Madoff Investors Probed by U.S. Prosecutors

Reuters via CNBC ^ | May 18, 2009 | Reuters

[CutePuppy]

U.S. prosecutors have broadened their criminal investigation of the Bernard Madoff case beyond the friends and family of the confessed swindler to at least eight investors and associates, The Wall Street Journal reported Monday, citing people familiar with the matter.

The paper named three investors under investigation by the U.S. Attorney's Office, including Jeffry Picower and Stanley Chais, two philanthropists who are the target of lawsuits brought by the trustee liquidating the Madoff firm.

Carl Shapiro, a women's clothing entrepreneur and close friend of Madoff, is also under criminal investigation, the article said.

Investigators have gathered evidence of Picower and Chais telling Madoff how much in returns they wanted and that their accounts would reflect the amounts, the paper said.

It said investigators were also reviewing evidence suggesting Shapiro knew his returns were fraudulent.

The paper said prosecutors have not charged any Madoff investors with criminal wrongdoing.

.....

Five months after Madoff's massive fraud was revealed, little of his victims' money has been found, and it appears increasingly likely that the worldwide hunt for their missing billions will drag on for years.

.....

[CutePuppy]

Finally, some action on selected Madoff "investors". We'll see if it goes anywhere beyond these.

[ButThreeLeftsDo]

OK.....everybody pony up ten bucks and let’s get this FReepathon over....

Thanks.

[Lorianne]

Greed is a two way street.

[CutePuppy]

From original article Madoff Victims Investigated - WSJ, May 19, 2009, by Amir Efrati

Prosecutors are continuing to probe Madoff family members and employees, but the investigation now includes investors who have claimed to be among the hardest-hit victims of the fraud, both directly and through their foundations. Mr. Madoff pleaded guilty in March and is set to be sentenced in June.

Aiding investigators is their discovery that Mr. Madoff was a "meticulous" record keeper who kept correspondence between some clients and the firm, said people familiar with the probe.

WSJ Video 1: Inside the Madoff Scandal: Chapter One

WSJ Video 2: Chapter Two: Unwinding the Money Trail

Fairfield Is Sued by Madoff Trustee for $3.54 Billion - BL, May 18, 2009

[Liz]

.........investigation now includes investors who "claimed" to be hardest-hit victims of Madoff's fraud, both directly and through their foundations.........

Course, everyone knows that I’m really, r-e-a-l-l-y humble (/snic).

So I could n-e-v-e-r bring myself to say "I told you so."

[Liz]

It is impossible to believe these savvy, wealthy successful people did not know Madoff was running a Ponzi scheme.

ITEM Stanley Chais tops Madoff's speed dial entry....a longtime money manager AND Bernie's pal on the elite Palm Beach country club circuit. Chais also fancies himself a "philanthropost."

CHAIS FEEDER FUND Chais heads Brighton Co Investments and serves on "charitable" boards with Madoff.

THIS IS THE FUNNIEST PART 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.

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ITEM Chais has said the Madoff swindle wiped out the Chais Family Foundation........which contributed millions annually to various Jewish charges. Monies Chais took from the Madoff operation have to be returned so that it can be redistributed to investors actually swindled by Madoff. Comes under the legal principle of "fraudulent conveyance"....means one cannot legally profit from a fraud.

ITEM That is over and above frauds perpetrated by these "so-called tax-exempt foundations." For example checks one foundation wrote to another foundation should be scrutinized..... could involve the biggest frauds, in the form of tax evasion, money laundering, etc.

[Liz]

.......investigators discovered Madoff was a "meticulous" record keeper who kept correspondence between some clients and the firm ......

Ut oh---a paper trail.

Didn't any of Madoff's lawyers tell him---"never write anything down."

LOL-----betcha Madoff (cough) "investors" are getting real nervous.

