Madoff Kickbacks Alleged in Austria (ut, oh--on the run from big, bad Russian oligarchs?)

US, UK and Austrian prosecutors are investigating former Austrian fund manager Sonja Kohn, chair of Austria's Bank Medici, they believe was paid more than $40M in kickbacks to funnel billions of dollars to Madoff via separate companies she controlled, according to affidavits reviewed by The WSJ. Ms. Kohn apparently turned three Bank Medici funds into "feeder funds" that supplied Madoff with an estimated $3.5B from European investors. Kohn, a 60-year-old Viennese former Wall Street penny-stock broker, has repeatedly denied prior knowledge of Madoff's fraud or any wrongdoing. According to an April affidavit from DOJ filed with Vienna prosecutors, Kohn is under investigation for potential criminal charges of conspiracy, fraud and wire fraud in connection with the alleged kickbacks.

Bank Medici is 75% owned by Kohn and 25% by Bank Austria, a unit of Italy's UniCredit SpA. US prosecutors allege that Kohn acted on her own behalf in receiving kickbacks and that Kohn and Bank Medici failed to disclose to investors that their funds were being invested wholly with Madoff.

Early this year, US investigators noticed a flow of payments totaling about $32M over 10 years from Bernard L. Madoff Investment Securities LLC, to Infovaleur Inc., a NY company "owned by Sonja Kohn personally," ...... US prosecutors were unable to locate a registration for Infovaleur Inc.

"It does not appear that Kohn, or Bank Medici, ever disclosed to investors in the feeder fund that Kohn was personally receiving payments from Madoff at the same time as she was investing the feeder funds with [Madoff's fund]," the affidavit says. Madoff was "actually in full control" of Bank Medici's investments, according to the affidavit.

BACKSTORY 'Austria's Woman on Wall Street' on the Run?
wowOwow | 1/7/2008
FR Posted on 01/07/2008 by bruinbirdman

Sonja Kohn may be literally running for her life. The woman once known here as "Austria’s woman on Wall Street" has disappeared. Kohn collected more than $2 billion from rich investors in Russia and across Europe for Bernard Madoff through her firm, Bank Medici. Touting her connections, she promised investors entrée to bigger fish in the finance world, including Madoff.

Some say it’s not out of the question that she’s hiding from Russian clients (do we dare say, perhaps, the Russian mob?) who trusted her with their cash and have had their wallets hit even harder by the Russian stock market and plummeting commodity prices. "With Russian oligarchs as clients, she might have reason to be afraid," a Viennese banker who knew Kohn and her husband told The New York Times. This has left Bank Medici – which funneled money to the alleged ponzi schemer Madoff — in the hands of Austrian regulators. People who know her are even afraid to talk on the record, since being linked to Madoff these days isn’t, exactly, the best idea.

A Bank Medici spokeswoman characterized Kohn, who has also served as an adviser to Austria’s economic affairs minister, foreign affairs minister and the Vienna Stock Exchange, as a "victim," but wouldn’t say where Kohn was. Bank Medici had $2.1 billion in exposure to Madoff’s investment securities through hedge funds run by the bank, but it says it had no liquidity problems.

Rene-Thierry Magon de la Villehuchet, the French aristocrat whose firm, Access International, lost $1.4 billion from Madoff’s dealings, committed suicide last month. Adolf Merckle, the German billionaire (worth $9.2 billion) whose speculation in volatile Volkswagen stock nearly ruined his company, committed suicide by throwing himself onto railroad tracks. "The distress to his firms caused by the financial crisis and the related uncertainties of recent weeks, along with the helplessness of no longer being able to handle the situation, broke the passionate family businessman, and he ended his life," his family said in a statement.

......how many of Bernie’s “investors” were actually channeling their money offshore?....

No question-----tax evasion and money laundering was the name of the game for the wealthiest Madoffians-----businessmen who were funneling income to Madoff to avoid US taxes AND to act as "philanthropists." Bernie needed more money to stay afloat---so he allowed less wealthy investors in later.

The deal outlined here also underlines the theory that Bernie was laundering for the Russian mob........billions from drugs, pornography, prostitution, staged accidents, insurance fraud, medicaid fraud, etc, etc, etc. Madoff helped the Ruskis steal, and his investors wanted in to get a piece of the action......and all of these crooks wanted to evade the taxman.

