERY BIG and "good" Democrat had a role in Bernie continuing the scheme..............

No question-----more likely even his investors who (on paper) were making huge profits, had a role in keeping the scam afloat.

A lot of politicans who were pocketing campaign contributions also kept it going.

He also told Steve Kroft he began studying Madoff b/c he was Markopolos' competitor and he wanted to know how to duplicate Madoff's successful investment strategy.

Probably, a shorthand answer. Here is the longer version:

Dogged pursuer of Madoff wary of fame - January 8, 2009

His bosses at Rampart were keen to learn how they could match Madoff's double-digit returns. As the office math whiz, Markopolos was assigned in 2000 to deconstruct Madoff's strategy to see if he could replicate it.
When he couldn't, the task became something of a running challenge around the office.
"I'd say, 'Hey Harry, how come you can't run a program like this?,' " said Frank Casey, a former Rampart colleague who now runs a consulting firm for hedge fund investors.
......
Markopolos allows that at times he was motivated partly by the opportunity to receive a bounty that the government pays to whistleblowers in successful prosecutions, if the fraud falls within certain categories - the front running issue, for example. Depending on the size of the fraud, such payments could run into the millions of dollars. But exposing a Ponzi scheme probably wouldn't generate such a bounty.
Over time, Markopolos concluded that he wasn't likely to get a whistleblower payment, but he continued nonetheless, spurred on by the pure intellectual challenge of cracking a Wall Street legend, as well as the ongoing encouragement from his SEC friend, Manion, to stay on the pursuit.

Now, this BG article says it was in 2000, but that doesn't explain how the first Markopolos tip about Madoff apparently came in 1999. I don't know the content of that complaint, so make no judgment on why that was not followed up by SEC - could be the weak substance, or could be the usual political interference. BG's "2000" may be a typo, since Reuters reports essentially the same story but dates it in 1996, which makes a lot more sense with timeline:

Markopolos, Madoff whistleblower say leave me alone - Reuters, January 11, 2009

The derivatives expert turned his analytical focus on Madoff in 1996 after his boss at Rampart asked him to figure out how to match the returns of Bernard L Madoff Investment Securities LLC.
Years of analysis convinced Markopolos, originally from Erie, Pennsylvania, that it was impossible for Madoff to consistently outperform markets so dramatically. He

And a slightly different but plausible timeline (1999) from Mass. investor saw inside Madoff scam, and the mathematicians / forensic accountants who did the bulk of analysis: Markopolos reached his conclusion with the help of mathematicians like Dan diBartolomeo, whose analysis of the Madoff's methods in 1999 helped fuel Markopolos' suspicions.
"People should have seen the writing on the wall," diBartolomeo said.
.....
Markopolos graduated from Cathedral Prep in Erie in 1974, then in 1981 from Loyola College in Maryland, which his mother said he paid for on his own. After time in the Army and in the financial services field, he earned a graduate management degree from Boston College in 1997.
By 1999, he was working for Rampart Investment Management Co. and charged with doing competitive research on Bernard L. Madoff Investment Securities, which was using a similar investment strategy as his company, but far outperforming it. Part of Markopolos's research included a visit to diBartolomeo, whom he knew from his professional circle.
"I think he was curious about how his competitor was doing so much better than they were," diBartolomeo recalled.
Researching Madoff's numbers, using data the firm distributed to prospective investors, diBartolomeo concluded within hours that it was impossible for Madoff to get the returns he reported while using the strategy he said he used.
It's logical to conclude that [first] 1999 report to SEC was his contact with his SEC friend in Boston branch, which could not be pushed into New York or DC, and the second, possibly enhanced, report was sent semi-anonimously to SEC in 2005.

Here are additional articles on number crunching that was done by Dan diBartolomeo to prove the impossibility of Madoff's returns (at least, without illegal front-running) and they are not that difficult.
I Knew Bernie Madoff Was Cheating--That's Why I Invested with Him

Incompetence, lack of math skills or understanding of option strategies on that low level could not possibly have been the weak point at SEC, and should not be used or alloweded to shoulder the blame in this case... it had to be something else.

Should have pinged you to #16

......additional articles on numbers-crunching done by Dan diBartolomeo prove the impossibility of Madoff's returns (at least, without illegal front-running).............

Thanks for the link.

Of course there were illegalities going on----money laundering and tax evasion would also explain why savvy, successful, sophisticated businessmen gave Bernie hundreds of millions of dollars to "invest" over a period of years.

Bernie's pal J Ezra Merkin----who ran four hedge funds and owned an offshore bank while heading GMAC---should come under intense scrutiny. Merkin's father, Hermann, a fur-trader who became director of the Israel Discount Bank of New York--the bank the US govt leaned on after finding evidence of money laundering.

MERKIN'S CAYMAN ISLAND HEDGE FUND As GMAC chair, Merkin ran hedge funds as a sideline and was feeding funds into Madoff's operation (and pocketing hundreds of $millions in fees)-----Merkin's name is connected to (1) Ariel Fund, based in the Cayman Islands (a partnership between Merkin and Fortis Bank in an infamous money laundering haven), (2) Ascot Partners, (3) general partner of Gabriel Capital LP, a $5 billion family of hedge funds, and, (4) managing partner of Gotham Capital.

GMAC chair J Ezra Merkin and Stephen A. Feinberg, bought Bank Leumi from the Israeli government for $500 million. Stephen A. Fineberg's private equity firm---Cerberus Capital Management LP--- also owns Chrysler Motors. The US Treasury is now buying a $5 billion stake in GMAC and lending $1 billion to GM. This latest loan is IN ADDITION to the $13.4 billion the US Treasury lent earlier to J Ezra Merkin's GM, and Fineberg's Chrysler

Same with Madoff's buddy Ira Rennert---the owner of an obscenely palatial Hampton residence. Ira Rennert, Fifth Avenue Synagogue board chair, and Chairman of Yeshiva University Investment Committee, "invested" some $200 million w/ Madoff.

This has tax evasion written all over it. Hamptonites complain this astoundingly palatial mega-mansion in the posh Hamptons is actually a "synagogue-residence-yeshiva" for Orthodox Judaism students. The complex---which rivals Versailles and Buckingham Palace----was built by Fifth Avenue Synagogue board chair Ira Rennert.

The average "hate-filled anti-Semite" might ask: How can Orthodox religionists be designated "disadvantaged minorities" when they are investing hundreds of millions of dollars w/ Madoff?

BGRND Orthodox Judaism was designated a "disadvantaged minority" under Lyndon Johnson's "Great Society." This meant that Orthodox became beneficiaries of millions upon millions of tax dollars----federal community development funds. Federal and city assistance received over the years include CETA (Comprehensive Employment Training Act) monies, Section 8 housing assistance, school meal funds, Headstart, HUD grants, and low interest loans. In 1984, federal aid was expanded when the federal government included Orthodox in a priority group of six disadvantaged minorities recognized by all federal agencies.