ponzi

Ethics Concerns At SEC May Undermine Funding Bid

by on March 11, 2011

Huffington Post…

As the SEC publicly campaigns for increased funding, chairwoman Mary Schapiro is facing new criticism over the appointment of a key agency official whose family has ties to Bernie Madoff’s Ponzi scheme. Earlier this week, the New York Times reported that attention has turned to the appointment of David M. Becker, who was the SEC’s general council from February 2009 until last month. Becker was appointed to the position even though Schapiro and the agency knew that Becker’s mother had invested with Bernie Madoff. Veterans of the SEC, however, are divided on whether or not Schapiro or the agency did anything wrong. For her part, in a Congressional hearing Thursday, Schapiro admitted that the agency mishandled Becker’s latest SEC tenure. (Becker previously served as SEC General Counsel from January 2000 to May 2002.) “While Mr. Becker did solicit and follow advice from the ethics counsel, I realize in light of this incident that as chairman I have to ensure that we go beyond what may be required in any particular situation,” Ms. Schapiro said . At the SEC, Becker’s work involved helping to decide how Madoff’s victims would be compensated, according to the New York Times . Becker’s late mother invested money with Madoff, and Becker and two of his brothers inherited the investment and its earnings. The money was withdrawn well before the Ponzi scheme was discovered. “How could anyone have missed this?” said Steve Thel, professor of securities regulation at Fordham University, who previously worked as a lawyer in the General Council’s office at the SEC. “It almost has to have been that they did this by mistake. Because it’s so clear that this would create problems if anyone knew about it. I don’t think anything we know about Becker indicates he did this to protect his own pocket. I think that people didn’t think enough about ethics violations.” But in former SEC chairman Harvey Pitt’s view the matter is, in a sense, “much ado about nothing.” “Before Becker was hired he disclosed this issue,” Pitt said. “When issues relating to Madoff arose both he and the chairman did what they should, they went to the ethics councilor to find out what they thought.” “I think that ethical issues are very, very important but this is pretty much a tempest in a teapot if you will,” Pitt continued. “And what I’m worried about is that there are those whose agendas involve basically criticizing the SEC and whatever it does or doesn’t do. And my fear is that whatever anybody’s view on the merits of this [appointment] was, there are real and important issues the SEC is grappling with, and I don’t think this deserves to be at the center of another storm.” Schapiro testified before two congressional hearings on Thursday — one focussed on Becker and the other on the SEC’s bid for a large funding increase to meet the new financial regulations set by the Dodd-Frank Act. Critics, pointing to the failure of the agency to detect the Madoff fraud, are saying Becker’s work at the SEC is further proof of the agency’s incompetence. Becker’s financial ties were not publicly disclosed until Irving Picard, the court-appointed trustee charged with recovering assets for Madoff’s victims, sued the three Becker brothers to recover $1.5 million of the $2 million they had inherited in 2004. Becker and Schapiro both say that Becker’s work at the SEC only went forward on advice from the SEC’s ethics counsel. “Even if they did go through the ethics processes, the ethics processes are then problematic,” said Thel. “If someone could come to the conclusion that this is not problematic — that is problematic.” Bloomberg reports that Becker has said he consulted with the ethics counsel at least twice about work related to Madoff. One specific matter — and the biggest apparent conflict of interest — concerns the amount of money Madoff victims would be compensated. The NYT reports that while the agency had agreed to a deal that would return to investors only the money they had originally put into their accounts with Madoff, Becker said the commission should allow victims to keep some of the gains their investment had generated as well. That change would benefit Becker’s family. In May 2009, Becker went to the ethics counsel again to ensure proper conduct over the Madoff fallout. Bloomberg reports that Becker wrote in a letter to U.S. House Republicans that the counsel “concluded that a reasonable person with knowledge of all of these facts would not question my impartiality.” “That’s a strained conclusion,” said Steve Thel. “To say that Becker’s participation in the decision in the clawback would not have a direct and predictable effect is very problematic.” Furthermore, Thel pointed out, it is not merely a matter of hindsight. Everything that is troubling about Becker’s appointment was known at the time he was hired. Becker has said that his departure from the agency last month is not connected with Picard’s lawsuit. “The problem, the horrible black eye,” Thel said, “is that now the SEC has given people who are simply critics of regulation and the [Obama] administration a way to criticize the SEC and bring up again the Madoff failings which largely all predate the Schapiro administration.” Rep. Randy Neugebauer (R – Texas) said earlier this week that people from both parties agree there was at least an appearance of a conflict of interest, according to Reuters . House and Senate Republicans, along with the SEC’s top watchdog, are investigating Becker’s role at the SEC.

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Ethics Concerns At SEC May Undermine Funding Bid

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Hedge Fund Manager Pleads Guilty To Ponzi Scheme

by on March 7, 2011

Huffington Post…

(Reuters) – A Connecticut hedge fund manager pleaded guilty on Monday to running a multiyear Ponzi scheme that may have defrauded investors out of hundreds of millions of dollars, U.S. prosecutors said. Francisco Illarramendi, 42, pleaded guilty to five criminal counts including securities fraud, wire fraud and conspiracy to obstruct justice and defraud the U.S. Securities and Exchange Commission, U.S. Attorney David Fein in Connecticut said. Two other men, Juan Carlos Guillen Zerpa and Juan Carlos Horna Napolitano, are being detained following their arrests Thursday on conspiracy and obstruction charges, he added. Illarramendi entered his plea before U.S. District Judge Stefan Underhill in Bridgeport, Connecticut. The New Canaan resident could face up to 70 years in prison, while Guillen and Horna each face up to 25 years, Fein said. “We believe this case represents the largest white-collar prosecution ever brought by this office,” Fein added. John Gleason, a lawyer for Illarramendi, did not immediately return a request seeking a comment. Lawyers for the other defendants could not immediately be located. Investigators said Illarramendi, majority owner of Michael Kenwood Group LLC, ran his Ponzi scheme from 2006 until last month, using money from new investors to repay old investors. They said that, after learning of an SEC probe late last year, Illarramendi provided a false letter from an accountant in Venezuela that purported to verify $275 million of assets that did not actually exist. Prosecutors said Illarramendi agreed to pay Guillen and Horna, both Venezuelan citizens, more than $3 million to fabricate the letter and evidence of the $275 million. Investigators said Illarramendi’s funds have included a Short Term Liquidity Fund said to once have $540 million of assets. The SEC said this fund in fact held “substantially less” because many assets were used to fund redemptions to investors in another fund. Separately, the SEC added new charges to its January civil complaint against Illarramendi. It said it won a court order freezing the defendant’s assets later that month. The criminal case is U.S. v. Illarramendi, U.S. District Court, District of Connecticut. The SEC case is SEC v. Illarramendi et al in the same court, No. 11-00078. (Reporting by Jonathan Stempel; editing by Gerald E. McCormick and Andre Grenon) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Hedge Fund Manager Pleads Guilty To Ponzi Scheme

