S.E.C. Previews Its Madoff Report

New York Times ^ | 7/1/09 | Zachery Kouwe

[steve-b]

Paul E. Kanjorski, the Pennsylvania Democrat, has finally received at least part of the information he requested — more than once — from the Securities and Exchange Commission's inspector general, who is investigating how the agency missed the vast fraud orchestrated by Bernard L. Madoff.

On Wednesday, H. David Kotz, the inspector general, released several suggestions on how to improve the S.E.C.'s oversight of the financial industry, including an expanded bounty program that awards tipsters and increased authority for the Public Company Accounting Oversight Board, or PCAOB....

[steve-b]

Here, we see the true meaning of the Founders' warnings that morality was necessary to maintain freedom. When this sort of corporate crime goes unchecked, faith in the free market is eroded, leading to expansion of government power and loss of freedom.

[Liz]

When this sort of corporate crime goes unchecked, faith in the free market is eroded, leading to expansion of government power and loss of freedom. ............... the true meaning of the Founders' warnings that morality was necessary to maintain freedom....

As Thomas Jefferson said: When people fear govt, we have tyranny; when govt fears the people, we have freedom.

[Liz]

It was recently uncovered that Madoff kept detailed notes about his activites and that some "investors" made deals, demanding specific returns on investments.....meaning they were in on the scam. Some investors also wrote Madoff personal checks......evidence of tax evasion and money laundering.

Madoff Investors Probed by U.S. Prosecutors
May 18, 2009 | Reuters
FR Posted 05/18/2009 by CutePuppy

EXCERPT U.S. prosecutors have broadened their criminal investigation of the Bernard Madoff case to at least eight investors and associates, The Wall Street Journal reported......named as under investigation by the U.S. Attorney's Office, are 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....... 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. (Excerpt) Read more at cnbc.com ...

[M. Dodge Thomas]

Mr. Kotz also wants to amend the Investment Advisers Act of 1940 to require investment managers, including hedge funds, to place their securities and similar investments in the custody of a bank or dealer registered with a national securities exchange.

Long overdue, IMO.

[dfwgator]

I wonder if they will reveal how many SEC members were paid off by Madoff to look the other way?

[stephenjohnbanker]

“I wonder if they will reveal how many SEC members were paid off by Madoff to look the other way?”

ROTFLOL!!

[Liz]

“I wonder if they will reveal how many SEC members were paid off by Madoff to look the other way?”

SEC'S THOMSEN DEPARTS, UNDONE BY MADOFF SCANDAL
By KAJA WHITEHOUSE, NY POST, 2/10/09

Linda Thomsen, the SEC bureaucrat who's been pilloried for missing red flags in the Madoff scandal, stepped down as head of the SEC's enforcement division yesterday, making way for a replacement with Wall Street cred. Her departure comes amid chatter that her new boss, the recently appointed SEC chief Mary Schapiro, has been actively compiling a list of replacement candidates from the ranks of the US Attorney's office.

Thomsen took over the reins of the unit in 2005, coming in with high marks as the top cop in the Enron investigation. But her reputation took a rapid turn for the worse when it emerged that her division failed to act on alleged con artist Bernard Madoff after her unit investigated him in 2006. Despite her tarnished reputation, people who know Thomsen seldom have bad things to say about her. "She's been a wonderful, wonderful person," said David Ruder, a former SEC chairman, adding that people should wait to pass judgment on the Madoff matter until the details of the 2006 investigation are clear.

http://www.nypost.com/seven/02102009/business/secs_thomsen_departs__undone_by_madoff_s_154310.htm/

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

Meaghan Cheung, SEC investigator who received whistleblower Markopolos' Nov 2005 complaint. Cheung and her superior Doria Bachenheimer, who signed off on the case, both have left SEC for personal reasons since September of last year, just a few months before Bernard Madoff confessed and was arrested.

Bernie's brother, Peter Madoff and his daughter, Shana both attended Fordham Law School. So did Meaghan Cheung, one of the SEC investigators of Harry Markopolos' November 2005 complaint.

[stephenjohnbanker]

Hmmmmmmmmmmmmmm....

[CutePuppy]

I wonder if they will reveal how many SEC members were paid off by Madoff to look the other way?

Or, more interestingly, with his connections and client list including prominent Democrats and politicians, if there was political interference?

There is nothing in his "report" on SEC's [mis]handling of several investigations, just "recommendations" on rewarding bounty hunters (like Markopolos), not just insider whistleblowers, and tightening or broadening some oversight, which will not prevent similar offenses (though hardly on the same scale). For instance, none of the recommendations would prevent or deter R. Allen Stanford's scheme. And it's more likely that more schemes like this will go offshore, with only little presence in US.