[Liz]

HOW'D HE DO THAT? To pull off a $65 billion scheme, the Madoff cabal would have had to involve investors, relatives, associates, co-conspirators (and/or subsets of them), businesses and tax-exempt organizations........all with similar goals.

Madoff may have escaped scrutiny by routing his scheme through telephone lines with a maze of complex telecommunications' systems equipped with call-forwarding and voice mail systems, and numerous postal and commercial mail boxes..........and perhaps money-transfer systems that operate in ethnic enclaves and places like NYC's Diamond District.

The "investment" monies could have been disguised (to evade the IRS) by routing through a network of domestic and international bank accounts using counterfeit checks.....opening commercial bank accounts in the name of bogus businesses and wire-transferring and/or depositing "investment" checks into those accounts.

Madoff's phony checks could have had invalid bank routing numbers, forged endorsements, or been drawn on the proceeds of other counterfeit checks deposited in other bank accounts. Before banks discovered the fraud, the funds might have been transferred out of the accounts……probably offshore----leaving banks unable to recoup their losses.

State and federal tax authorities could have been swindled, if the scheme involved filing hundreds of phony tax returns in real or fictitious names, falsely claiming federal EITC credits (meant to benefit low-income earners).

In an international scheme with offshore ties, the Madoff co-conspirators or subsets of them might have obtained hundreds of taxpayer identification numbers for phantom citizens with worldwide addresses, and used the information, along with phony passports, to claim hundreds of bogus tax refunds.

Investigators poring over Madoff's books have discovered he routinely falsified documents in a fraud that could take months to unravel. In a classic fraud MO, Madoff kept two (or more) sets of books. One set keeps track of losses at Bernard L. Madoff Investment Securities LLC's (his investment advisory arm), while the other set consisted of "investors" writing Madoff personal checks.

Madoff's methods may have included limited-recourse loans to artificially inflate "asset value," so that he could fraudulently borrow real money based on “assets” that didn’t really exist.

Madoff's Web site claimed the firm was technologically-advanced, however investigations found the firm 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.

It could be postulated that most of his investors figured Madoff was doing something illegal---Wall Street was whispering Madoff was laundering proceeds from Russian mob activities.

If Madoff was helping gangsters steal, some investors might have figured they could make a profit on the deal.

[Condor51]

U.S. prosecutors have broadened their criminal investigation of the Bernard Madoff case beyond the friends and family of the confessed swindler to at least eight investors and associates,

*** "LOL-----betcha Madoff (cough) "investors" are getting real nervous." ****

Bernie's *investors* SHOULD be nervous. Particularly the ones who got in his Ponzi Scheme early and received 'some' profits. As I have a friend who got caught up in one and lost everything thanks to the FEDS, even though he himself was a victim.

My friend was a Business owner, and this scum bag 'Investment Manager' targeted Business Owners like him in this Lounge we hung out at after work (ten or so got suckered in). And after the Ponzi Scheme fell apart the scum bag and his secretary/lover skipped town and my friend who got in early was then indicted by the FEDS because early on he received 'some' cash profits from the phony investments that never took place.

Besides the 'profit money on paper' my friend was originally a Millionaire, or very close to one, and the FEDS took every penny he had, and he had to sell his business, all to pay off 'investors' who got in late. It was like my friend was running the Ponzi scheme.

So now my friend works as a commission salesman for the company he used to own, and lives in a tiny two bedroom cookie-cutter condo in a NW Chi suburb.

So Bernie's *early investors* better watch out. Not only won't they get any money back, they'll be on trial and paying others.

There was an 'upside' to my friends story, poetic justice was served. The scum bag and his secretary/lover were subsequently caught in AZ (or Nev?) and when he was surrounded by LEOs in a motel parking lot, he blew his brains out.
(but alas, last I heard the money scammed was never found. The Feds had the Secretary/Lover but she wasn't talking)

[Liz]

Sorry to hear about your friend.

Under the legal principle of “fraudulent conveyance,” one is not permitted to profit from a fraud.....