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Bernie Madoff: ‘I’m A Good Person’

February 28, 2011

Bernie Madoff’s personal PR campaign has begun. The convicted ponzi schemer made a series of calls from prison to writer Steve Fishman in hopes of setting the record straight — and to potentially “get a message” across to his estranged son, Andy Madoff, according to a new article in New York magazine. He apologized for calling collect. “I don’t have that much money in my commissary account,” he said. Madoff is serving a prison sentence of 150 years for running the largest recorded Ponzi scheme in history, one that had a direct effect on thousands of investors and a host of charities and hedge funds. The collective investment of $36 billion in Madoff’s scheme returned only $18 billion to investors before the financial collapse. And while there is still debate about where the other $18 billion exactly landed, much of it believed to have gone to Madoff. Madoff appears to have spent the better part of the interviews defending his actions, stopping short of excusing himself entirely. “I am a good person,” Madoff says. “I’m not the kind of person I’m portrayed as.” He also believes others are less innocent than they appear. “Everyone was greedy,” he explains, “I just went along.” He also notes that not everyone left empty-handed: “I’m sure it’s a traumatic experience to some, but I made a lot of money for people.” Madoff again had some choice words about Wall Street. In February, in his only other interview, Madoff said banks and hedge funds “had to know… But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know.” JPMorgan Chase, Madoff’s bank, has come under scrutiny for its alleged role in the Ponzi scheme. Trustee Irving Picard is suing the bank for $6.4 billion on behalf of scammed investors. His lawyer, David Sheehan, says the bank was “willfully blind” to the scheme and played a direct role in abetting Madoff’s scheme by ignoring “red flags,” while collecting fees and profits. Picard has also sued Citigroup for $425 million, alleging the bank knowingly passed Madoff’s dirty money onto other banks. This time, he went farther, admitting the market exploits individual investors. “There’s no chance that investors have in this market,” he says. During the interview, he also expresses surprise that no one else on Wall Street has seen criminal convictions. Regulatory reform, he believes, didn’t go far enough. His stated reason for calling Fishman, though, had more to do with his estranged son, Adam, than with Wall Street. Madoff hasn’t spoken to Adam since his other son, Mark, committed suicide on the second anniversary of the Madoff’s arrest in downtown Manhattan. Through the interview, he hopes to reach his son, against his lawyer’s advice. Since the Mark’s suicide, Madoff has also lost contact with his wife, Ruth Madoff. Read the entire piece here.

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Mark Madoff Suicide: Bernie Madoff’s Son Found Hanged In NYC Apartment

December 11, 2010

NEW YORK — One of Bernard Madoff’s sons was found dead of an apparent suicide Saturday on the second anniversary of his father’s arrest, according to police and a lawyer for the family. Mark Madoff, 46, was found dead in his apartment in Manhattan’s fashionable SoHo section, according to police department spokesman Paul Browne. A relative notified police around 7:30 a.m. “Mark Madoff took his own life today. This is a terrible and unnecessary tragedy,” his lawyer, Martin Flumenbaum, said in a written statement. His body was found hanging from a dog leash that had been fashioned into a noose and strung over a pipe in the ceiling of his living room, according to a law enforcement official. The official was not authorized to speak publicly about the case and spoke to The Associated Press on the condition of anonymity. “Mark was an innocent victim of his father’s monstrous crime who succumbed to two years of unrelenting pressure from false accusations and innuendo. We are all deeply saddened by this shocking turn of events,” Flumenbaum said. Mark Madoff and his brother, Andrew, were under investigation but hadn’t faced any criminal charges in the massive Ponzi scheme that led to their father’s jailing. Bernard Madoff swindled a long list of investors out of billions of dollars and is serving a 150-year prison term in North Carolina. He was arrested on Dec. 11, 2008, after confessing his crimes to his family. Madoff’s sons, according to the family’s attorneys, were the ones who turned him in. The scandal put a harsh light on members of the family. The financier’s brother, Peter, played a prominent role in the family’s company. Mark and Andrew Madoff both worked on a trading desk at the firm, on a side of the business that wasn’t directly involved in the Ponzi scheme. In February, Mark Madoff’s wife, Stephanie, petitioned a court to change her last name and the last names of their two children, saying her family had gotten threats and was humiliated by the scandal. Law enforcement officials told The Associated Press that Mark Madoff’s wife, who is in Florida, became concerned about her husband after getting a communication from her husband either Friday night or early Saturday morning suggesting that someone should check on their two-year-old child. She asked her father to check on the home. When he arrived, he found the two-year-old sleeping safely in his bedroom, as well as the body. A dog in the apartment was also unharmed. A call to Bernard Madoff’s attorney was not immediately returned Saturday. Calls to the FBI and U.S. Attorney’s office were also not immediately returned. Previously, spokespeople for the brothers had repeatedly denied that they had any knowledge of their father’s crimes. A year ago, the court-appointed trustee trying to unravel Madoff’s financial affairs sued several relatives, including Peter, Mark and Andrew, accusing them of failing to detect the fraud while living lavish lifestyles financed with the family’s ill-gotten fortune. The lawsuit accused Mark Madoff of using $66 million he received improperly to buy luxury homes in New York City, Nantucket and Connecticut. Police investigators were at Madoff’s apartment Saturday morning, along with officials from the medical examiner’s office, which will determine the cause of death. ___ Associated Press writers Tom Hays and Verena Dobnik contributed to this report.

