I'm curious as to what you think this article demonstrates.
On Dec 13, 11:45 am, ornamentalmind <[email protected]> wrote:
> http://www.nytimes.com/
>
> December 13, 2008
> Now Accused of Fraud, Wall St. Wizard Had His Skeptics
> By ALEX BERENSON and DIANA B. HENRIQUES
> For years, investors, rivals and regulators all wondered how Bernard
> L. Madoff worked his magic.
> But on Friday, less than 24 hours after this prominent Wall Street
> figure was arrested on charges connected with what authorities
> portrayed as the biggest Ponzi scheme in financial history, hard
> questions began to be raised about whether Mr. Madoff acted alone and
> why his suspected con game was not uncovered sooner.
> As investors from Palm Beach to New York to London counted their
> losses on Friday in what Mr. Madoff himself described as a $50 billion
> fraud, federal authorities took control of what remained of his firm
> and began to pore over its books.
> But some investors said they had questioned Mr. Madoff’s supposed
> investment prowess years ago, pointing to his unnaturally steady
> returns, his vague investment strategy and the obscure accounting firm
> that audited his books.
> Despite these and other red flags, hedge fund companies kept promoting
> Mr. Madoff’s funds to other funds and individuals. More recently,
> banks like Nomura, the Japanese firm, began soliciting investors for
> Mr. Madoff internationally. The Securities and Exchange Commission,
> which investigated Mr. Madoff in 1992 but cleared him of wrongdoing,
> appears to have been completely surprised by the charges of fraud.
> Now thousands, possibly tens of thousands, of investors confront
> losses that range from serious to devastating. Some families said on
> Friday that they believed they had lost all their savings. A charity
> in Massachusetts said it had lost essentially its entire endowment and
> would have to close.
> According to an affidavit sworn out by federal agents, Mr. Madoff
> himself said the fraud had totaled approximately $50 billion, a figure
> that would dwarf any previous financial fraud.
> At first, the figure seemed impossibly large. But as the reports of
> losses mounted on Friday, the $50 billion figure looked increasingly
> plausible. One hedge fund advisory firm alone, Fairfield Greenwich
> Group, said on Friday that its clients had invested $7.5 billion with
> Mr. Madoff.
> The collapse of Mr. Madoff’s firm is yet another blow in a devastating
> year for Wall Street and investors. While Mr. Madoff’s firm was not a
> hedge fund, the scope of the fraud is likely to increase pressure on
> hedge funds to accept greater regulation and transparency and protect
> their investors.
> On Thursday, the Federal Bureau of Investigation and S.E.C. said that
> Mr. Madoff’s firm, Bernard L. Madoff Investment Securities, ran a
> giant Ponzi scheme, a type of fraud in which earlier investors are
> paid off with money raised from later victims — until no money can be
> raised and the scheme collapses.
> Most Ponzi schemes collapse relatively quickly, but there is
> fragmentary evidence that Mr. Madoff’s scheme may have lasted for
> years or even decades. A Boston whistle-blower has claimed that he
> tried to alert the S.E.C. to the scheme as early as 1999, and the
> weekly newspaper Barron’s raised questions about Mr. Madoff’s returns
> and strategy in 2001, although it did not accuse him of wrongdoing.
> Investors may have been duped because Mr. Madoff sent detailed
> brokerage statements to investors whose money he managed, sometimes
> reporting hundreds of individual stock trades per month. Investors who
> asked for their money back could have it returned within days. And
> while typical Ponzi schemes promise very high returns, Mr. Madoff’s
> promised returns were relatively realistic — about 10 percent a year —
> though they were unrealistically steady.
> Mr. Madoff was not running an actual hedge fund, but instead managing
> accounts for investors inside his own securities firm. The difference,
> though seemingly minor, is crucial. Hedge funds typically hold their
> portfolios at banks and brokerage firms like JPMorgan Chase and
> Goldman Sachs. Outside auditors can check with those banks and
> brokerage firms to make sure the funds exist.
> But because he had his own securities firm, Mr. Madoff kept custody
> over his clients’ accounts and processed all their stock trades
> himself. His only check appears to have been Friehling & Horowitz, a
> tiny auditing firm based in New City, N.Y. Wealthy individuals and
> other money managers entrusted billions of dollars to funds that in
> turn invested in his firm, based on his reputation and reported
> returns.
> Victims of the scam included gray-haired grandmothers in Florida,
> investment companies in London, and charities and universities across
> the United States. The Wilpon family, the main owners of the New York
> Mets, and Yeshiva University both confirmed that they had invested
> with Mr. Madoff, and a Jewish charity in Massachusetts said it would
> lay off its five employees and close after losing nearly all of its $7
> million endowment. Other investors included prominent Jewish families
> in New York and Florida.
> On Friday afternoon, investors and lawyers for investors with Mr.
