Madoff Scandal - $50 billion fraud

[Astronuc]

List of potential victims grows in NY fraud case
http://news.yahoo.com/s/ap/20081213/ap_on_bi_ge/wall_street_arrest

NEW YORK – Investors who put their fortunes in the hands of arrested New York money manager Bernard Madoff are waiting to hear how much of their stake is left.

The roster of potential victims in what prosecutors said was a $50 billion Ponzi scheme has grown exponentially longer in the past few days.

Madoff, 70, said in regulatory filings that he only had around 25 clients, but it has become apparent that the list of people who lost money may number in the hundreds or even thousands.

Among those who have acknowledged potential losses so far: Former Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services.

A charity in Massachusetts that supports Jewish programs, the Robert I. Lappin Charitable Foundation, said it had invested its entire $8 million endowment with Madoff. The organization's executive director said she doesn't expect it to survive.

Other institutions that believed they had lost millions included The North Shore-Long Island Jewish Health System and the Texas-based Julian J. Levitt Foundation.

Hedge funds and other investment groups looked like big losers too. The Fairfield Greenwich Group said it had some $7.5 billion in investments linked to Madoff. A private Swiss bank, Banque Benedict Hentsch Fairfield Partners SA, said it had $47.5 million worth of client assets at risk.

The losses may have extended far beyond the coffers of the wealthy and powerful.

The town of Fairfield, Conn., said it placed nearly 15 percent of its retiree pension fund with Madoff. Officials were scrambling to determine how much of the $42 million remained.

Harry Susman, an attorney in Houston, said he represents a group of clients who had unknowingly become entangled in the scandal by investing in a hedge fund managed by Merkin, which then put almost all of its $1.8 billion in capital in Madoff's hands.
. . . .
Madoff himself described his investment business as an unsophisticated "Ponzi scheme," according to investigators who interviewed him.

Perhaps more startling than the loss was that it apparently caught regulators and investigators off guard, only coming to light last week when Madoff's own family turned him in.
. . . .

This is just stunningly unbelieveable!

The key in investing is 'due diligence'.

 

[mgb_phys]

described his investment business as an unsophisticated "Ponzi scheme,"

So the exact opposite of the rest of Wall St's troubles

 

[Ben Niehoff]

Looks like he Madoff with everyone's money!

 

[Danger]

Looks like he Madoff with everyone's money!

Where the hell is that 'groan' smilie that Moonbear has been requesting for years?
Greg, in a memorial for her leaving us, you should add one.

Ben, that was so bad (good) that it should be bronzed and mounted in the pun hall of fame.

 

[chemisttree]

50 Billion is bigger than the Enron scandal.

 

[mgb_phys]

Even funnier it wasn't just rich idiots - it was a lot of major banks that 'invested' with this guy.
They are all blaming the US government regulators and say they should be bailed out.
I wish I had sent some money to all those Nigerian investment schemes in my email - then the government might have bailed me out as well.

Santander, Spain - $3.1bn
HSBC, UK - $1bn
Natixis, France - $605m
Royal Bank of Scotland, UK - $601m
BNP Paribas, France - $460m
BBVA, Spain - $400m
Man Group, UK - $360m
Reichmuth & Co, Switzerland - $325m
Nomura, Japan - $303m

 

[Proton Soup]

The key in investing is 'due diligence'.

but he seemed like such a mensch!

 

[mgb_phys]

I can see some rich idiots being tricked into a scheme.
Apparently they were approached by friends of a friend and it was a secret deal that but if you got in you made lots of money, but don't show the details to your lawyer/accountant because it's a bit dodgy.
But how the <beep> does HSBC fall for this?
Don't they watch the Sting as part of an MBA anymore?

On the other hand - maybe HSBC will let me pay off my credit card bill with magic beans!

 

[BobG]

Even funnier it wasn't just rich idiots - it was a lot of major banks that 'invested' with this guy.
They are all blaming the US government regulators and say they should be bailed out.
I wish I had sent some money to all those Nigerian investment schemes in my email - then the government might have bailed me out as well.

Santander, Spain - $3.1bn
HSBC, UK - $1bn
Natixis, France - $605m
Royal Bank of Scotland, UK - $601m
BNP Paribas, France - $460m
BBVA, Spain - $400m
Man Group, UK - $360m
Reichmuth & Co, Switzerland - $325m
Nomura, Japan - $303m

Interesting analogy. How to rob a bank. Banks seem to have a soft spot when it comes to falling for Nigerian con artists, although for much smaller amounts than Madoff - their scams only cost millions instead of billions.

Hmmm, a secured credit card where the customer sends in $99, about 65% in interest and other finance charges. Looks like the bank has lured in a real sucker. Until the credit limit goes up to $3000 and all the checks bounce. Turns out the scammer is enjoying a 3000% return on his investment instead of the bank making a killing.

Why do people think banks are smarter than average people when average people work at a bank?