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Madoff Victims’ Trustee Files Dozens Of Lawsuits

November 28, 2010

NEW YORK — Relatives of both Bernard Madoff and his wife are among those being targeted in 40 lawsuits announced Friday by the trustee endeavoring to recover money for victims fleeced by the disgraced financier. Twenty-two of the lawsuits were filed against relatives of Madoff and his wife, trustee Irving H. Picard said in a news release. Eighteen lawsuits were filed against former employees of Bernard L. Madoff Investment Securities LLC, he said. An attorney for Ruth Madoff didn’t immediately respond to an e-mailed request for comment Friday night. Picard said his firm is seeking about $69 million in funds deposited by the company’s customers and stolen in the 72-year-old’s vast Ponzi scheme. Picard said the lawsuits were filed as part of an effort to recover funds from relatives and employees “who were closest to the center of the fraud and who were, in many cases, among those who benefited most from the Ponzi scheme.” Among the complaints, Madoff’s sister, Sondra M. Weiner, is accused of having “profited for decades” from the scheme, Picard said. A woman who answered the phone at Boynton Beach, Fla., listing for Weiner hung up without commenting late Friday. Picard said the lawsuits were filed after discussions with the defendants and their attorneys collapsed. Other complaints were previously filed against relatives of Madoff and senior BLMIS employees. The fresh batch of lawsuits comes three days after Picard announced a lawsuit against Swiss bank UBS AG, alleging it funneled clients to Madoff and then “looked the other way.” The bank called the allegation “completely unfounded.” Madoff is serving a 150-year sentence in federal prison in North Carolina after confessing to the nearly two-decade scheme that ensnared thousands of victims, including charities, celebrities and institutional investors. An estimated $20 billion was lost, making it the biggest investment fraud in U.S. history.

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Janet Tavakoli: Wall Street’s Advice to Joran van der Sloot

June 8, 2010

Before we get to your problem areas, we’d like to congratulate you on almost having “the right stuff.” You are a manipulator and an unabashed liar. You have no remorse. You are a master at twisting things to suggest your victims had it coming, and you don’t think of them as human beings. You suggest that Natalee Holloway threw herself at you when you weren’t even interested. Stephany Flores “intruded” on your private life, after you escorted her to your room. She took your computer–presumably a computer that either didn’t have logon password protection, or for which you gave her the password. She failed to acknowledge your greatness and recoiled in horror. How dare she? What an insult to your Weltanschauung! You couldn’t allow her to roam free with that sort of judgmental attitude aimed in your direction. We appreciate your attitude and then some. Unfortunately, you are a piker and more than a little sloppy. Extorting money in exchange for information was truly inspired, but you only collected $15 thousand of the $250 thousand you originally asked for. We are really big on extortion, and we know how to keep milking our victims. We threatened our government that the financial system would collapse, if it allowed shareholders to be wiped out and debt holders to accept debt for equity swaps. We had our government eating out of our hands, begging us to take hundred of billions in TARP money, and hundreds of billions more in back-door bailouts and ongoing Fed subsidies. We deflected some blame to Fannie and Freddie, even though most of the problematic subprime mortgages were fueled by money raised from our private securitizations. We got Congress to pressure Fannie and Freddie to lower their standards and buy hundreds of millions of our “AAA” rot. After our Ponzi schemes unraveled, they were forced to pick up the slack. Meanwhile, we make money hand-over-fist funded by our victims, U.S. taxpayers. We pillaged entire neighborhoods driving millions into bankruptcy. We destroyed families and drove a few of our victims to suicide . As for lack of remorse, we’ve even propagated what Elizabeth Warren calls the ” myth of the immoral debtor.” We excel at shifting blame and kicking our victims when they’re down. Fortunately for us, we devastated the finances of the least powerful people. The public outcry from our victims has been successfully muted. This brings us to the most important part, and here’s where you really screwed up. If you kill an influential customer, don’t get caught in unfriendly territory. If you forget that rule, don’t confess. Notice how well things went for you in Aruba where your family had connections? Your friends and family sheltered you. The justice system seemed designed to protect you. The entire investigation was a farce to feed the media. It left you free to commit more crimes. In Peru, your victim’s family has connections, and now the shoe is on the other foot. You don’t see us vacationing in China do you? They take financial crimes seriously. We stay in friendly territory. “Investigations” and “financial reform” are designed to feed sensational–but harmless–content to the media. They love us! We’ve bought most of Congress, the SEC crafts lame complaints, the entire regulatory system is captured, rating agencies are in our pocket, the FBI’s budget is a joke, and the Department of Justice can’t seem to remember its purpose. We cratered the economy and got the financial equivalent of a traffic ticket. This has left us free to make a mockery of traditional banking and ramp up global systemic risk. We’re rolling in more cash than ever before. You probably noticed that all of this good advice comes a bit too late to be helpful. We’d like to say it’s because we have a conscience, and that you are a bigger creep than we are, except you’d see through that. The fact is we enjoy rubbing salt in wounds, and when it comes to creating havoc and misery, we just want you to know that we are better at it than you are. Endnote: Free Copies for the Grand Jury My book on the the global financial meltdown, Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street , (Wiley, January 2009) explains that the relationship between failed mortgage lenders and Wall Street securitization departments was a widespread interconnected Ponzi scheme, which is illegal in the United States, and names culprits: mortgage lenders, investment banks, CDO managers, credit rating agencies, monoline insurers, regulators, Congress, and more. Some were criminals, others were enablers. If the Department of Justice ever decides to prosecute, I will provide free copies for the first grand jury.

