Most of Madoff's victims were also his accomplices

IHT ^ | 03/13/09 | Joe Nocera

[TigerLikesRooster]

Most of Madoff's victims were also his accomplices

By Joe Nocera

Friday, March 13, 2009

NEW YORK: Standing in the security line Thursday morning, waiting to get into the federal courthouse in Manhattan, I started chatting with the man behind me. He looked to be in his early 60s, and though he was well dressed, he looked a little haggard. I asked him if he was a victim of Bernard Madoff, who would soon be pleading guilty to masterminding the greatest Ponzi scheme in history. He said he was.

Did he want to talk about it? He wasn't sure, he said. I asked his name. "I'm not going to give my name unless there is some benefit for me," he said dourly. "I haven't had too many benefits lately."

How much had he lost? I asked. He grimaced. "I don't really want to say," he replied, but conceded that it was a lot.

What was he hoping for today? He shrugged.

As we passed through security, I asked him what role he thought the government should be playing. It was as if I had flipped a switch. Suddenly, his reticence fell away.

"The SEC," he said, referring to the Securities and Exchange Commission, which muffed multiple opportunities to catch Madoff, "they played a big role in this. They have a lot to answer for." He said that the tax code should be changed so that Madoff victims can recoup taxes they paid on profits that turned out to be illusory — no matter how far in the past those taxes were paid. He thought the Securities Investor Protection Corporation, which tries to put at least a little money in the hands of investors whose firms have gone under, should give victims more than the current $500,000 maximum.

[Liz]

Note that the SEC received complaints only from Madoff's competitors. Not one Madoff investor ever filed a complaint.

Now there are two legal principles operating here:

LEGAL PRINCIPLE ONE Under the legal doctrine of "fraudulent conveyance" . investors who withdrew their money before the fraud was revealed, must return their profits or even part of their initial investments. Legally, one cannot profit from a fraud. The recovery process identifies remaining assets that are then redustributed to those who were defrauded.

Some of Madoff's clients should be facing serious legal problems----some investors were writing personal checks that were placed with a separate Madoff financial entity that was not listed on the SEC. That might be construed as money-laundering and tax evasion.

Keep in mind Bernie‘s investors were savvy, astute successful business people, accustomed to constructing, picking apart and analyzing financial statements. One investor who spoke to reporters was a stockbroker (her family invested with Bernie for generations---the family's patriarch founded the wildly successful Stop and Shop supermarket chain). Other inevstors gave Madoff $100-500 millions to "invest" for years and years.

LEGAL PRINCIPLE TWO The compelling legal principle of . “condonation” ---implied forgiveness for certain behavior. . This should foreclose any cockamamie ideas that taxpayers are gonna bailout these mega-millionaires (who most assuredly have money stashed offshore). Investors implicitly “condoned” Madoff’s actions over a period of time--sometimes for decades---- willingly acquiescing to Madoff's activities in several ways:

(1) Sending Madoff enormous sums of money, sums that were spread out over time (some families invested for generations), even AFTER they had the opportunity to assess their investments;

(2) Referring other investors to Madoff (if the investment was so bad, why did they bring in other investors?);

(3) Taking profits out of the investment, rolling it over, or putting more money in;

(4) Writing PERSONAL checks to Madoff's subrosa spinoff vehicle that was not listed on the Securities Exchange (tax evasion modus);

(5) Accepting, without question, Madoff’s obviously flawed monthly statements.

============================================

REFERENCE BY Ronald D. Orol, a MarketWatch reporter, based in Washington.

EXCERPT There were several things that alerted some in the hedge-fund industry that an investment with Madoff may not have been as safe as it initially appeared. Aksia LLC, which researches hedge funds and advises institutions about investing in the industry, said that it never recommended that clients put money in some of the "feeder funds" that allocated their capital to Madoff. On the surface, these feeder funds looked like institutional-quality vehicles, but there were "a host of red flags," Aksia Chief Executive Jim Vos and colleague Jake Walthour wrote in a letter to clients after the Madoff scandal erupted last week.