 

[WarPhalange]

Because they wear suits and ties! How could someone who looks so professional be dumber than someone who wears jeans and a t-shirt?

 

[Proton Soup]

banks have really gone downhill since abandoning the granite exterior for stucco facades.

 

[OAQfirst]

banks have really gone downhill since abandoning the granite exterior for stucco facades.

That's just precious. :rofl:

 

[Astronuc]

An interesting perspective on the Madoff scandal -

Madoff scam is part of "the bezzle"
http://marketplace.publicradio.org/display/web/2008/12/16/pm_big_bezzle/

PARKER: The "bezzle's" a term that was coined by the American economist John Kenneth Galbraith in a book called "The Great Crash: 1929" which he wrote in the middle of the 1950s. What he recognized was that at any given time there is a certain amount of embezzlement going on in the economy. Now this falsely inflates the sense of the total wealth of the economy at that moment. Because, not only does the embezzler now have substantial resources under his control but the embezzled does not yet know that he or she has lost those resources. And so there's, in effect, a kind of double counting of wealth of both the victim and the victimizer. And the inventory of that duplicity is what Ken called the bezzle.

VIGELAND: And at another point in time, then, all of that comes to light, is discovered?

PARKER: Yeah, what happens is that the bezzle varies in size with the business cycle and with the financial cycle. And so, what we've had in the last few years, presumably, is a run-up in the bezzle in conjunction with the run-up in the value of the markets. So that more and more people were drawn into the markets. Money was being made. More and more people came in, threw more money at the market and, as long as the markets kept rising and a new round of investors kept coming in, older investors kept getting good returns on their money and spreading the news that this was a great, sound and high-returning investment.

VIGELAND: So, how does Bernie Madoff fit into the bezzle and particularly within the context of the entire financial crisis?

PARKER: Bernie Madoff is a representative of the species of the bezzler, if you will. And he's by no means unique. This pattern of behavior can be traced back to that famous South Sea Bubble, or the Dutch Tulip Mania. It was a prominent feature in the crash of 1929, and is always present in the run-up in these financial cycles. And then, as the top of the market is reached, and we tip over and start sliding downward . . . of course, new money stops coming in and the game is over.

. . . .

Country club circuit key to Madoff's rise
http://marketplace.publicradio.org/display/web/2008/12/16/pm_madoff_culture/


Schmoozing and bezzling


Apparently there may be more Madoff-type scandals, and perhaps some of larger magntitude.

 

[Jimmy Snyder]

Apparently there may be more Madoff-type scandals, and perhaps some of larger magntitude.

Probably there is only a single real dollar bill in circulation and the rest is an illusion. We only thought we had money.

 

[mgb_phys]

Isn't there a story about that?
Somebody goes to the bank wanting to withdraw all his money in cash, they count out the piles of however many $1000 and ask him if he would like a bag, no says the customer you can put it all back - I just wanted to make sure it was all still there.

 

[Jimmy Snyder]

Isn't there a story about that?
Somebody goes to the bank wanting to withdraw all his money in cash, they count out the piles of however many $1000 and ask him if he would like a bag, no says the customer you can put it all back - I just wanted to make sure it was all still there.

I remember a story by Al Capp in the comic strip Li'l Abner in which a character named General Bullmoose acquired all the money in the world except for $1. I forget how it turned out.

 

[mathwonk]

I was reminded recently of Will Rogers' prescient characterizations of the two parties:

We all know his: "I don't belong to any organized political party, I'm a Democrat",

but I had forgotten his version of a Republican president's motto: "Boys, my back is turned".

The outcomes from recent non regulatory behavior by our government make it sound fresh.

 

[TheStatutoryApe]

They are all blaming the US government regulators and say they should be bailed out.

Apparently someone went to the SCC about Madoff in '99 with credible evidence of his illegal activities and was blown off.

 

[Astronuc]

Apparently someone went to the SCC about Madoff in '99 with credible evidence of his illegal activities and was blown off.

Apparently the warnings went far back as 1992.

A lot of people are asking - what happened?

I read a headline tonight, which indicated that the Madoff scandal may cost Uncle Sam $17 billion. I don't know what that is - perhaps loss of tax revenue from capital gains? Or some coverage for losses? I don't think any of this was covered by FDIC, but then I don't know any specifics.

 

[jal]

The scammers got scammed by one of their own. (It's too bad about the innocents).
Now they want blood and they will get the "Socialists" to draw up "enforceable regulations" to protect themselves.
It's too bad about the innocents, they are needed for the next scam to work.

Capitalism is about the survival of the fittest.

By the time they get around to convicting him he will be dead of old age.
He out-foxed them all.
He will be rolling with laughter, in his grave, and his family will be rolling in cash.
jal

 

[Astronuc]

Mass. investor saw inside Madoff scam
http://biz.yahoo.com/ap/081219/madoff_scandal_whistleblower.html

BOSTON (AP) -- His repeated warnings that Wall Street money manager Bernard Madoff was running a giant Ponzi scheme have cast Harry Markopolos as an unheeded prophet.