REFERENCE The FBI has fingered the Russian mob in all kinds of frauds---billion-dollar staged auto accidents, billion-dollar Medicare/Aid fraud, billion-dollar insurance and securities fraud, ID theft, sex crimes, child porn......you name it.

Cable-TV's History Channel did an excellent expose of the depravity of Russian organized crime. The expose asserted that before they land here, Russian criminals stop off in Israel to get all the available freebies (some of the Russian rascals pretend to be Jewish to make Jews look bad, and to fraudulently pocket free Israeli benefits). They come to the US whining about "political asylumm" pleading "religious persecution" and immediately get on the US gravy train, sucking up US tax dollars like it was going out of style. Russian emigres arriving in the US are treated like royalty, with tax-subsidized government grants, tax-subsidized housing, and job set-asides waiting for them......jobs taken from taxpaying born-Americans. Russian TV airs a nightly show outlining the US giveaway programs, how to fill out the forms etc, which US offices to apply to, etc. The sense of entitlement and preying off working class Americans is outrageous.

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

REFERENCE----EXECUTIVE SUMMARY THE TRI-STATE JOINT SOVIET-EMIGRE ORGANIZED CRIME PROJECT. RUSSIAN-EMIGRE CRIME IN THE TRI-STATE AREA

Gangsters from the former Soviet Union have established a strong and abiding presence in the New York/New Jersey/Pennsylvania region, engaging in a wide array of crimes that range from sophisticated financial frauds to narcotics trafficking to murder.

Evidence also shows that members of disparate Russian-emigre crime groups here have the potential to develop into one of the most formidable organized crime challenges to law enforcement since the advent of La Cosa Nostra.

These are among the key findings of the Tri-State Joint Soviet-Emigre Organized Crime Project, a cooperative research and investigative effort launched four years ago by four agencies in New York, New Jersey and Pennsylvania - the New York Organized Crime Task Force, the New York State Commission of Investigation, the New Jersey State Commission of Investigation and the Pennsylvania Crime Commission.

Investigative agents and staff from these agencies conducted the project in conjunction with criminal justice experts from Rutgers University. The Project's report presents the first comprehensive public assessment of the threat posed to this region by criminal elements emanating from within the former Soviet Union.

The report catalogues the history and growth of Russian-emigre crime networks, from their core base in the Brighton Beach section of Brooklyn to their current reach well beyond the New York metropolitan area into the counties of central New Jersey and the suburbs of Philadelphia.

One of the most troubling aspects is evidence of links between individuals here and criminal elements in the former Soviet Union, a phenomenon that lends a disturbing and complex international dimension to this emerging domestic law enforcement problem.The range of criminal and illicit activities linked to these groups is impressive.

The Project report details Russian-emigre involvement in a variety of highly sophisticated frauds and confidence schemes, financial crimes, including money laundering, counterfeiting and securities fraud, narcotics trafficking and an assortment of vice crimes.Russian-emigre criminals are no strangers to violence either.

THE NATURE OF RUSSIAN-EMIGRE CRIME

Crimes of Deception

Motor Fuel Tax Fraud

Insurance and Entitlement Fraud

Confidence Schemes

Counterfeiting

Violent Crimes

Homicide/Attempted Homicide

Extortion and Kidnapping

Drug Trafficking

Money Laundering

Vice Crimes (Regpay, a Florida credit card processing company operated by Byelorussians, was nailed for processing online child porn payments; Minx, Belarus, once a constituent republic of the Soviet Union (independent since 1991) is the country of origin of many of these predators now thieving on US soil.

--SNIP--PDF LONG READ http://64.233.167.104/search?q=cache:Ahm0dOHcKHEJ:www.state.nj.us/sci/pdf/russian.pdf

I've thought that the Madoff scheme could have been used for money laundering but without any explicit agreement.

The tax-exempt dimension to Madoff's fraud is very fishy. Madoff was connected to numerous so-called tax-exempt " charities, and family foundations." The Robert I. Lappin Charitable Foundation, Steven Spielberg's tax-exempt Wunderkind Foundation, tax-exempt schools and synagogues---and more---all invested with Madoff.

NOW UNDER INVESTIGATION---The Chais Family Foundation; The Picower Foundation, (pulled out $5 BILLION just BEFORE the Madoff collapse).

The IRS has asserted that tax-exempt "foundations and charities" are the locus classicus for tax evasion money laundering., and IRS fraud.

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 to Madoff's worldwide bank connections.

