Madoff Used U.K. Office in Cash Ploy, Filing Says

For years the London operation for Bernard Madoff's firm was a little-known outpost of his New York trading group. Now, authorities said it played a role in how Mr. Madoff carried out his alleged fraud.

The development, disclosed in the government's criminal charges against Mr. Madoff on Tuesday, draws a more-direct connection between the alleged fraud and the trading operation in London, where directors and shareholders included family members and associates of Mr. Madoff.

Mr. Madoff, the government alleges, used the London operation to launder client money. He carried out the alleged fraud by transferring client money from the investment-advisory business in New York to London and then back to the U.S. to support the U.S. trading operation of Bernard L. Madoff Investment Securities LLC, and also for his personal benefit and for family members and associates, authorities said.

Mr. Madoff is expected to plead guilty Thursday to 11 felony counts on allegations that he took in money and claimed to have invested it for clients when in fact he was perpetrating a multibillion-dollar Ponzi scheme.

Authorities in the U.K. have said they are looking for evidence of money laundering involving the London operation, Madoff Securities International Ltd., as they seek to build a case against Mr. Madoff.

In 1998, Mark and Andrew Madoff became directors of the London operation and took stakes in the business. Both sons were given loans by Mr. Madoff's U.S. operation to buy their shares, according a representative for the sons. Interest on the loans was paid by dividends made by the London operation, according to a representative and documents filed in a 2000 divorce for Mark Madoff. His stake at the time was valued at $5 million. Other family members with shares in the business were Bernard's wife, Ruth, and brother, Peter.

From Family Filled Posts at Industry Groups - WSJ (subscription), March 12, 2009

Bernard Madoff and his brother, sons and niece have for years filled prominent leadership roles in groups that police the financial industry and lobby for favorable regulation, routinely contributing money and offering opinions on regulations affecting their firm.
Bernard Madoff's brother Peter resigned Wednesday from the board of the Securities Industry and Financial Markets Association, a lobbying group that represents 650 global securities firms, due to "circumstances surrounding recent events," a Sifma spokesman said. The group is influential on securities and banking regulation in Washington. Peter Madoff couldn't be reached for comment.
Since 1999, the Madoff family and firm have contributed more than $50,000 to the association's political action committee and a PAC run by its predecessor, and spent thousands more in sponsorship fees, according to the Center for Responsive Politics, a nonpartisan research group.
A Sifma spokesman said the organization has approached the Securities Investor Protection Corp. about turning over to the SIPC the money Sifma received from Bernard Madoff. The money could be used to compensate people who invested with Bernard Madoff, the spokesman said. A SIPC spokeswoman couldn't be reached for comment on the plan.
.....

WSJ.com/Madoff: Complete Coverage

From SEC Nominee Has Madoff Connection - WSJ political blog (public), February 21, 2009:

Mary Schapiro, Barack Obama’s pick to lead the Securities and Exchange Commission, has crossed paths with family members of accused fraudster Bernard Madoff through her career at the head of securities-industry bodies.

Madoff and members of his family were active for decades in the National Association of Securities Dealers, which Ms. Schapiro led. His firm was instrumental in founding the Nasdaq stock market created by the association, which merged with the enforcement and regulation arms of the New York Stock Exchange to form the Financial Industry Regulatory Authority last year. Ms. Schapiro now heads Finra.

Madoff was chairman of the board of Nasdaq from 1990 to 1993. Schapiro joined the NASD in 1996.

Both of Bernard Madoff’s sons, Andrew and Mark, served on one of the NASD’s district committees. In 2004, Mark Madoff was appointed to a mutual-fund task force. He had previously been a member of the National Adjudicatory Council for several years.

In a press release announcing new appointments to the adjudicatory council, Schapiro describes it as playing “a critical role in deciding disciplinary matters that set a standard for fairness within the securities industry,” adding “we rely on the NAC’s experience and perspective to help formulate effective membership policy.”

Bernard Madoff and his family had relationships with various philanthropic groups and held numerous honorific positions, especially in the financial industry. Those relationships may have allowed Madoff’s company, Bernard L. Madoff Investment Securities, to attract investors and avoid serious scrutiny. Madoff’s brother, Peter, resigned today from the board of the Securities Industry and Financial Markets Association, a trade association of 650 securities firms.

Bernard Madoff’s niece, Shana Madoff, served on Finra’s Compliance Advisory Group as Ms. Schapiro was heading Finra. Shana Madoff resigned that position this week.

I love to tell this story.

RE: cold call brokers fishing for clients.

The phone rings-——broker says he has a good deal. Gives me the details-—I act interested. Then I spill it-—I just happen to have a $100,000 inheritance from my aunt that’s sitting around doing nothing. Just when I got the guy salivating over the thought of a large commission-—I say I can’t talk-—I gotta get back to work.

“Work,” he says? “Yeah,” I say-—”I head the FBI’s Telephone Fraud Unit.”

They hang up so fast-—don’t even say goodbye.

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.