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Sweethearts-In-Crime Financial Scams Are On The Rise: Reuters

April 16, 2010

While statistics are hard to come by, the number of married couples caught engaging in insider trading, stock manipulation or running a Ponzi scheme appears to be on the rise. In the past three years, at least a dozen legally joined couples have been charged with securities fraud by U.S. regulators or prosecutors.

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Frank DiPascali, Madoff Aide, May Get ‘Extraordinary’ Leniency

February 19, 2010

Prosecutors expect to recommend “extraordinary” leniency for Frank DiPascali Jr., who has admitted being Bernard L. Madoff’s crucial lieutenant in history’s largest Ponzi scheme, according to documents made public in federal court in Manhattan on Friday.

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AP: Ponzi Busts Nearly Quadrupled In 2009

December 28, 2009

(AP — CURT ANDERSON) – It was a rough year for Ponzi schemes. In 2009, the recession unraveled nearly four times as many of the investment scams as fell apart in 2008, with “Ponzi” becoming a buzzword again thanks to the collapse of Bernard Madoff’s $50 billion plot. Tens of thousands of investors, some of them losing their life’s savings, watched more than $16.5 billion disappear like smoke in 2009, according to an Associated Press analysis of scams in all 50 states. While the dollar figure was lower than in 2008, that’s only because Madoff — who pleaded guilty earlier this year and is serving a 150-year prison sentence — was arrested in December 2008 and didn’t count toward this year’s total. In all, more than 150 Ponzi schemes collapsed in 2009, compared to about 40 in 2008, according to the AP’s examination of criminal cases at all U.S. attorneys’ offices and the FBI, as well as criminal and civil actions taken by state prosecutors and regulators at both the federal and state levels. The 2009 scams ranged in size from a few hundred thousand dollars to the $7 billion bogus international banking empire authorities say jailed financier Allen Stanford orchestrated, as well as the $1.2 billion scheme they say was operated by disbarred Florida lawyer Scott Rothstein. Both have pleaded not guilty. While enforcement efforts have ramped up — in large part because of the discovery of Madoff’s fraud, estimated at $21 billion to $50 billion — the main reason so many Ponzi schemes have come to light is clear. “The financial meltdown has resulted in the exposure of numerous fraudulent schemes that otherwise might have gone undetected for a longer period of time,” said Lanny Breuer, assistant attorney general for the U.S. Justice Department’s criminal division. A Ponzi scheme depends on a constant infusion of new investors to pay older ones and furnish the cash for the scammers’ lavish lifestyles. This year, when the pool of people willing to become new investors shrank and existing investors clamored to withdraw money, scams collapsed across the country. “Some portion of the investors in the Ponzi scheme always get the short end of the stick and do not get paid,” said Elizabeth Nowicki, a former Securities and Exchange Commission attorney who now teaches law at Boston University. Even those who say they did their homework before investing ended up losing everything. A retired Air Force sergeant, Tom Annis searched the Internet for red flags like complaints or lawsuits involving Minneapolis-based host Patrick Kiley after hearing about his investment on a weekly Christian radio show called “Follow The Money.” Finding none, the 63-year-old from Jacksonville, Fla., invested his $270,000 nest egg — money that has since evaporated after federal regulators shut down what they’ve called an elaborate, $190 million Ponzi scheme. “I tried to do my level of due diligence,” Annis said. “How could I be duped like this after years of investing?” Ponzi schemes, named for infamous swindler Charles Ponzi, are extremely simple: Investors attracted by promises of high profits are paid with money from an ever-increasing pool of new investors, with the scammer skimming off the top. Sometimes the investments are at least partially legitimate but more often are completely fictional. There’s no reserve fund for lean times, or for when droves of investors start demanding their money. Ponzi himself was an Italian immigrant who concocted a scheme in 1919 involving bogus investments in postal currency. He cheated thousands of people out of $10 million, eventually going to jail for wire fraud before being deported back to Italy in 1934. Eighty years after his scheme, federal statistics paint the picture of a Ponzi nation: _The FBI opened more than 2,100 securities fraud investigations in 2009, up from 1,750 in 2008. The FBI also had 651 agents working in 2009 on high-yield investment fraud cases, which include Ponzis, compared with 429 last year. _The SEC this year issued 82 percent more restraining orders against Ponzi schemes and other securities fraud cases this year than in 2008, and it opened about 6 percent more investigations. Ponzi scheme investigations now make up 21 percent of the SEC’s enforcement workload, compared with 17 percent in 2008 and 9 percent in 2005. _The Commodity Futures Trading Commission filed 31 civil actions in Ponzi cases this year, more than twice the 2008 amount. Many of the 2009 cases have yet to head to trial. In its tally, the AP counted schemes in which prosecutions were initiated or in which regulators filed civil cases in 2008 and 2009. The Justice Department does not have totals of how many people were convicted in Ponzi schemes for either year, or for previous years. Experts believe the recession was the main reason for the collapse of so many Ponzi schemes, though the Madoff case brought greater regulatory scrutiny and heightened public awareness. More people are inclined to raise questions when things don’t look right. “We do get a lot more questions from investors now,” said Denise Voigt Crawford, Texas Securities Comissioner. “They are really worried about Ponzi schemes. That’s a good thing.”

