Madoff Aide Allegedly Got Fake "Trading Tickets” (Bernie's bro Peter conducted "secret audits")

thestreet.com ^ | 3/09/09 | JOSEPH WOELFEL

[Liz]

A longtime aide to Madoff instructed two assistants to generate trading tickets, now believed to be bogus, the WSJ reports......Annette Bongiorno, a four-decade Madoff employee, would ask assistants to research daily share prices for blue-chips from the previous month or several months.......Using the data, Bongiorno would then instruct the assistants to generate "tickets" showing purported trades, which resulted in gains that were in line with Madoff's steady annual returns.......Madoff is expected to plead guilty Thursday to charges he carried out a massive swindle ......charges against Madoff are to include securities fraud, wire fraud, mail fraud and money laundering, according to one person familiar with the case...........

[Liz]

Madoff will likely accept life in prison hoping to help his wife Ruth and son Andrew (above) avoid a criminal rap. Ruth withdrew $15.5 million right before her husband's Dec. 11 arrest, and is now trying to protect $69 million of assets in her name from being attached by thousands of claimants. "Where does Mrs. Madoff get millions of dollars from? Mrs. Madoff was not known as the genius of Wall Street independently," a lawyer for some of Bernie's customers, told Reuters. "What did she do to earn that money?"

AND THEN THERE'S BERNIE'S BROTHER. Whistleblower Harry Markopolos says Madoff’s Brother Audited Firm’s Investments and that ONLY Peter Madoff was "authorized to audit" fund performance "for reasons of secrecy".

Among other things, Peter Madoff was a Chief Compliance Officer at his brother Bernie's firm. Peter was also a director of several securities associations and exchanges. Peter's daughter Shana, was Bernie' firm's compliance officer.

Here's Peter Madoff's house.

As the No. 2 executive at Bernard L. Madoff Investment Securities LLC, Peter Madoff worked side by side with his older brother Bernard for nearly 40 years. Peter was viewed as Bernie's heir apparent so the brothers tried to avoid flying together when they went on skiing trips together. Now, they are keeping their distance. Peter has stopped coming into the office and isn't talking publicly about his role at the securities firm, where he headed trading operations. Peter's daughter also joined the family business. She worked primarily as a "compliance lawyer" at Madoff Securities' market-making arm at the time of her uncle's arrest.

[Dante3]

bttt

[freespirited]

A longtime aide to disgraced financier Bernard Madoff instructed two assistants to generate trading tickets, now believed to be bogus, for Madoff's investing clients, the Wall Street Journal reports, citing to information the assistants gave the government in the investigation.

Phony trading tickets come under the jurisdiction of not just the SEC but the supposed self-regulatory body of the securities industry, long known as NASD (and now called FINRA).

Obama picked the longtime head of FINRA as the new head of the SEC. When Congress asked her why FINRA hadn't spotted the Madoff scam, she claimed it was beyond FINRA's jurisdiction because it didn't involve trading.

This is a good example of why the people who supposedly protect us little guy investors from the Madoffs of the world have never impressed me as particularly competent or honest.

[Liz]

Phony trading tickets also come under the jurisdiction of NASD----the supposed self-regulatory body of the securities industry (now called FINRA).

If this was done on a computer, that would entail wire fraud, electronic fraud, computer trespass........and the like.

[Liz]

Federal investigators should examinine the criminal MO of “structuring” in connection with Madoff's activities.

If Madoff "structured" cash transactions to evade reporting requirements, he may be guilty of a felony.

31 U.S.C. 5324 prohibits certain actions by any person who acts with the purpose of evading the reporting requirements of Section 5313 (Currency Transaction Reports).

The elements of the structuring regulations are: A person acting alone, in conjunction with others, or on behalf of others , Conducts or attempts to conduct, One or more transactions in currency, In any amount, At one or more financial institutions, On one or more days, For the purpose of evading the reporting requirements of 31 C.F.R. 103.22 (requiring CTRs).

The definition is specifically written to include those transactions which occur beyond a single business day and transactions which are conducted through more than one financial institution.

(The definition of "structuring" for purposes of currency transaction reporting is found at Criminal Code 31 C.F.R. 103.11(gg).)

[Timeout]

never impressed me as particularly competent or honest

That presumes they have a real "mission", such as preventing fraud. But, in reality, they're just placeholders, drawing their pay until they can collect their pension and make room for the next placeholder.