The funds were marketed as using a "split-strike conversion" investment strategy that is "remarkably" simple, but the returns it purportedly generated could not be replicated by Aksia's quantitative analyst, Vos and Walthour wrote.

The Madoff funds supposedly traded in the Standard & Poor's 100 index options market, but that market is relatively small and may not have been able to handle trading by vehicles with roughly $13 billion in assets, they said. The feeder funds had almost all their assets custodied with Madoff Securities, the brokerage unit of Madoff's firm.

Aksia checked into the auditor of Madoff Securities and discovered it was a firm called Friehling & Horowitz, which had three employees -- one of whom was 78 years old and another was a secretary. The firm's office in upstate New York was 13 feet by 18 feet. Madoff's Web site claimed the firm was technologically-advanced, but it sent paper confirmations of trades via US mail at the end of each day, rather than providing electronic access to this important information.

Paper copies provide a hedge-fund manager with the end-of-the-day ability to manufacture trade tickets that confirm the investment results.

[Liz]

THE RELIGIOUS, SOCIAL, AND BUSINESS LABYRINTH OF
4800 INVESTORS 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

ANOTHER MADOFF FEEDER FUND Brighton Co Investments is headed by Stanley Chais, a Beverly Hills "philanthropist" who served on "charitable" boards with Madoff. Chais (pronounced Chase) told the Jewish Journal of Los Angeles that he personally invested with Madoff but also "facilitated" others who wished to do likewise. However, spokesmen for the SEC and the California Dept of Corporations said they could find no record of Chais registering as an investment advisor or a broker.

Stanley Chais offers remarks at the Weizmann Institute of Science.

[jonascord]

You are correct in that Madoff couldn't spend that much money on himself. The 50 billion is the total that flowed thru his hands.

Example: Bernie gets 5 million from "A" to invest. Bernie then buys a newspaper, pays his rent, and has a business lunch that he pays for with "A"'s money with "B", "C", "D", and "E". Bernie gives each of his guests a check for $50,000.00, (From that $5 mill), and sends the rest out as "dividends" to the rest of his patsies.

His greedy investors send more money to Madoff to "invest", that Madoff, after paying his own bills, recyles out. The greedy ones give out $1,000,000, get back $150,000.00 and THINK they have made a profit. Like us and the Social Security System, we all believe that the original million is safe somewhere.

We've all been lied to.

[SkyPilot]

Michael Savage said it best last week:

These people were almost 100% Democrats, who thought they were better than everyone else. They thought they were smarter than everyone else. They were "speshul."

The "rules" didn't apply to them.

Now, they are spewing this "It's the fault of the SEC" garbage because they want you and me to pay back some of their millions.

Typical Democrats!

[FreedomPoster]

The Ponzi scheme has been running since FDR.

Madoff is a piker, by comparison with the gov’t run scheme.

[FreedomPoster]

The Social Security system is the world’s biggest Ponzi scheme, plain and simple. Surely you don’t believe in the fiction of the “Social Security Trust Fund”?

You need to do some reading. Here’s a good place to start:

http://www.cato.org/subtopic_display_new.php?topic_id=66&ra_id=6

[Lonesome in Massachussets]

The author saved the best part for last

It was a professionally written article, with an adult point of view. The IHT is owned and operated by the NYT. The Times itself has a few old pros in the bullpen, but under the current management, the children have definitely taken charge.

[FreedomPoster]

When this story first appeared here on FR, in one of the first threads, I did an Federal Election Commission search on Madoff and posted the results in the thread. There was a lot of money involved, and almost all of it went to Democrats.

I expect we would find the same of his victims.

[SkyPilot]

I feel bad for Wiesel. He is a courageous man, and has suffered in his life.

But this "part of a special club" fallacy was his fault. he should not have believed that lie.

By the way, here are the High School photos of Bernie and Ruthie.

[SkyPilot]

When this story first appeared here on FR, in one of the first threads, I did an Federal Election Commission search on Madoff and posted the results in the thread. There was a lot of money involved, and almost all of it went to Democrats. I expect we would find the same of his victims.

Good for you. I did the same thing, using the Open Secrets website. Yup - almost all Democrats. Chuckie Schumer was a BIG recipient.

