Bernie Madoff, financier behind largest Ponzi scheme in history, dies in prison

Big Daddy

T20I Debutant
Jan 29, 2005
Madoff Moved The
Money To Israel?
Amount May Be Closer To $100 Billion
From Mark Graffis

As more info comes in regarding the Madeoff scheme, news from several sources say that Madeoff and his clients were the largest bank account holders listed on a computer disk leaked by a Swiss bank worker regarding US persons with hidden Swiss bank accounts.

As the IRS approached him regarding the repayment of taxes from his hidden swiss account, Madeoff reportedly became admamant that his wealth would not be taxed by the US. He also realized that once the swiss records were exposed that his and his client's wealth were also within reach of seizure or judgement by a US court regarding past frauds of him or his clients.

Realizing that he was be certain to arrested on other securities and market making fraud issues in the near future, insiders say that it was at this point he made the decision to just say it was all lost in trading and move it directly to Israel. Insiders also report that he was ready to pay the taxes on the money in Israel but was adamant that taxes in the US would not be paid nor would any of the money be available for US court judgements in subprime, fraudlent trading and misrepresentation charges in the future.

Sources say that most of his and his clients wealth were gained through issuing subprime mortgages to unqualified borrowers and then tranching the mortgages into CDOs and circulating the CDOs among US pension funds including GM, GE, IBM and Califorina's State pension fund. Some of the wealth was also gotten through investments in Vegas housing sub divisions and Miami condo projects at the height of the real estate bubble.

Finally, sources say that the wealth from Madeoff's scam has been fully transfered to Israel and that "most if not all of the clients have been made aware" that their money is available to them in Israel and that it was felt that this was a necessary measure in protecting certain high level clients in the face of a collapse of the USA.

A European bank executive has said early this morning that the Banks involved in Madeoff's fund were exposed through loads and leveraging and that these loans will be repaid in full from Israel.

All of the charities involved have Israeli offices, so they also are of an understanding that their money is now available there.

Sources say that Madeoff has a base in Israel and that he will offer all clients his services there as a continuem to his services in New York.

Speculation has it that he is advising transfer of client's funds into physical gold holdings in coded safety deposit boxes. This advise jives with the notion that the money needed to be taken out of the US on fear of collapsing US dollar and seizure of funds by IRS and courts for frauds committed during the sub prime bubble.

The Swiss bank client leak has caused these banks to no longer be viable avenues for asset concealment.
Madeoff's clients are not just in the US. He has moved funds to Israel for clients in Russia, France, England and Swiss in the scheme in which he is involved.

Some insiders are saying the amount involved may be closer to $100 Billion.
(Fortune) -- Like the conclusion that Lee Harvey Oswald was a lone gunman, the theory that Bernard Madoff acted alone is hard to swallow.

True, Madoff has allegedly confessed that he perpetrated a massive fraud that left behind $50 billion in losses; and he claimed to have done this all alone.

But this is a man who kept false records, sent bogus documentation, bilked investors for billions, lied for years to friends and knowingly harmed charities. It's within the realm of acceptable behavior to cast a jaundiced eye upon his confession.

"Speaking as a Jew on Christmas, I would be less shocked if Santa Claus showed up to my house than if Bernie Madoff pulled off this fraud alone," says Ron Geffner, a partner at law firm Sadis & Goldberg who specializes in structuring, organizing and counseling hedge funds and other investment advisors.

"It's hard to imagine that given the amount of assets that he managed that people would not have been aware. If nothing else, employees, no matter what floor they were on, would have known that somewhere within the firm money was being lost," Geffner adds.

To put it into perspective, if a company generated $50 billion in revenue, it would be in the Fortune 50. That's a huge sum to hide, even over a period of years. To date, the largest similar fraud has been Sam Israel's Bayou Group, which turned out to be a $400 million ponzi scheme. Even Tom Petters, who managed to keep a huge investment scheme going for 13 years, only lost $3 billion for investors.

Not only is it difficult to hide $50 billion in losses without anyone knowing, it's hard to manage that much money. The amount of paperwork generated by a legitimate operation requires a huge backroom operation and lots of employees just to keep careful records of trades, profit and loss, and investor distributions and redemptions.

To successfully run a fraudulent operation for as long as Madoff did, he would not only need to keep records of what was actually going in and out of his operation, he would have to falsify an alternative sets of books, trading records and investor returns.

"This was a very large scheme, and he couldn't have done it without the cooperation and assistance of someone well informed who could process trades, report them and create monthly statements," says Doug Kass, founder of the dedicated short fund Seabreeze Partners. "Someone had to help him falsify all those reports, conduct mail fraud and create multiple sets of books."