...........but why was he was not permitted to keep monies he made OUTSIDE the scam?

Seems to me your friend was honest........he owned up to his participation .......and ended up paying for others.

I’m pretty sure Bernie’s “investors” are not as honest as your friend.

[Condor51]

Sorry to hear about your friend. ...........but why was he was not permitted to keep monies he made OUTSIDE the scam?

Thanks he got screwed. As to why they took all his money, as I understood it the FEDS made him responsible for all the other 'suckers' losses at the bottom because he was one of the first 'investors' and actually got some of the idiotic profit percentages claimed by the Ponzi Scheme scum bag. (He didn't appeal, he didn't have the money)

Seems to me your friend was honest........he owned up to his participation .......and ended up paying for others.

Yep, my friend is honest as the day is long and honorable as 'heck'. When I placed orders with him and the Factory goofed up - he owned up to it and ate the replacement costs. (Many Sales Reps in the construction industry will blame you for an order screw up and fight you like crazy when needing an equipment re-order)

And here's the funny part (sit down) ... He's a life long Democrat originally from Boston! I met him when he moved to the Chi metro area about 1972 when he became the area Sales Manager for a company he worked for then.

We never seriously talked politics, except I would tease him occasionally about Ted Kennedy and the goofy Massachusetts Liberals or like when Dubya won twice. We'd laugh, have a drink (he'd always buy) and then talk sports or business (which Mech Engineers were the biggest ... jerks)

[CutePuppy]

It is impossible to believe these savvy, wealthy successful people did not know Madoff was running a Ponzi scheme.

FTA: Investigators have gathered evidence of Picower and Chais telling Madoff how much in returns they wanted and that their accounts would reflect the amounts, the paper said.

This is not an "investment" in any normal understanding of risk associated with real investments. Something similar "happened" to Hillary Clinton with her cattle futures trading, when she invested $1,000 and abruptly quit her unbelievably successful commodities trading sideline when account reached $100,000 within a year, while not even using full available margin.

They may not have known specifically about Ponzi scheme, but everyone understood the front-running, and they made darn sure that the profits would be assigned or allocated into their accounts, whether anyone else has profits for that period or not.

They also understood that "lower but stable" returns and low trading commissions promised by Madoff and available only to small elite circle wouldn't invite much outside interest and scrutiny the way most hedge funds with sky-high returns and high management fees usually do.

[Liz]

Investigators have evidence of Picower and Chais telling Madoff how much they wanted and that their accounts should reflect the returns demanded........they understood Madoff's front-running, and made darn sure they profited whether anyone else did........They also understood that "lower but stable" returns and low trading commissions promised by Madoff and available only to small elite circle wouldn't invite much outside interest and scrutiny the way most hedge funds with sky-high returns and high management fees usually do.

Looks like Bernie was hightailing it to all the global money-laundering havens before he got nailed. (1) BVI's Vizcaya Partners Ltd. AND (2) Gibraltar-based Banque Jacob Safra Ltd. got $150M (that we know of) about six weeks before Madoff was exposed. $12B was pulled out of Bernard L. Madoff’s firm in 2008, and $6B just three months before he was arrested last Dec.....

ONE ANGLE-----MERKIN'S CAYMAN ISLAND HEDGE FUND While he was GMAC chairman, Bernie's pal, J Ezra Merkin, ran hedge funds as a sideline and was feeding funds into Madoff's Ponzi operation (and pocketing hundreds of $millions in fees).

Merkin was feeding funds to Madoff---connected to 1) Ariel Fund, based in the Cayman Islands (an infamous money laundering haven--a partnership between Merkin and London's Fortis Bank), (2) Ascot Partners, (3) general partner of Gabriel Capital LP, a $5 billion family of hedge funds, and, (4) managing partner of Gotham Capital.