> Madoff packed Judge Louis L. Stanton’s courtroom at federal court in
> Manhattan, hoping to question lawyers for Mr. Madoff and the S.E.C.
> But a deputy for Judge Stanton canceled the hearing, leaving investors
> with few answers. Several investors said they were planning to file
> lawsuits against the firm in the hope of recovering some money.
> Based on the vagueness of the complaints against Mr. Madoff, his
> confession, as detailed in court filings, seems to have taken the
> F.B.I. and S.E.C. by surprise. Investigators have not explained when
> they believe the fraud began, how much money was ultimately lost and
> whether Mr. Madoff lost investors’ money in the markets, spent it, or
> both. It is not even clear whether Mr. Madoff actually made any of the
> trades he reported to investors.
> The F.B.I. and S.E.C. have also not said whether they believe Mr.
> Madoff acted alone. According to the authorities, Mr. Madoff told
> F.B.I. agents that the scheme was his alone. He worked closely with
> his brother, sons and other family members, many of whom have retained
> lawyers.
> Also likely to face very difficult questions are the hedge funds,
> investment advisers and banks that raised money for Mr. Madoff. At
> least some big investment advisers steered clients away from putting
> money with Mr. Madoff, believing the returns could not be real.
> Robert Rosenkranz, principal of Acorn Partners, which helps wealthy
> clients choose money managers, said the steadiness of the returns that
> Mr. Madoff reported did not make sense, and the size of his auditor
> raised further concerns.
> “Our due diligence, which got into both account statements of his
> customers, and the audited statements of Madoff Securities, which he
> filed with the S.E.C., made it seem highly likely that the account
> statements themselves were just pieces of paper that were generated in
> connection with some sort of fraudulent activity,” Mr. Rosenkranz
> said.
> Simon Fludgate, head of operational due diligence for Aksia, another
> advisory firm that told clients not to invest with Mr. Madoff, said
> the secrecy of his strategy also raised red flags. And Mr. Madoff’s
> stock holdings, which he disclosed each quarter with the Securities
> and Exchange Commission, appeared to be too small to support the size
> of the fund he claimed. Mr. Madoff’s promoters sometimes tried to
> explain the discrepancy by explaining that he sold all his shares at
> the end of each quarter and put his holdings in cash.
> “There were no smoking guns, but too many things that didn’t add up,”
> Mr. Fludgate said.
> However, the S.E.C. had already investigated Mr. Madoff and two
> accountants who raised money for him in 1992, believing they might
> have found a Ponzi scheme. “We went into this thing just thinking it
> might be a huge catastrophe,” an S.E.C. official told The Wall Street
> Journal in December 1992.
> Instead, Mr. Madoff turned out to have delivered the returns that the
> investment advisers had promised their clients. It is not clear
> whether the results of the 1992 inquiry discouraged the S.E.C. from
> examining Mr. Madoff again, even when new red flags surfaced. Lawyers
> at the S.E.C. did not return calls.
> Meanwhile, Fairfield Greenwich Group, whose clients have $7.5 billion
> invested with the Madoff firm, said it was “shocked and appalled by
> this news.”
> “We had no indication that we and many other firms and private
> investors were the victims of such a highly sophisticated, massive
> fraudulent scheme.”
> At the court hearing, an individual investor, who declined to give his
> name to avoid embarrassment, expressed a similar sentiment.
> “Nobody knows where their money is and whether it is protected,” the
> investor said.
> “The returns were just amazing and we trusted this guy for decades —
> if you wanted to take money out, you always got your check in a few
> days. That’s why we were all so stunned.”
> Zachery Kouwe and Stephanie Strom contributed reporting.
>
> On Dec 12, 6:29 pm, ornamentalmind <[email protected]> wrote:
>
> > clog, your analogy and anecdotal experience are similar to the local
> > of where you live….way out in the country.
>
> > On Dec 12, 12:47 pm, Clogtowner <[email protected]> wrote:
>
> > > Hi y'all - if he's talking about toasters and the like, I still
> > > disagree. Try buying a toaster in Europe or many other places. The
> > > ultimate example of Govt. interference in business can be seen in what
> > > used to be called "the Bread Basket of Africa," Zimbabwe, where
> > > inflation is running at 2 million %/day and cholora, amongst other
> > > diseases is destroying the populace.
>
> > > On Dec 12, 12:30 pm, Taylor <[email protected]> wrote:
>
> > > > <<I can buy or sell any amount of stock for $7>>
>
> > > > I sorta think orn's talking about STUFF, like toasters, not just
>
> ...
>
> read more »
--~--~---------~--~----~------------~-------~--~----~
You received this message because you are subscribed to the Google Groups
"Memphis Freethought Alliance" group.
To post to this group, send email to [email protected]
To unsubscribe from this group, send email to
[email protected]
For more options, visit this group at
http://groups.google.com/group/memphisfreethoughtalliance?hl=en
-~----------~----~----~----~------~----~------~--~---