Madoff Insiders’ Claims of Ignorance Said to Be a Focus of U.S. - BL, July 1, 2009

U.S. officials pursuing their investigation of Bernard Madoff’s Ponzi scheme are focusing on close associates of the convicted con man who insist they didn’t know of any wrongdoing, a person familiar with the matter said.

The continuing investigation of Madoff’s $65 billion fraud may implicate as many as 10 other people, some of whom deny any knowledge of the massive fraud .....

“It was a calculated, well orchestrated, long-term fraud, that this defendant carried out month after month, year after year, decade after decade,” Assistant Manhattan U.S. Attorney Lisa Baroni told U.S. District Judge Denny Chin at Madoff’s sentencing. “He created literally hundreds and hundreds of thousands of fake documents every year.”

Federal authorities are now scrutinizing those who worked in close proximity to Madoff at his firm, the person familiar with the probe said. The government doesn’t believe Madoff acted alone because, considering the scope of the fraud, the duration of his crimes and number of victims, he would have needed help, the person said. .....

[dfwgator]

Who is watching the watchers?

[Liz]

I wonder if they will reveal how many SEC members were paid off by Madoff to look the other way? Or, more interestingly, with his connections and client list including prominent Democrats and politicians, if there was political interference?

" I'm Bernie. Trust me."

Bernie cultivated a personna as a knowledgeable, affable, avuncular success story.....with a high-rise NY penthouse, a Hamptons beachouse, Palm Beach and Riviera estates, private planes, yachts, pricey posessions, jewelry, and the like........all the accoutrements of success.

It appears that when questions were raised, Madoff and his wealthy “investors” colluded----waving off investigations with scary charges of anti-Semitism. In L/E circles, implying people of Jewish heritage are doing something illegal is a decided career killer. One broker who tried to warn Madoff investors was told rumors that Madoff was a crook were anti-Semitic....read on.

REFERENCE
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. --SNIP--

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. THE END

[CutePuppy]

And, after more rules and regulations, and more watchers and monitors, "... who's gonna monitor the monitors of the monitors?" - Enemy of the State (1998)

It's not the quantity, it's the quality and the integrity that really counts. We have precious little of that in the government today.

[dfwgator]

I think of it more like the movie “Casino” :

In Vegas, everybody’s gotta watch everybody else. Since the players are looking to beat the casino, the dealers are watching the players. The box men are watching the dealers. The floor men are watching the box men. The pit-bosses are watching the floor men. The shift-bosses are watching the pit-bosses. The casino manager is watching the shift-bosses. I’m watching the casino manager. And the eye-in-the-sky is watching us all.

[CutePuppy]

Another classic! :-)

But in Casino it's pretty much self-regulated, with every chain in the link having an incentive to watch over adjacent links. Government employees, not so much...

[dfwgator]

You make a good point there. That is precisely how Wall Street should have been set up. But once they abdicated their responsibility, there was no other choice but for government to step in.

[CutePuppy]

I should have, more correctly, said that government employees have different set of incentives, political favors count for more than disposition of regular duties, such as catching a "bad guy".

And just like one person's terrorist is another person's freedom fighter, one person's "bad guy" is another person's friend and benefactor.

That is precisely how Wall Street should have been set up.

It was, in a way. NASD, which became FINRA ( Financial Industry Regulatory Authority) after merger with similar NYSE enforcement agency, was supposed to self-regulate the industry. Mary Schapiro, who was appointed by Obama to be and is a current SEC Chairman, was in charge of FINRA when Madoff ran circles around the regulators. FINRA, more so than SEC which has their hands full with listed companies and exchanges, should have been interested in firms like Madoff.

Mark Madoff, sone of Bernie was on NASD/FINRA National Adjudicatory Council, which reviews disciplinary decisions of FINRA... Bernard Madoff was at some time on board of Governors of NASD and served on its different committees. Peter Madoff was Vice-Chairman of NASD... There were conflicts of interests up the wazoo...

The chain was broken, nobody was watching Madoff... maybe because nobody was interested in watching Madoff. And that has much less to do with "Wall Street" that was interested in watching Madoff, and mostly avoided dealing with his firm, or kept their investments at arm's length. It has to do with all the political connections Madoff and his sons had, and all the secrecy and elite clientele that it entailed.

[stephenjohnbanker]

Remarkable. If the financial markets hadn’t imploded, he never would have been caught.