I think this is what I resent most about these agencies. No one ever pays a price for incompetence (because competence wasn't expected to begin with). The flunkies at the SEC were star-struck and fell full force for Madoff's veneer of respectability. And there's the regulator at the Office of Thrift Supervision who HELPED banks doctor their books...he was recently allowed to quietly retire with full pension. At Fannie Mae, those down the line were never made to reveal what they knew. They suffered no consequences for that magnificent fraud even though it's certain they knew the books were being cooked. (Franklin Raines didn't sneak down to Accounting and make those entries himself.) Even Raines et al simply got a slap on the wrist. In the larger picture, why does no one ever ask HUD why "public housing" spends so much but has failed to improve the situation after 40 years and trillions of dollars? Answer: because spending the money is the goal, not improving anyone's life.

It's not "incompetence". It's their secure knowledge that those on the inside...those well-connected bureaucrats, former officials and politicians...are protected by the Justice Department. One need look no further than the Sandy Berger and Franklin Raines scandals. And that's not even touching the tax scandals of other prominent Dems.

[PGalt]

Madoff will likely accept life in prison hoping to help his wife Ruth and son Andrew (above) avoid a criminal rap.

Thanks for posting, Liz. ANY and ALL co-conspirators should be prosecuted and their assets seized.

[CutePuppy]

Ruth Madoff Gets A New Lawyer

Ruth Madoof, the wife of accused Wall Street scammer Bernard Madoff, will get her own counsel, according to Ira Sorkin, defense attorney for Mr. Madoff.

Sorkin has been representing both Mrs. Madoff and her husband Bernie. Mr. Madoff confessed to authorities on Dec. 11 to running a $50 billion Ponzi scheme.

Sorkin said Mrs. Madoff decided to get her own lawyer as she has been sued in a number of civil cases.

Recently, Sorkin said Mrs. Madoff intended to fight prosecutors to claim $70 million in assets as hers alone. ...

[Liz]

That’s nice——she needs a lawyer more than Bernie does.

[GovernmentShrinker]

I haven’t seen any evidence at all to suggest that structured cash transfers were part of this scam. What purpose would it have served? In most cases, such large amounts of cash were involved that it would have taken dozens of separate transactions to put each one under the reporting threshold, and there was no reason to conceal the size of the transactions — institutional and high net worth investors were moving large chunks of cash in and out of Bernie’s famous investment fund, and Bernie was taking huge amounts out as successful managers of large hedge fund managers normally do.

It’s possible he complied with occasional investor requests to move money in sub-reportable chunks, but I doubt he was willing to do very much of this — most of the investors big enough for Bernie to give a crap about were well-known institutionals and family foundations that had no reason to be concealing cash movements. Probably somewhere in this huge, decades-long scam, some instances of structured cash transfers can be found, but I can’t imagine they’d be significant in the big picture.

[Liz]

The point is to postulate———if tax evasion was the name of the game, any MO that could be useful was probably employed. Maybe items like manufactured “loss statements” for “investors” to show the taxman?

[GovernmentShrinker]

But there’s no evidence that tax evasion was “the name of the game”. All the evidence suggests that Bernie and some inner circle of co-conspirators were in it to get rich, and that at least the overwhelming majority of his investors believed his operation was totally legitimate. Madoff and his inner circle did in fact take huge amounts of money out of the scam and there’s no evidence they didn’t pay all the applicable taxes on their take. Most of the investors were high net worth individuals with easily traceable business sources for their original investments, family foundations (tax exempt), and non-profit institutions such as universities and pension funds (also tax exempt). Why use illegal cash transfer maneuvers to avoid taxes when you’re already tax exempt? And I’m sure at least a few of the HNW investors were doing various kinds of cheating on their taxes, but there’s no indication that their investments in the Madoff fund had any role in any tax cheating they were doing.

Madoff raked in money first and foremost by creating the image that his organization was reliable, respectable, totally above-board, and closely tied to regulatory organizations. If you want to launder money for tax avoidance or any other reason, this is the last type of investment vehicle you’d choose. There is an ample supply of sketchy hedge funds that cater to the money laundering/tax avoidance market. Most of them either show phony losses to be used for tax purposes, while the “lost” funds are secretly transferred back to the client, or show outrageously high returns (not outrageously steady returns, like Madoff) that can be used to provide an apparent legitimate explanation for huge amounts of money that actually came from illegal activity.

[kcvl]

Madoff Key Aide Bongiorno Recruited Her Neighbors as Investors

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ako.FblVLClw

[Liz]

Key Aide Bongiorno's investors held accounts called “RuAnn” ............

The really sad thing here is that cheated individual investors can each get $500,000 from SIPC---but an account that lumps investors together gets $500,000 that the investors have to split.

[Liz]

.........Madoff's investors included family foundations (tax exempt), and non-profits such as universities and pension funds (also tax exempt). Why use illegal cash transfer maneuvers to avoid taxes when you’re already tax exempt?..........

Oh please---the IRS has pinpointed nonprofits and tax-exempts as the locus classicus for tax evasion.