But people who know or worked with Markopolos say it wasn't prescience that helped him foresee the collapse of Madoff's alleged $50 billion fraud. Instead, they say diligence and a strong moral sense drove his quixotic, nine-year quest to alert regulators about Madoff.

"He followed through on everything he ever did. He never let up," said his mother, Georgia Markopolos, in an interview Thursday. "Some kids just let it go if it's too hard, but he wouldn't do that."

"He feels very sorry for these people that got taken," she added. "It wouldn't have happened if they would have listened to him long ago."

Markopolos waged a remarkable battle to uncover fraud at Madoff's operation, sounding the alarm back in 1999 and continuing with his warnings all through this decade. The government never acted, Madoff continued his ways, and people lost billions.

Markopolos reached his conclusion with the help of mathematicians like Dan diBartolomeo, whose analysis of the Madoff's methods in 1999 helped fuel Markopolos' suspicions.

"People should have seen the writing on the wall," diBartolomeo said.

. . . .

 

[chasely]

Sounds a little bit like our Social Security system...

 

[Astronuc]

Sharpton calls for justice outside Madoff's home
http://news.yahoo.com/s/nm/20090207/us_nm/us_madoff_sharpton

. . . .
Madoff is under house arrest and 24-hour surveillance in his penthouse apartment as a condition of his $10 million bail agreement.

It was not known if he was home during the rally.

Huh?!

 

[jal]

http://uk.reuters.com/article/burningIssues/idUKTRE5156FB20090206?sp=true
Savings lost to Madoff, elderly forced back to work
By Jason Szep

BOSTON (Reuters) - After losing his entire life's savings to disgraced fund manager Bernard Madoff, 90-year-old Ian Thiermann abandoned retirement and now works the aisles of a grocery store to make ends meet.

More examples of the damages in the article.

 

[Astronuc]

Madoff has gone to jail while awaiting sentencing, and the Feds are seizing his properties and assets.

Feds seize Madoff's mansion after taking his yacht
http://news.yahoo.com/s/ap/madoff_property_seized

PALM BEACH, Fla. – Federal authorities seized disgraced financier Bernard Madoff's Palm Beach mansion, his vintage yacht and a smaller boat Wednesday, part of an effort to recoup assets to pay back investors he swindled. Barry Golden, a spokesman for the U.S. Marshals Service, said about five U.S. marshals arrived at the 8,753-square-foot, five-bedroom mansion late Wednesday afternoon, hours after marshals seized the boats.

Authorities planned to enter and secure the mansion, change the locks and conduct an inventory of the property, which Palm Beach County records show had a taxable value of $9.3 million last year.

Golden said marshals will spend about three to four hours filming and photographing items in the house that might be removed at some point. The mansion was unoccupied when federal authorities arrived.

"It's not an April Fools' joke," he said.

Palm Beach County property records show the mansion was purchased in 1994 under his wife Ruth's name for $3.8 million. The 2008 property tax bill was $157,298. Golden said the estate would be "monitored and maintained" and is no longer considered Madoff's property.

"Once the judge signed the order, it stopped being Bernie Madoff's home," Golden said.

. . . .

And apparently, Madoff's wife may lose a lot.

Court documents filed by Madoff's attorneys indicate Madoff and his wife had up to $826 million in assets — including the boats — at the end of last year.

If prosecutors get their way, Madoff and his wife, who has not been charged, will have to give up all their assets, including a $7 million Manhattan penthouse bought in 1984, the Florida home, a $1 million home in Cap d' Antibes, France and a $3 million luxury home on New York's Long Island. The government also wants Madoff and his wife to forfeit $10 million in furnishings for all the homes and luxury cars, among other items.

Defense attorneys have indicated they may try to keep the Manhattan apartment, as well as about $62 million in securities, for his wife.

. . . .

Various state AGs are going after companies that steered investors to Madoff. Apparently some were starting to be concerned about the potential losses.

Massachusetts Secretary of State William Galvin accused Fairfield Greenwich Group of Connecticut of civil fraud charges in relation to the Madoff scandal.

 

[Al68]

Sounds a little bit like our Social Security system...

Just a little? It's amazing that when a private criminal does it, it's horrible, but when government does the exact same thing to a lot more people for a lot more money that they need a lot more, it's called compassion.

There's a reason that any non-government investment system that works like Social Security is illegal.

 

[projektMayhem]

Just a little? It's amazing that when a private criminal does it, it's horrible, but when government does the exact same thing to a lot more people for a lot more money that they need a lot more, it's called compassion.

There's a reason that any non-government investment system that works like Social Security is illegal.

Shhh... If the rest of the plebeians knew this, the jig would be up.