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SEC Must Fix Process for Rating Advisers After Madoff Miss, Watchdog Says

November 19, 2009

By David Scheer and Joshua Gallu Nov. 19 (Bloomberg) — The U.S. Securities and Exchange Commission should revise the process for rating investment- advisers after designating Bernard Madoff’s firm a “medium risk” and missing his Ponzi scheme, the agency’s watchdog said. Agency examiners set the rating for Bernard L. Madoff Investment Securities LLC when the firm registered in 2006 after repeated investigations, SEC Inspector General H. David Kotz said a report released today. Madoff’s firm collapsed two years later without being examined. Firms categorized “high risk” trigger reviews within three years, the report said. The findings in Kotz’s fourth report stemming from the SEC’s failure to detect Madoff’s fraud complete the reviews promised to Congress this year. In a 457-page report Sept. 4, he showed how the agency inadequately pursued at least six tips about Madoff since 1992. SEC investigators handling one of the last reviews forced Madoff to register as an investment adviser, a step that should have subjected him to periodic visits from the Office of Compliance Inspections and Examinations, or OCIE. OCIE should “change the risk rating of an investment adviser based on pertinent information garnered from all divisions and offices of the commission, including information from OCIE examinations and enforcement investigations,” the inspector wrote. “Enforcement and OCIE should establish and adhere to a joint protocol providing for the sharing of all pertinent information.” Madoff, 71, is serving a 150-year prison sentence after pleading guilty to a fraud that federal investigators said dated to at least the 1980s. The scam funneled funds from new clients to pay returns that were purportedly generated by a stock and options trading strategy known as a split-strike conversion. The criminal case against Madoff is U.S. v. Madoff, 09-cr- 213, U.S. District Court, Southern District of New York (Manhattan). To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net .

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Madoff’s Powerboats, Mercedes Exceed $1 Million in Florida Asset Auction

November 17, 2009

By Katya Kazakina Nov. 17 (Bloomberg) — Three powerboats owned by Bernard L. Madoff and named with various forms of “bull” fetched $1,041,000 today at an auction in Fort Lauderdale, Florida. The proceeds will benefit victims of Madoff’s $65 billion Ponzi scheme. “Bull,” a 55-foot 1969 Rybovich Sportfish, sold for $700,000. “Sitting Bull,” a 38-foot 2003 Shelter Island Runabout Sport, sold for $320,000. “Little Bull,” a 24-foot 2000 center-console powerboat from Maverick Boat Co. , brought in $21,000. In addition, a 1999 Mercedes Benz CLK 320 convertible owned by Ruth Madoff sold for $30,000. The car has 12,827 miles on it. By the time the auction got underway, 70 bidders had registered with National Liquidators , a Florida-based vessel- recovery company offering Madoff’s boats and the Mercedes Benz for the U.S. Marshals Service. The sale began at 4 p.m. New York time and took less than an hour, according to the service. The 71-year-old Madoff is serving a 150-year prison sentence after pleading guilty to using money from new clients to pay off old ones. ‘Lots of Money’ “I hope every boat sells and a lot of money returns to the victims fund,” said Bob Toney, president of National Liquidators, in a telephone interview. He declined to release the presale estimates. The company also took in $950,000 for a 61-foot 2003 Viking sport-fishing yacht owned by Frank DiPascali , former chief financial officer of Bernard L. Madoff Investment Securities LLC. He pleaded guilty to aiding Madoff in the Ponzi scheme. The Madoff provenance was not likely to attract hard-core fishermen, said John D’Agostino, sales manager at HMY Yacht Sales , a Florida-based company that sells used yachts. “They want a deal,” he said in a telephone interview. “They could care less whose boat it was.” Madoff’s custom-designed “Bull” features a hydraulic elevator, Toney said, and teak woodwork. Bar glasses have hand- painted bulls. Well Maintained “Mr. Madoff has taken better care of his yachts than anyone else I know,” Toney said. “They were crew-maintained all the time.” The average price for a 1969 Rybovich is $450,000 in HMY’s database, D’Agostino said. The U.S. Marshals Service seized the vessels on April 1. It is responsible for the management and disposition of Bernard and Ruth Madoff’s assets, and for collecting the proceeds from sales of the assets, which will be used for victim restitution. Furs, Rolex watches, a Mets sports jacket, diamonds and hundreds of other personal items belonging to the Madoffs fetched more than $900,000 at a packed New York auction last weekend. About 2,000 dealers and collectors placed bids online and in the ballroom of the Sheraton New York Hotel & Towers. Many of the roughly 170 lots surpassed high estimates set by Gaston & Sheehan Auctioneers , the Pflugerville, Texas, company, handling the sale for the U.S. Marshals Service. To contact the reporter of this story: Katya Kazakina in New York at kkazakina@bloomberg.net .

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Madoff Yachts, Fishing Boat Draw Bargain Hunters in Florida Asset Auction

November 17, 2009

By Katya Kazakina Nov. 17 (Bloomberg) — Three powerboats owned by Bernard L. Madoff and named with various forms of “bull” are being auctioned today in Fort Lauderdale, Florida, with sale proceeds to benefit the victims of his $65 billion Ponzi scheme. By noon today, 55 bidders had registered with National Liquidators , a Florida-based vessel-recovery company offering Madoff’s three boats and a black Mercedes Benz for the U.S. Marshals Service. The sale begins at 4 p.m. New York time and includes eight lots, of which three aren’t related to Madoff. The 71-year-old Madoff is serving a 150-year prison sentence after pleading guilty to using money from new clients to pay off old ones. Bidders had to make a $100,000 deposit to compete for “Bull,” a 55-foot 1969 Rybovich Sportfish, or “Sitting Bull,” a 38-foot 2003 Shelter Island Runabout Sport. Those interested in his “Little Bull,” a 24-foot 2000 center-console powerboat from Maverick Boat Co. , or his 1999 Mercedes had to put up $50,000. The car has 12,827 miles on it. “I hope every boat sells and a lot of money returns to the victims fund,” said Bob Toney, president of National Liquidators, in a telephone interview. He declined to release the presale estimates. The company is also selling a 61-foot 2003 Viking sport- fishing yacht owned by Frank DiPascali , former chief financial officer of Bernard L. Madoff Investment Securities LLC, who pleaded guilty to aiding Madoff in the Ponzi scheme. The Madoff provenance isn’t likely to attract hard-core fishermen, said John D’Agostino, sales manager at HMY Yacht Sales , a Florida-based company that sells used yachts. “They want a deal,” he said in a telephone interview. “They could care less whose boat it was.” Hand-Painted Bulls Madoff’s custom-designed “Bull” features a hydraulic elevator, Toney said, and teak woodwork. Bar glasses have hand- painted bulls. “Mr. Madoff has taken better care of his yachts than anyone else I know,” Toney said. “They were crew-maintained all the time.” The average price for a 1969 Rybovich is $450,000 in HMY’s database, D’Agostino said. Madoff’s “Bull” could “go for $500,000 or more,” he said. “The runabout could probably get up into the $500,000s as well, only because it’s a newer boat.” The smallest boat could fetch about $20,000 to $30,000, according to D’Agostino. Yachtworld.com’s database for used boats lists a 21-foot 2000 Maverick for $18,000, he said. By comparison, a 78-foot custom-made 2009 Rybovich is currently listed for $7.5 million, he said. Seized Assets The U.S. Marshals Service seized the vessels on April 1. It is responsible for the management and disposition of Bernard and Ruth Madoff’s assets, and for collecting the proceeds from sales of the assets, which will be used for victim restitution. Furs, Rolex watches, a Mets sports jacket, diamonds and hundreds of other personal items belonging to the Madoffs fetched more than $900,000 at a packed New York auction last weekend. About 2,000 dealers and collectors placed bids online and in the ballroom of the Sheraton New York Hotel & Towers. Many of the roughly 170 lots surpassed high estimates set by Gaston & Sheehan Auctioneers , the Pflugerville, Texas, company, handling the sale for the U.S. Marshals Service. To contact the reporter of this story: Katya Kazakina in New York at kkazakina@bloomberg.net .