Authorities need to determine the extent to which donors to Madoff-invested N/P's colluded in schemes that may have included misusing reserve bank accounts, concealing transfers, inflating asset values and improperly accounting for transactions.

A formal inquiry should be conducted into the Madoff-invested tax-exempts and their financial activities with officers of publicly-held companies) including (1) Enron-style accounting frauds by manipulating N/P records, (2) bundling contributions into the pockets of politicians, (3) the extent to which networks of companies are financing political candidates in the names of business partners without their knowledge or consent, (4) the extent to which officers of publicly-held companies used accounting fraud to hide illegal campaign contributions, and, (5) the extent to which campaign donations exceeded campaign-finance limits.

Charges might include Madoff-invested tax-exempt charities' accounting managers misappropriating funds to cover personal expenses, fraudulently overcharging for management services, diverting non-profit funds, then converting them to campaign accounts, or in the style of WorldCom greed spending thousands of non-profit dollars on organization credit cards for personal expenses.

A formal inquiry should be undertaken with respect to the Madoff-invested N/P's relatives, associates, co-conspirators or subsets of them, and donors (particularly officers of publicly-held companies), the business dealings between recipients, employees and elected and appointed officials and the extent to which influence-peddling is taking place, and more specifically the extent to which relatives, associates, and principles of the Madoff-invested foundations and charities and their co-conspirators or subsets of them, directed political activities from tax-free non-profit organizations in illegal arrangements.

The BIGGEST FRAUDS are between foundation and foundation .....writing checks to each other (which is the MO for laundering tax-exempt monies).

Authorities need to determine the extent to which the Madoff-invested charities manipulated philanthropic transactions, such as:

(1) loans, the (2) sale, (3) exchange or (4) leasing of property to related organizations, and donors, and the extent to which organizations reported (5) "excess benefit transactions" on Form 990, and, (6) the extent to which executive pay properly accounted for with the IRS.

The Madoff-invested charities need to reveal the dimension of contributions these organizations that may have been illegally redirected to political activity and be requested to explain:

(1) how the Madoff-invested charities solicit non-profit contributions,

(2) how non-profit donations are made, and,

(3) the manner in which donors to the Madoff-invested N/P's (particularly officers of publicly-held companies allocated company assets).

The Madoff-invested N/P's should be asked for details about who inside, and outside, these organizations is soliciting contributions, how the various subcommittees are funded, and the extent to which the Madoff-invested N/P's their donors (particularly officers of publicly-held companies) are colluding to perhaps finance political campaigns surreptitiously, and are engaging in other illegal transactions.

The landscape is littered with these "foundations and charities." Investigators need to determine why wealthy Brooklyn, NY residents registered some 800 tax-exempts in Lakewood-----a small flea-bitten central New Jersey town.

Any bets on how many of Bernie’s “investors” were actually channeling their money offshore?

No, it's a very safe bet.

Big Kickbacks to Austrian Banker in Madoff Case? - CNBC, July 03, 2009

..... A spokeswoman for Bank Medici said neither Kohn nor the bank had received kickbacks.
Prosecutors allege that in exchange for the kickbacks, Kohn turned three Bank Medici funds into "feeder funds" that supplied Madoff with an estimated $3.5 billion from European investors, the paper reported. .....