Chrysler/Cerebrus’ Fineberg and GMAC/ Merkin who got billions in bailouts-----co-own an Israeli bank. Debark from anywhere in the world, deposit a suitcase full of case and nobody asks where your got it, or if taxes were paid on it. Stash all the loot you can carry ......out of sight of the IRS and US banking laws.

FEDERAL RESERVE A FACTOR IN BAILOUTS AND SWINDLES? Were the connivers stealing Federal Reserve insider info? Madoff swindled $65B and had financial connections to billion dollar auto industry bailouts.....GM J Ezra Merkin and Chrysler's Stephen Fineberg. Chrysler's Fineberg tapped ex-Treasury Secy John Snow to head his company, Cerebrus. Knowing Federal Reserves moves in advance would make zillions for the thieves...........on top of the billions they were swilling elsewere. These termites were running rampant over the US government---while Merkin and Feinberg's auto companies received billions in govt bailouts.

ANOTHER ANGLE One of the theories is that Bernie was laundering billions for the Russian mob.....and that's why he's still alive. The mob needs to know where he hid all the money. Once they know, Bernie can say his prayers. BTW, smaller investors got in---b/c they figured if Bernie was helping the mob steal billions, they oughta make a few bucks on it. Guess that's why Bernie wants to be locked up----for protection....the Ruskis play rough.

[Liz]

THE SHEER NUMBER of tax-exempt "schools, charities and foundations" connected to Madoff smells to high heaven. Bernie's operation had an unusually large number of tax-exempts "investing" with him.

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 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-exempts 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 checks.

9. Having no official tax-exempt deposit and withdrawal control system.

Authorities should investigate the Madoff-invested tax-exempts' 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.

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Madoff, raised millions for Orthodox Jewish groups (no other branch of Judaism was involved)...... he resigned as chairman of Yeshiva University's Sy Syms School of Business and as board treasurer.

At Hofstra University, a stunned board voted unanimously to put Madoff "on leave." Yeshiva's board scrubbed all mention of Madoff from its Web site. Madoff also sits on the boards of North Shore-Long Island Jewish Graduate School of Molecular Medicine, the Picower Institute for Medical Research and New York City Center, a theater organization.

Madoff and his wife, Ruth, Madoff also run a “self-funded non-profit“……………with about $19 million in assets, according to IRS filings…………..donating millions to Jewish charities, Dalton School, the Metropolitan Opera, Queens College, Lincoln Center Theater, the Robin Hood Foundation, and groups for underprivileged kids. SOURCE http://www.nypost.com/seven/12132008/news/regionalnews/charity_trustees_a_bustee_143968.htm

THIS HAS TAX EVASION WRITTEN ALL OVER IT Ira Rennert, Fifth Avenue Synagogue board chair, deeply invested w/ Madoff. 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.

Is this astoundingly palatial oceanfront Hamptons mega-mansion
a "synagogue-residence-yeshiva" for Orthodox Judaism students?

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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.

Investigators need to determine why Orthodox Brooklyn, NY residents registered some 800 tax-exempts in Lakewood-----a small flea-bitten central New Jersey town.

SOURCE Read more about this subject on the PBS web site which aired a three-part series on the activities of Orthodox in America.

It is believed that J. Ezra Merkin, Fifth Avenue Synagogue president, through Mr Merkin‘s Ascot Partners fund, had about $1.8 billion invested w/ Madofff. Members of the Fifth Avenue Synagogue, located on the wealthy Upper East Side of Manhattan, are estimated to have lost about $2 billion. Mr Merkin was also Chairman of Yeshiva University Investment Committee, He introduced clients to Madoff and gave him access to prominent Jewish charities and universities.

REFERENCE Yeshiva University is a huge complex and Orthodox stronghold---it maintains four campuses in New York City and a campus in Israel: along with dormitories, a library, a hospital and other medical facilities; several Graduate and Professional Schools, rabbinical schools, a museum, academic centers and institutes for high school level students, and centers for Israeli studies in New York, and in Israel, etc, etc, etc.

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