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Madoff’s Personal Mets Jacket Brings $14,500 in Auction of Seized Goods

November 14, 2009

By Philip Boroff Nov. 14 (Bloomberg) — Ruth Madoff’s 14-carat diamond earrings sold for $70,000 today in a Manhattan auction of keepsakes, jewelry and clothing owned by Bernard L. Madoff and his wife that raised hundreds of thousands of dollars for victims of his Ponzi scheme. An 18-carat gold Rolex “prisoner watch” — one of about 50 watches on the block — sold for $65,000. It got its name because Rolex offered similar steel ones to prisoners of war in Germany during World War II. The 71-year-old Madoff is serving a 150-year sentence after pleading guilty to using money from new clients to pay off old ones. Prosecutors said he told investors they had as much as $65 billion with New York-based Bernard L. Madoff Investment Securities LLC. About 2,000 dealers and collectors placed bids in the ballroom of the Sheraton New York Hotel & Towers and online. Many of the roughly 170 lots blew past high estimates set by Gaston & Sheehan Auctioneers , the Pflugerville, Texas, company that handled the sale for the U.S. Marshals Service. The goods had been seized from Madoff’s Manhattan penthouse and home in Montauk, New York, by the Marshals Service, which supports the federal judiciary system. In all, the Madoff lots had a presale estimate of about $470,000 to $586,000, according to Bloomberg calculations. The Marshals Service declined to say how much the auction raised. The pre-Victorian earrings, a top lot with a higher estimate of $21,400, were bought by a man with a Russian accent sitting in the back of the ballroom. Wearing a black pullover and baseball cap, he identified himself as a dealer and otherwise declined to comment. ‘The Notoriety’ “People were paying for the provenance, the notoriety,” said Sherwin Robin, a 60-year-old lawyer from Savannah, Georgia. “The prices were over retail.” Robin was in town for a legal conference and bid $1,500 for a ladies 14-carat charm bracelet. It sold for $3,000, above the high presale estimate of $1,000. Personalized items fetched a premium. A blue satin New York Mets jacket, with “Madoff” stitched on the back, had a $720 high estimate and went for $14,500, 20 times as much, to an online bidder. “What size is it?” screamed Miami dealer Alan Richardson, breaking the tension in the saleroom as he was outbid. ‘BM’ Wallet A men’s Mont Blanc black leather wallet, embossed with “BM,” sold for $2,200. Three boogie boards, with “Madoff” written in magic marker on one, and assorted fishing gear went for $1,000. A Lady Hermes brown suede handbag, plus two other purses, sold for $1,900, compared with a $210 high estimate. On Nov. 17, the Marshals Service is auctioning three boats Madoff owned in Fort Lauderdale, Florida. Also on the block is a luxury sport-fishing yacht owned by Frank DiPascali , who pleaded guilty to aiding Madoff in the Ponzi scheme. The 3 1/2-hour sale was packed with media, with some 150 journalists covering the auction preview on Friday. “I’d have to rob a bank to get this much press,” music entrepreneur Norman Chesky said, trailed by two reporters, as he rolled out a tree-stump table he bought for $500. To contact the reporter on the story: Philip Boroff at pboroff@bloomberg.net

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Madoff `Prisoner’ Watch Brings $65,000 at Auction, Wife’s Earrings $70,000