The usual suspects

So who were his accomplices? Bernard Madoff Investment Securities was essentially a family operated business. His brother Peter Madoff was the chief compliance officer. His son Andy Madoff was the director of trading, and his son Mark Madoff was the director of proprietary trading. Shana Madoff, his niece, was the firm's compliance attorney.

And account statements uncovered by the website CityFile show that Mark Madoff's charitable trust was handled by asset-management firm Neuberger Berman, rather than by his dad. The millions in Bernie Madoff's foundation were managed by his own investment firm.

Strikingly, his family has been largely ruled out as suspects in the case; and it is possible that they only ran the trading operation. In a move that distanced them from their father, neither son was willing to sign Bernie Madoff's bail papers.

As for outside help, Cohmad Securities, a Boston based investment firm is being subpoenaed by regulators to find out more about its relationship with Madoff.

The firm is 20% owned by Madoff and 80% owned by Maurice Cohn; and its name is a combination of the names Cohn and Madoff. Cohmad's New York office is in the same building as Bernard Madoff Investment Securities, on the 10th floor. On the 17th floor, Madoff allegedly carried out his ponzi scheme in private.

An executive at Cohmad is Robert "Bob" Jaffe, who helped introduce members of the Palm Beach Country Club to Madoff's investment outfit. He is also the son-in-law of Carl Shapiro, a man who made his fortune in New York City's Garment District and was one of Madoff's earliest and largest investors.

But as with Madoff's family, Jaffe has said that he was unaware of the fact that Madoff's investment arm was a fraud. And it has been exceedingly difficult to turn up any real leads in the case. Even those close with former Madoff employees are exceedingly frustrated by the opacity of the situation. No one knows with for sure how many people actually worked for Madoff. No one knows how many investors he had or how much money he actually managed.

"This is clearly the biggest financial scandal and cover up in history," says Kass.

Let's hope that the SEC is better at closing the case than the Warren Commission
Madoff’s “Auditing” Firm: Friehling & Horowitz, One Room Office, Three Employees
December 16th, 2008

Via: Bloomberg:

The auditor for Bernard L. Madoff Investment Securities LLC, whose namesake was charged in a $50 billion Ponzi scheme last week, is under investigation by the district attorney in New York’s Rockland County, a northern suburb of New York City.

The New City, New York, auditing firm Friehling & Horowitz signed off on the annual financial statement of Madoff’s Manhattan-based investment advisory business through Oct. 31, 2006, according to a copy obtained by Bloomberg News.

Madoff was charged by federal prosecutors in Manhattan and sued by the U.S. Securities and Exchange Commission on Dec. 11. He told senior employees that the firm was insolvent and “had been for years,” prosecutors said in the criminal complaint. David Friehling, whose name is on the door to the store-front accounting office, hasn’t been charged.

“We’re trying to determine if there have been any state crimes here,” Rockland County District Attorney Thomas Zugibe said in a telephone interview yesterday. “When you have a key player like that operating in your county, you have to look.”

Friehling didn’t return calls for comment.

Zugibe said, among other things, he was probing to see whether any other Rockland-based businesses or other organizations might be affected.

“The implication is pretty broad,” Zugibe said.

Friehling is on the board of the JCC Rockland, a Jewish center in the county. He also is a past-president and a current board member of the Rockland chapter of the New York State Society of Certified Public Accountants.

Hedge Fund Adviser

Hedge fund investment adviser Aksia LLC warned clients last year not to put their money with Madoff after learning of “red flags” at his company, including that its books were audited by a three-person accounting firm.

Friehling & Horowitz included one partner in his late 70s who lives in Florida, a secretary, and one active accountant, Aksia said.

The copy of the four-page annual financial statement, dated Dec. 18, 2006, attested that the financial statements of Madoff’s securities firm were “in conformity with accounting principles generally accepted in the United States.”

The financial analysis said Madoff Securities had $1.3 billion in assets, including $711 million in marketable securities and $67 million in U.S. debt. Members’ equity, the firm’s net worth, was $604 million, according to the document.

The firm operates from a storefront office in the Georgetown Office Plaza in New City, New York, sandwiched between a pediatrician’s office and another medical office.

Leslie Cousar, who works in a nearby office, said on Dec. 12 that the man who comes to the auditor’s office does so for 10-to- 15 minute periods and leaves. She said he drives a Lexus and doesn’t dress in business attire.

The case is U.S. v. Madoff, 08-MAG-02735, U.S. District Court for the Southern District of New York (Manhattan).
Bernard Madoff, the one-time Wall Street titan who orchestrated one of the largest frauds in history, has died in prison aged 82.

