Mr. Madoff and his Ponzi fund


Madoff fund may have made no trades

Published: January 16, 2009 - 1:08 pm
(AP) - The investment fund run by disgraced money manager Bernard Madoff may not have made even a single trade, a new twist in the scandal around an alleged $50 billion fraud that has engulfed thousands of investors and financial institutions worldwide.
The securities and brokerage industry's self-policing organization, the Financial Industry Regulatory Authority, confirmed there was no evidence of Mr. Madoff's secretive investment fund executing trades through his brokerage operation. And Fidelity Investments, which had a money-market fund listed among the many trades included in statements Mr. Madoff's fund sent to customers, says Mr. Madoff was not a client.

Mr. Madoff, long a prominent Wall Street figure and former chairman of the Nasdaq Stock Market, has become a global villain since he confessed last month to stealing $50 billion in what may be the largest Ponzi scheme in history.

The scandal also has cast a harsh light on regulators. The Securities and Exchange Commission failed to detect the scheme despite credible allegations against Mr. Madoff's operations being brought to the agency's staff over the course of a decade. The SEC inspected his brokerage operation and the investment firm. SEC spokesman John Nester declined to comment Friday.
The industry's self-policing organization, known as FINRA, made periodic examinations of Mr. Madoff's brokerage operation, which functioned as a wholesale platform for trading by big securities firms and investment banks.

"We saw no indication of any trading on behalf of" [Mr.] Madoff's investment firm, FINRA spokesman Herb Perone said Friday. "And we saw no evidence of customer account statements being generated" by the brokerage for the investment arm.

Adam Banker, a spokesman at Fidelity's Boston headquarters, said that neither Mr. Madoff nor his firm were clients of any Fidelity divisions. "We're not aware of any investments by [Mr.] Madoff in our funds on behalf of his clients," Mr. Banker said.

The apparent lack of trades by Mr. Madoff's firm was first reported Thursday by The Boston Globe.
Mary Schapiro, the chief executive of FINRA, is President-elect Barack Obama's nominee to become the new chairman of the SEC. She said in her Senate confirmation hearing Thursday that because the alleged fraud was carried out through Mr. Madoff's investment business, and FINRA was empowered to inspect only the brokerage operation, it wasn't possible for the organization to discover the violations.

Mr. Madoff allegedly orchestrated a Ponzi scheme, in which people are persuaded to invest in a fraudulent operation. The early investors are paid their returns out of money put in by later investors. Federal prosecutors are seeking to jail him.

©Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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Madoff Serfs Were Faking Trading Tickets

So, it turns out Bernie Madoff wasn't acting alone, after all. Imagine that.

Annette Bongiorno, one of Madoff's trusted deputies, had two assistants research price moves of major stocks every day and generate a report, then have the pair produce trading "tickets." Of course, the fun here is that the trades never took place.

From experience, we know how old time stock brokers in Cleveland used to pull this scam off with a few clients and dot-matrix printer back in the 1980s. But this many people? For this long? Truly amazing. They should let Bernie run the bingo game at whatever Club Fed he lands.

The market-making portion of Bernard Madoff's business, which he ran for years alongside the Ponzi scheme for which he has been convicted of fraud, has been relaunched under the name Surge Trading.
The business will be led by Frank Petrilli, former chief executive of TD WaterHouse, and will provide financial institutions, including broker-dealers, with access to trade execution services and exchanges.

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NEW YORK (Reuters) – Bernard Madoff, convicted of swindling $65 billion through the biggest-ever Ponzi scheme, has told fellow prison inmates that he is dying of cancer, the New York Post reported on Monday, citing unnamed prison sources.

Madoff dying of cancer, fellow inmates say: report

I guess is getting out of jail rather sooner than later and maybe going to Libya...
August 24, 2009, 2:27 pm
Bureau of Prisons Denies Madoff Has Cancer

The Federal Bureau of Prisons said Monday that the convicted swindler Bernard L. Madoff had not been diagnosed with cancer and was not terminally ill.

The bureau directly contradicted a report in The New York Post on Monday that said Mr. Madoff was dying of cancer, citing only unidentified sources.

After receiving numerous queries about the report, a spokeswoman for the Bureau of Prisons, Traci Billingsley, released the following statement:

“While the N.Y. Post story is full of inaccuracies, and we can’t specifically address all of them, we can tell you that Bernie Madoff is not terminally ill, and has not been diagnosed with cancer.”

Mr. Madoff, the architect of the largest Ponzi scheme in history, is serving a 150-year term at the federal prison in Butner, N.C.

Bureau of Prisons Denies Madoff Has Cancer - DealBook Blog -
I'm not sure whether to laugh or cry when I read this. Isn't Uncle Benny something?
WASHINGTON — Unseasoned investigators from the Securities and Exchange Commission were alternately intimidated and enthralled by a name-dropping, yarn-spinning Bernard L. Madoff as he dodged questions about his financial house of cards, according to a scathing new report on the agency’s repeated failure to uncover the huge investment fraud.

“Madoff carefully controlled to whom they spoke at the firm,” the S.E.C.’s independent watchdog said in the report released on Wednesday.

When one of Mr. Madoff’s employees was talking to investigators in 2005, an aide to Mr. Madoff broke up the conversation, explaining that it was time for lunch — at 3 in the afternoon.

The incident was one of several recounted by the agency’s inspector general, H. David Kotz, in a report that concludes numerous “red flags” were missed by the agency from at least 1992, not just because of inexperience and incompetence, but because investigators failed to follow incriminating evidence in plain sight and were cowed by Mr. Madoff, who had an inflated reputation on Wall Street.