Madoff Wasn’t Friend, Pain Is ‘Unbearable,’ Kohn Says - BL, January 15, 2009 Sonja Kohn, chairman of the Austrian private bank that invested $3.2 billion with Bernard Madoff, said the man accused of running what may be the world’s biggest Ponzi scheme wasn’t a personal friend and didn’t confide in her.
“Having fallen victim to a company supervised by a U.S. regulator, as did many of the world’s most illustrious financial institutions, does not ease the pain,” Bank Medici AG Chairman Kohn, 60, said in an e-mailed statement, her first public comment since Madoff was arrested last month. “Reading that some voices believe that I should have known better makes the pain even more unbearable.” .....
Madoff Enablers Winked at Suspected Front-Running - BL, January 27, 2009 ..... The feeders were the gatekeepers, and they qualified for royal treatment. A money manager for a family office recalls accompanying Sonja Kohn, whose Vienna-based Bank Medici AG funneled $3.2 billion to Madoff, to a meeting with Madoff in New York in 1991.
He says Madoff treated her as if she were the Queen of England. The money manager also says Madoff wouldn’t answer any questions about his strategy. .....
Some bankers had their doubts. Glenn Gramolini, a Geneva- based asset manager with Themis MN Fund Plc, which has about 20 million pounds ($27 million) under management, recalls his first visit in the mid-1990s from Bank Medici’s Kohn.
She explained Madoff’s split-strike strategy, he says, and then reported that as one of the biggest market makers -- claiming to handle 10-20 percent of New York Stock Exchange order flow at the time -- Madoff had an edge.
In 2002, Gramolini decided to invest about 3 percent of his assets under management in Bank Medici’s Dublin-based Thema International Fund.
It seemed like a safe bet: The fund was registered as a UCITS (Undertakings for Collective Investment in Transferable Securities) vehicle, which made it subject to European Union regulation. London-based HSBC Holdings Plc, Europe’s biggest bank, was custodian of the fund’s $1.1 billion in assets. ..... Gramolini learned too late that it was all managed by Madoff. “Nowhere in the prospectus was it written that the funds would be handed to Madoff,” he says. .....
All about Sonja Kohn's career - Sonja Kohn Wooed Bernard Madoff Billions With Medici ‘Fantasy’ - BL, February 19, 2009 Sonja Kohn, who used her relationship with Bernard Madoff to help build a Vienna private bank, was doing what she is known for at a Dec. 9 reception in Zurich: promoting her investment record. Swiss investment adviser Hans Kaufmann liked what he heard over goulash soup.
“We agreed to meet in Vienna soon as I wanted to know more,” said Kaufmann, founder of Kaufmann Research AG in Wettswil am Albis near Zurich. He says he was impressed that Kohn reported investment gains during a year in which he was proud to keep losses to 7 percent.
The meeting never happened. Two days later, Madoff was arrested in New York .....
Sonja Kohn Family Lost Over $6 Million to Madoff, Profil Says - BL, May 28, 2009 Bank Medici founder Sonja Kohn and her family lost more than $6 million that they had invested with Bernard Madoff, Austria’s Profil magazine reported today, citing Kohn’s April 21 testimony to Austrian state prosecutors.
Kohn said it was “incomprehensible and unimaginable” how Madoff could have evaded controls and perpetuated his fraud, according to a transcript of the testimony obtained by the magazine. She said she “cannot imagine” no one else was aware of his actions, the magazine reported. .....
Medici’s Kohn Claims No Personal Payments From Madoff - BL, July 03, 2009 Bank Medici AG Chairman Sonja Kohn didn’t receive any personal payments from Bernard Madoff, her lawyer Andreas Theiss said.
Kohn, 60, is being investigated in connection with Madoff in the U.S., the U.K. and Austria, Theiss said today in a telephone interview from Vienna. Kohn said in January that she was a victim of Madoff’s fraud.
Bank Medici, which last month changed its name to 20.20 Medici AG, managed and distributed three funds that put $3.2 billion with Bernard L. Madoff Investment Securities LLC. Medici, 75 percent owned by Kohn, with UniCredit SpA holding the rest, was stripped of its banking license in May.
“Kohn has no way of knowing what transactions were carried out at companies, in which she has holdings,” Theiss said.
Austrian authorities are probing Kohn, who hasn’t been charged with any wrongdoing, on fraud and breach of trust, Michaela Schnell, a spokeswoman for the Vienna prosecutor’s office, said in a telephone call from Vienna today. .....
Finally! SEC Should Have Said ‘Sorry’ for Madoff, Ex-Chairman Pitt Says - July 02, 2009 The U.S. Securities and Exchange Commission should have apologized for missing Bernard Madoff’s $65 billion Ponzi scheme, former chairman Harvey Pitt said.
“I would’ve liked to see the SEC say, ‘We’re really sorry,’” Pitt told reporters in London today at a briefing hosted by CQS UK LLP, the hedge-fund firm founded by Michael Hintze. “I never heard that from anyone at the SEC.” .....
Pitt, chairman of the SEC from 2001 to 2003, said the agency examined Madoff’s firm four times and didn’t spot his fraud due to “human failure.” The SEC may have developed a blind spot because it’s “over-lawyered” and needs more traders, managers and veterans of markets, Pitt said.
“That’s been a weakness at the SEC,” said Pitt, who was a partner at the law firm Fried, Frank, Harris Shriver & Jacobson LLP before joining the agency. “Part of the problem is you can’t find fraud with just lawyers.” .....
Pitt said he had a plan for spot checks at investment management firms that he failed to push through before leaving the SEC. The system may have helped catch Madoff or similar frauds .....

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