November 14, 2009

By Philip Boroff Nov. 14 (Bloomberg) — Ruth Madoff’s 14-carat diamond earrings sold for $70,000 today in a Manhattan auction of keepsakes, jewelry and clothing owned by Bernard L. Madoff and his wife that raised hundreds of thousands of dollars for victims of his Ponzi scheme. An 18-carat gold Rolex “prisoner watch” — one of about 50 watches on the block — sold for $65,000. It got its name because Rolex offered similar steel ones to prisoners of war in Germany during World War II. The 71-year-old Madoff is serving a 150-year sentence after pleading guilty to using money from new clients to pay off old ones. Prosecutors said he told investors they had as much as $65 billion with New York-based Bernard L. Madoff Investment Securities LLC. About 2,000 dealers and collectors placed bids in the ballroom of the Sheraton New York Hotel & Towers and online. Many of the roughly 170 lots blew past high estimates set by Gaston & Sheehan Auctioneers , the Pflugerville, Texas, company that handled the sale for the U.S. Marshals Service. The goods had been seized from Madoff’s Manhattan penthouse and home in Montauk, New York, by the Marshals Service, which supports the federal judiciary system. In all, the Madoff lots had a presale estimate of about $470,000 to $586,000, according to Bloomberg calculations. The Marshals Service declined to say how much the auction raised. The pre-Victorian earrings, a top lot with a higher estimate of $21,400, were bought by a man with a Russian accent sitting in the back of the ballroom. Wearing a black pullover and baseball cap, he identified himself as a dealer and otherwise declined to comment. ‘The Notoriety’ “People were paying for the provenance, the notoriety,” said Sherwin Robin, a 60-year-old lawyer from Savannah, Georgia. “The prices were over retail.” Robin was in town for a legal conference and bid $1,500 for a ladies 14-carat charm bracelet. It sold for $3,000, above the high presale estimate of $1,000. Personalized items fetched a premium. A blue satin New York Mets jacket, with “Madoff” stitched on the back, had a $720 high estimate and went for $14,500, 20 times as much, to an online bidder. “What size is it?” screamed Miami dealer Alan Richardson, breaking the tension in the saleroom as he was outbid. ‘BM’ Wallet A men’s Mont Blanc black leather wallet, embossed with “BM,” sold for $2,200. Three boogie boards, with “Madoff” written in magic marker on one, and assorted fishing gear went for $1,000. A Lady Hermes brown suede handbag, plus two other purses, sold for $1,900, compared with a $210 high estimate. On Dec. 17, the Marshals Service is auctioning three boats Madoff owned in Fort Lauderdale, Florida. Also on the block is a luxury sport-fishing yacht owned by Frank DiPascali , who pleaded guilty to aiding Madoff in the Ponzi scheme. The 3 1/2-hour sale was packed with media, with some 150 journalists covering the auction preview on Friday. “I’d have to rob a bank to get this much press,” music entrepreneur Norman Chesky said, trailed by two reporters, as he rolled out a tree-stump table he bought for $500. To contact the reporter on the story: Philip Boroff at pboroff@bloomberg.net

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Video: Madoffs’ Rolexes, Furs, Hermes Handbags Set for Auction: Video

November 13, 2009

Nov. 13 (Bloomberg) — Seventeen Rolexes, including an Oyster chronograph watch, fur coats and designer handbags are among the 150 to 200 lots up for auction that once belonged to Bernard and Ruth Madoff. The items will be auctioned tomorrow at the Sheraton New York Hotel & Towers to benefit victims of his $65 billion Ponzi scheme. Bloomberg’s Gigi Stone reports. (Source: Bloomberg)

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SEC’s Madoff Report: Madoff Was Amazed Regulators Repeatedly Failed To Detect His Fraud

October 30, 2009

WASHINGTON — Bernard Madoff was apparently convinced that it never even occurred to Securities and Exchange Commission staff he was running a Ponzi scheme, despite the agency’s numerous probes of his business. A document released Friday details a prison interview conducted on June 17 by the SEC inspector general in which Madoff says he had the impression that “it never entered the SEC’s mind that it was a Ponzi scheme.” There were some shades of boasting even as Madoff sat in jail a few months after pleading guilty to fraud. The only problem with officials at the SEC’s Washington headquarters, Madoff said, is that he had “too much credibility with them and they dismissed” the idea of a Ponzi scheme. The disgraced financier confided that he didn’t bring an attorney with him when he testified in an inquiry by the SEC’s enforcement division because he believed he didn’t need one – and he was trying to fool the government investigators into thinking he had nothing to hide. The details emerged in a summary of Inspector General David Kotz’s interview with Madoff at the Metropolitan Correctional Center in New York, released along with hundreds of other documents related to Kotz’s extensive investigation of the SEC’s stunning failure to detect Madoff’s fraudulent scheme for 16 years. As the SEC inspectors carried out probe after probe of his business, Madoff said in the interview he was “worried every time” that he’d be caught. “It was a nightmare for me,” he said. “I wish they caught me six years ago, eight years ago.” Madoff, 71, a former Nasdaq stock market chairman, pleaded guilty in March to charges that his secretive investment-adviser operation was a multibillion-dollar Ponzi scheme that destroyed thousands of people’s life savings and wrecked charities. It was possibly the largest-ever Ponzi: the classic scheme in which investors are paid with other investors’ money rather than actual profits on their investment. He is serving a 150-year sentence in federal prison in North Carolina. Kotz also issued a statement Friday saying his probe found no evidence to support Madoff’s claim of having a “close relationship” with SEC Chairman Mary Schapiro, who previously headed the Financial Industry Regulatory Authority, the brokerage industry’s self-policing organization. In the interview, Madoff called Schapiro a “dear friend,” saying she “probably thinks, I wish I never knew this guy.” Like the SEC, FINRA made periodic exams of Madoff’s brokerage operation, which functioned separately from his investment business hidden from regulators’ view. An internal review by FINRA found a regulatory breakdown on the part of the organization in the Madoff case. The new details from Kotz’s inquiry came the same day as word that Madoff’s longtime auditor is expected to plead guilty next week in a cooperation deal. Prosecutors told a federal judge in New York that accountant David Friehling was expected to offer a guilty plea at a conference Tuesday to revised charges that accuse him of securities fraud, investment adviser fraud, making false filings to the SEC, and obstructing or impeding administration of the Internal Revenue laws. The charges carry a prison term of up to 108 years, though significant cooperation with prosecutors can bring leniency. In his interview with Kotz, Madoff said the SEC never asked him about his tiny accounting firm. It seemed incongruous that, with more than $65 billion in private investments he claimed he oversaw for thousands of people, Madoff used what seemed to be a small-time auditor with a minuscule office in suburban New City, N.Y. Authorities say that Friehling appeared to have rubber-stamped Madoff’s records. Kotz’s report of his investigation, made public in early September, painstakingly detailed how the agency’s investigations of Madoff were bungled, with disputes among inspection staffers over the findings, lack of communication among SEC offices in various cities and repeated failures to act on credible complaints from outsiders forming a sea of red flags. An inspection of Madoff’s operation in 2003-04, for example, “was put on the back burner” even though the exam team still had unresolved questions, Kotz found. Madoff said in the interview that the SEC examiners “never asked” for basic records to corroborate his operations. Madoff’s former finance chief, Frank DiPascali, is cooperating with prosecutors after pleading guilty in August to helping Madoff carry out his fraud. Madoff was asked in the interview whether he was concerned about DiPascali’s testimony. His answer: “No, he didn’t know anything was wrong, either.”