The report details six substantive complaints against Mr. Madoff received by the agency, which were followed by three investigations and two examinations. Yet the agency never verified Mr. Madoff’s trading through a third party. Time and again, it was noted that the volume of his purported options trades were implausible. When the enforcement staff received a report showing that Mr. Madoff indeed had no options positions on a certain date, the agency simply did not take any further steps.

In fact, the string of lapses was capped by a staff lawyer receiving the highest performance rating from the agency, in part for her “ability to understand and analyze the complex issues of the Madoff investigation.”

Perversely, Mr. Madoff used the S.E.C.’s inquiries as a selling point to reassure investors that the government had looked over his operations and found no problem.

It was not Mr. Madoff’s cleverness that enabled him to fleece thousands of investors out of billions of dollars for years, Mr. Kotz said. It was the fact that, “despite numerous credible and detailed complaints,” the S.E.C. never took “the necessary, but basic, steps to determine if Madoff was operating a Ponzi scheme.”

Perhaps the most egregious lapse was the repeated failure of investigators to verify the trades that Mr. Madoff claimed to be making over the years, bringing in steady profits that turned out to be, quite literally, too good to be true, the inspector general found.

“A simple inquiry to one of several third parties could have immediately revealed the fact that Madoff was not trading in the volume he was claiming,” the report said.

The chairwoman of the S.E.C., Mary L. Schapiro, called the Madoff episode “a failure that we continue to regret” in a statement issued on Wednesday. She said better training, more attention to outside tips and the recruitment of “new skill sets” since she was appointed by President Obama in January would help to prevent future frauds.

“The executive summary makes abundantly clear that the agency bungled numerous investigations and failed to heed numerous warnings about Madoff’s dubious activities,” said Jacob H. Zamansky, a white-collar criminal defense lawyer.

The S.E.C.’s failures have been widely discussed since Mr. Madoff’s scheme collapsed last December, prompting then-Chairman Christopher Cox to say he was “gravely concerned” over the regulatory ineptitude.

Mr. Madoff pleaded guilty in March to securities fraud and was sentenced in June to 150 years in federal prison, leaving in his wake thousands of ruined investors, as well as many charities whose officials had thought their investments with Mr. Madoff were steady and safe.

Although Mr. Kotz’s report did not lay bare any startling new early warnings about the business of Mr. Madoff, it did add embarrassing new details to what may be the S.E.C.’s biggest failure since it was created 75 years ago.

Mr. Kotz recounted incidents in which investigators seemed hopelessly out of their depth, far too credulous and perhaps just plain lazy.

One investigator described Mr. Madoff as “a wonderful storyteller” and “a captivating speaker” after the 2005 encounter in which Mr. Madoff, a former Nasdaq chairman, boasted of his ties to people high up in the S.E.C. and said he was on the short list to be the next agency chairman — the post that went to Mr. Cox.

But Mr. Madoff turned angry — “veins were popping out of his neck,” an investigator said — when asked to produce certain documents, and he tried to dictate what paperwork he would yield. When the investigators reported back to their superior in the S.E.C.’s Northeast regional office, “they received no support and were actively discouraged from forcing the issue.”

The inspector general revisited the failure of the S.E.C.’s Boston office to take seriously the warnings of Harry Markopolos, a private fraud investigator who had been trying since 1999 to get the agency to investigate Mr. Madoff. The failure to heed Mr. Markopolos was almost inexplicable, except that some agency officials did not like him personally, Mr. Kotz said.

From 1992 until the Madoff empire imploded, one inquiry after another went nowhere, the inspector general said. Some investigators “weren’t familiar with securities laws,” and some seemingly refused to believe their own ears even when Mr. Madoff contradicted himself or offered illogical answers to questions.

At one point, investigators drafted a letter to NASD seeking independent trade data, “but they never sent the letter, claiming that it would have been too time-consuming to review the data they would have obtained,” the inspector general wrote.

There were also simple bureaucratic foul-ups, like the one in which different branch offices of the S.E.C. were both looking into the operations of Mr. Madoff. “Astoundingly, both examinations were open at the same time in different offices without either knowing the other one was conducting an identical examination,” Mr. Kotz noted.

“In fact, it was Madoff himself who informed one of the examination teams that the other examination team had already received the information they were seeking from him.”

Jack Hewitt, a former S.E.C. prosecutor who is now a partner at the McCarter & English law firm, said, “There seems to have been a lack of competent coordination between various offices of the commission.”

Mr. Hewitt observed, as have many others, that Mr. Madoff “was remarkable in his ability to conceal his conduct and to communicate an image of integrity to the public.”

A small consolation for the S.E.C. was Mr. Kotz’s conclusion that there had been no improper influence by Mr. Madoff on agency investigators or officials. (One investigative team that examined the Madoff firm was headed by Eric Swanson, who left the commission in 2006 and married Shana Madoff, Mr. Madoff’s niece, in 2007.)

The inspector general’s report could rekindle more outrage at the S.E.C. in particular and Wall Street in general. And there may be more embarrassing details to trickle out: the document released on Wednesday was a 22-page executive summary by Mr. Kotz. The full report runs to some 450 pages.

Scathing Report on S.E.C. Failure to Uncover Madoffs Scheme -
Peotic justice: Madoff beaten in prison

Just saw this on TV and it showed up on WSJ.
Bernard Madoff, who is serving a 150-year sentence in North Carolina for running a fraud scheme that cost investors billions of dollars, was physically assaulted by another inmate in December, according to three people familiar with the matter.
Madoff Was Beaten in Prison -

(Reuters) - Mark Madoff, the elder son of convicted swindler Bernard Madoff, was found hanged in his New York City apartment in an apparent suicide, police and his lawyer said on Saturday.

Mark Madoff, 46, was found dead on the two-year anniversary of the arrest of his father. Bernard Madoff is now serving 150 years in prison after confessing to running a decades-long Ponzi scheme that bilked investors out of billions.