Wthout even thinking-----just off the top of my head----I can think of about 50 ways rich individuals and sucessful businessmen evade the taxman using N/P and "charities."

One notorious scam: the "charity" takes a cut of the donation then wire transfers the bulk offshore for the donaee's use later..........out of sight of the taxman and US banking laws.

N/P writing checks to another N/P is a huge tax evasion scam.

The Madoff-related entities need to reveal monies that may have been illegally redirected and be requested to explain:

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

(2) how tax-exempt 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 are soliciting contributions, how the various subcommittees are funded, and the extent to which donors to Madoff-invested tax-exempts (particularly officers of publicly-held companies) perhaps colluded in various schemes with tax-exempt monies, perhaps financing political campaigns surreptitiously, and engaging in other illegal transactions.

The (a) loan, (b) sale, (c) exchange or (d) leasing of tax-exempt property to other "charities," individuals, or donors is another MO.

Authorities should check the "charities" under Bernie's control......particularly how they reported tax-exempt "excess benefit transactions" on Form 990.

[GovernmentShrinker]

Nonprofit organizations are a form of legalized tax evasion. Sure there are some that go further and engage in outright illegal tax evasion, but the vast majority of nonprofits that have significant money to invest are either totally legitimate (like Yeshiva University and the Fairfiled County pension fund, to name a couple of Madoff investors), or are taking legal advantage of the tax laws to fund their favorite activities (theater, museums, symphonies, art galleries featuring the “works” of rich bored housewives, etc). A lot of these pet charities are engaged in circular giving, with a particular social crowd all donating to each others charities, getting tax deductions for the money they spend having their favorite kinds of fun. This is totally, completely legal.

However, just because there are quite a few nonprofits that are engaging in illegal tax evasion activities, does not imply that investment vehicles where they invest large chunks of their assets are involved in their illegal activities. If an organization has all the right paperwork showing it’s a tax-exempt non-profit, then virtually any investment vehicle catering to non-profits (basically all unleveraged investment vehicles) will accept their investment as long as they can meet the vehicle’s minimum investment amount.

I don’t understand why you think the Madoff scam was run to support its investors’ tax evasion activities. All the evidence suggests that it was a massive SELF-enrichment scheme run by Bernie Madoff with the help of at least a couple of family members and a crooked accountant, all of whom were enriching themSELVES at the expense of the investors in the fraudulent vehicles. Madoff played off his tremendous success in building a legitimate broker-dealer, and his credibility from being the Chair of NASD Board of Governors, to rake money from investors into his Ponzi scheme. With such a huge number of his investors, and especially the largest ones, being very clearly NOT tax evading scammers, obviously the “investment opportunity” was attractive to legitimate institutional and high net worth investors. Where’s the evidence that there were also a lot of investors who were in league with Madoff, who was helping them run some money-laundering or tax evasion scam?

If there was any designed-for-tax-evasion or designed-for-money-laundering activity going on in this mess, it was most likely at the level of some of the smaller feeder funds, and not anything Madoff and his cronies were directly involved in. Madoff had a brilliant and awesomely lucrative scheme going — why endanger it by deliberately dabbling in aiding and abetting tax evasion or money laundering, when that would greatly increase the risk of a serious law enforcement investigation of one of those investors that would end up including some close scrutiny of the Madoff operation and exposing it as a scam?

[Liz]

THIS JUST IN: Bernard Madoff’s lawyer told a judge his client will plead guilty later this week to 11 counts including money laundering, perjury, securities fraud, mail fraud, wire fraud and——————international money laundering.

The buzz is Madoff has money hidden all over the world-—may involve $170 billion from theft, and other crimes.

Madoff’s Mellon bank accounts are being scrutinized-—show signs of offshore activity. Accounts in Madoff family members’ names are also under scrutiny.

[CutePuppy]

Madoff to Plead Guilty in Largest U.S. Ponzi Scheme

Madoff, 70, will admit he directed a fraud that prosecutors alleged began in the 1980s. By last November, Madoff told 4,800 investors their accounts held $64.8 billion, according to court papers filed in Manhattan federal court. Prosecutors will seek forfeiture from Madoff of as much as $170 billion. Madoff, free on $10 million bail, faces 150 years in prison.

Madoff, originally charged with a sole count of securities fraud, will plead guilty to that charge and an additional 10 counts filed today in a so-called criminal information, defense attorney Ira Sorkin said. The new charges are investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the U.S. Securities and Exchange Commission and theft from an employee benefit plan.

[Liz]

The new charges against Madoff are investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the SEC, and theft from an employee benefit plan.

A very accomplished crook to be sure---Madoff knew every conniving trick in the book to be able to pull this off for so long.

Impossible to believe no one else in the organization knew a fraud was being perpetrated.....including the investors.