Madoff, known as Bernie, was a former chairman of the Nasdaq stock exchange, and was regarded for years as an investment sage. But unbeknown to his thousands of victims, he was running a Ponzi scheme that wiped out at least $17.5bn in savings. Imposing a 150-year sentence in 2009, judge Denny Chin called Madoff’s crimes “extraordinarily evil”. His criminal behavior devastated the lives of his victims, leading to suicides, bankruptcies and home losses.

“We thought he was God; we trusted everything in his hands,” Elie Wiesel, the late Holocaust survivor and Nobel laureate, said in the same year. Madoff’s scam cost Wiesel’s foundation $15.2m. Wiesel described him as “one of the greatest scoundrels, thieves, liars, criminals”.

Madoff died at the Federal Medical Center, a prison for inmates with health needs, in Butner, North Carolina, apparently from natural causes. Last year his lawyers filed court papers to try to get him released from prison during the pandemic, saying he had end-stage renal disease and other chronic medical conditions. The request was denied.

In 2008, Madoff pleaded guilty to orchestrating a massive Ponzi scheme, in which instead of investing cash, he paid off older investors with funds from new investors. A court-appointed trustee recovered more than $13bn of an estimated $17.5bn that investors put into Madoff‘s business.

The recovered sum fell far short of the sums Madoff told duped clients he was managing. At the time of his arrest, fake account statements were telling clients they had holdings worth $60bn.

The global financial crisis of 2008 prompted the scheme to unravel, leaving thousands of victims bereft of their savings and Madoff as an avatar for the failure of regulators and financial corruption.

In December 2008, as investors worried about the impending crisis started asked for their money back, Madoff called a family meeting at his Manhattan apartment, and confessed to his sons that the family business they both worked in was based on “one big lie”.

After the meeting, a lawyer for the family contacted regulators, who alerted federal prosecutors and the Federal Bureau of Investigation. Madoff was in a bathrobe when two FBI agents arrived at his door unannounced on a December morning.

He invited them in, and then confessed after being asked “if there’s an innocent explanation”, a criminal complaint said.

Madoff responded: “There is no innocent explanation.”

As well as Wiesel, investors in Madoff’s company included the actors Kevin Bacon, Kyra Sedgwick and John Malkovich, and the Hollywood director Steven Spielberg.

Madoff pleaded guilty in March 2009 to securities fraud and other charges, saying he was “deeply sorry and ashamed”. After spending several months under house arrest at his $7m penthouse apartment, he was led off to jail in handcuffs, to scattered applause from angry investors in the courtroom.

“He stole from the rich. He stole from the poor. He stole from the in between. He had no values,” former investor Tom Fitzmaurice told the judge at the sentencing. “He cheated his victims out of their money so he and his wife … could live a life of luxury beyond belief.”

The Madoff family took a severe financial hit: a judge issued a $171bn forfeiture order in June 2009, stripping Madoff of all his personal property, including real estate, investments, and $80m in assets his wife, Ruth, had claimed were hers. The order left her with $2.5m.

But it also took a toll in more personal terms. In December 2010, Madoff’s eldest son, Mark, was found hanged in his New York apartment on the second anniversary of the billionaire investment manager’s arrest for what was then described the biggest swindle in Wall Street history.

His brother, Peter, who helped run the business, was sentenced to 10 years in prison in 2012, despite claims he was in the dark about his brother’s misdeeds. Another son, Andrew, died from cancer at age 48. Madoff’s wife, Ruth, survives him.

Bernie Madoff was born in 1938 in a lower-middle-class neighborhood in the New York borough of Queens. He began his Wall Street career in 1960 alongside his brother Peter with a few thousand dollars saved from working as a lifeguard and installing sprinklers.

“They were two struggling kids from Queens. They worked hard,” said Thomas Morling, who worked closely with the Madoff brothers in the mid-1980s.

In the 1980s Bernard L Madoff Investment Securities occupied three floors of a midtown Manhattan high-rise. There, with his brother and later two sons, he ran a legitimate business as middlemen between the buyers and sellers of stock.

Madoff raised his profile by using the expertise to help launch Nasdaq, the first electronic stock exchange, and became so respected that he advised the Securities and Exchange Commission on the system.

But what the SEC never found out was that behind the scenes, in a separate office kept under lock and key, Madoff was secretly spinning a web of phantom wealth by using cash from new investors to pay returns to old ones.

Authorities later said that over the years, at least $13bn was invested with the company, which used an old IBM computer to crank out monthly statements showing steady double-digit returns, even during market downturns.

But in truth no securities were ever bought or sold. Frank DiPascali, the company’s chief financial officer, said in a guilty plea in 2009 that the statements detailing trades were “all fake”.