[shove_it]

"Any of these "Victims" who had been in the "Scheme" for more than 7 years and have spent their "Gains", have already received all their original investment back, plus!"

Excellent point that bears repeating.

[TweetEBird007]

Bernie appears to have been a Univ of Alabama attendee for one year.

[SkyPilot]

Did you all read this:

"I think there should be some legislation," he said finally. What kind of legislation?Watch out! That means he wants taxpayer money! What he was hoping for, he said, was that the government would set up a fund for Madoff victims — maybe give them 60 percent of their losses, he suggested.Why stop at 60%? How about the taxpayers just give you back 100% - and in turn you all donate a few more millions to Democrats, just like you did before. We turned a corner, and saw a long line of people waiting for a spot in the courtroom — far more people, it was obvious, than could ever fit in the chambers. (There was a large overflow room, where I watched the proceedings.) Most of them were holding notebooks; this was clearly the media line. "Is there a line for the victims?" the man asked the marshal. "Are you a victim?" said the marshal. As the man nodded yes....I've got news for this jerk: "Victims" in courtrooms are people whose daughters were raped and murdered. "Victims" are not rich Democrats who foolishly gave all their money to another rich Democrat who paid them back an annual return in the double digits every year. They all knew this was a sham.

Many of Madoff's investors have been left with nothing, having foolishly entrusted their life savings to a man they thought "was God," as Elie Wiesel put it not long ago. Wiesel's foundation lost more than $15 million in the Madoff fraud, and he and his wife, Marion, lost their personal fortune as well. Well, that't the problem, isn't i? God is God. You can't serve two masters.

[panthermom]

I haven’t been paying much attention to this Madoff thing because the way I see it, they willfully gave this man their money. Surely, you would think they would have asked questions, but no, all they heard was give me your savings and I will double it. Nothing is that easy.

I am so tired of having to be responsible for other peoples mistakes, I have to worry about my own mistakes and I can promise you nobody is helping me out.

[SubMareener]

Elie) Wiesel expressed, better than I’ve ever heard it, why people gave Madoff their money. “I remember that it was a myth that he created around him,” Wiesel said, “that everything was so special, so unique, that it had to be secret. It was like a mystical mythology that nobody could understand.” Wiesel added: “He gave the impression that maybe 100 people belonged to the club. Now we know thousands of them were cheated by him.”

Gee! Madoff sounds a lot like Pres__ent 0bama!

[Just mythoughts]

I do not recall the US taxpayers bailing out the ENRON investors. Seems to me, Madoff ran a private club of investors and not just anybody or everybody had an opportunity to invest.

And given the liberals want their sticky fingers on all 401ks and solvent pension funds these that invested with Madoff should not get another advantage off US taxpayers.

[Larry Lucido]

He said that the tax code should be changed so that Madoff victims can recoup taxes they paid on profits that turned out to be illusory

Who pays taxes on unrealized income? Either you got a dividend check or cashed out, or you didn't. You only pay income/capital gains on one of those events. Can a tax specialist help me out?

[SkyPilot]

Afterward, the TV cameras surrounded a woman named Sharon Lissauer. She had not been wealthy, she said, but she's lost everything. She didn't know what she was going to do. She was weeping. It was hard not to feel sad for her — indeed, for all the victims of Mr. Madoff's evil-doing. But one also has to wonder: what were they thinking?

Easy.

They were worshipping money; thinking they had a special right to greed with returns that were too good to be true.

[SkyPilot]

The last part of the article was the best. Especially after my blood boiled after reading this:

I spoke, for instance, to Phyllis Molchatsky, who lost $1.7 million with Madoff — and is now suing the S.E.C. to recoup her losses, on the grounds the agency was so negligent it should be forced to pony up. Her story is sure to rouse sympathy — Madoff was recommended to her by her broker as a safe place to put her money, and she felt virtuous making 9 or 10 percent a year when others were reaching for the stars. The failure of the SEC, she told me, "is a double slap in the face." And she felt the government owed her. Her lawyer, who represents several dozen Madoff victims, told me he "wouldn't be averse" to a victims' fund

[wita]

I love the way Savage, savages the word “spe shul”.