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Video: Madoff Associate Found Dead

October 26, 2009

The man who benefits more from Bernie Madoff Ponzi scheme is found dead. (Bloomberg News)

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Finra Missed Opportunities to Catch Stanford, Madoff, Internal Report Says

October 2, 2009

By Joshua Gallu, David Scheer and Ian Katz Oct. 2 (Bloomberg) — The Financial Industry Regulatory Authority didn’t fully probe transactions at Bernard Madoff’s firm and repeatedly failed to investigate tips about R. Allen Stanford’s alleged $7 billion fraud, an internal report found. The staff of the U.S. brokerage industry’s main regulator is “not adequately trained” on its investigative authority, and the Washington-based watchdog lacks procedures to escalate matters to senior management or special investigators “based on the gravity and substance of the fraud allegations,” according to a report posted on Finra’s Web site today. The report shows that regulatory lapses linked to Madoff’s record Ponzi scheme weren’t confined to the Securities and Exchange Commission, which has been faulted by its own internal watchdog for inadequately pursuing tips over 16 years. Finra said it will create a new Office of Fraud Detection and Market Intelligence to ensure that staff with expertise in fraud detection respond rapidly to suspected scams. “As regulators, we owe it to investors — especially those harmed by recent scandals — to develop a better, more comprehensive, response to fraud,” Finra Chief Executive Officer Richard Ketchum said in a statement. “I am committed to taking the lessons from the report’s findings to make Finra even stronger.” Jurisdictional Limits In a series of reports this year, SEC Inspector General H. David Kotz has faulted his agency’s oversight of Madoff and examined its attempts to investigate Stanford. In the Stanford case, he concluded the SEC was hampered by jurisdictional limits and Stanford’s refusal to cooperate. Kotz found that the SEC never fully investigated at least six tips on Madoff since 1992 while he was building a $65 billion Ponzi scheme. While there is no evidence that Finra received similar whistleblower complaints, its examiners did uncover several facts worthy of inquiry that, “with the benefit of hindsight, should have been pursued,” the Finra report said. In 2006, Finra examiners noticed Madoff was making payments to Cohmad Securities Corp., according to the report. Had examiners sought more documents, they may have realized that the fees were for steering clients to Madoff’s investment advisory business. Such a discovery “may not have uncovered the Ponzi scheme, but it would have undermined the Madoff firm’s longstanding representations” that it didn’t have customer accounts, the report said. Money Laundering In 2007, Finra staff uncovered commissions from a London affiliate that criminal investigators have linked to money laundering, according to the report. If examiners had fully scrutinized the transactions, they may have fueled suspicions and prompted a broader investigation, it said. In 2003, Finra received an anonymous letter calling Stanford’s business a “massive Ponzi scheme that will destroy the life savings of many.” The letter was not seen by the organization’s enforcement staff until six years later after an analyst determined Stanford’s CDs were not securities and therefore outside of Finra’s jurisdiction, the report said. The analyst referred the letter to the SEC. “By more aggressively using its authority, Finra could have obtained evidence of wrongdoing much earlier than it did,” the report said. If examiners had fully pursued information that Stanford’s customers were selling securities to purchase CDs based on his allegedly false advertising, they may have found sufficient evidence of fraud, the report said. Employee Complaints On at least two occasions, Finra handled complaints from former Stanford employees who claimed they had been fired after refusing to sell CD’s without conducting due diligence. One of the former employees said Stanford was soliciting unsophisticated investors in Latin America and that the value of his bank’s assets were “well below” his obligations to clients, indicating he was running a Ponzi scheme. Finra didn’t follow up on the allegations, the report said. Madoff, 71, is serving a 150-year prison sentence after pleading guilty to a fraud that federal investigators said dated to at least the 1980s. Cohmad, which was sued by the SEC in June, has denied wrongdoing. Stanford, 59, faces 21 fraud and conspiracy counts linked to what the SEC has called a “massive” scheme to defraud investors through the sale of bogus certificates of deposit by Antigua-based Stanford International Bank. He denies wrongdoing and remains in a Texas jail awaiting trial. Finra Panel The report was prepared by a special panel formed to review Finra’s examination program, particularly the Madoff Ponzi scheme and Stanford’s alleged fraud. It was led by Charles Bowsher , U.S. comptroller general from 1981 to 1996. Other members included Harvey Goldschmid , a former SEC commissioner; Joel Seligman , president of the University of Rochester; and Ellyn Brown , Maryland’s securities commissioner from 1987 to 1992. Finra, funded by Wall Street firms and overseen by the SEC, writes rules for and polices almost 4,800 brokerages. Its board includes representatives of the financial industry along with former regulators and academics. To contact the reporters on this story: Joshua Gallu in Washington at jgallu@bloomberg.net ; David Scheer in New York at dscheer@bloomberg.net ; Ian Katz in Washington at ikatz2@bloomberg.net

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Madoff Victims’ Personal Data On Stolen Laptop

September 23, 2009

More than 2,200 Bernard Madoff investors are learning that some of their personal and financial information has potentially been breached after the July theft of a laptop in Dallas, Newsday has learned. The names, addresses, Social Security numbers and some Madoff account information on 2,246 investors was contained in a computer stolen from the car of an employee of AlixPartners Llp, the consulting firm that has been processing victims’ claims in the Ponzi scheme, a company spokesman, Tim Yost, said Tuesday.

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Fairfield NEPC Clash Over Madoff Loss

July 27, 2009

The Town of Fairfield Connecticut is contesting in court with NEPC which acted as consultant to the towns pension plan over the 19 million loss the plan faced due to the Bernard Madoff Ponzi scheme

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Hotprisonpals.com Gives Madoff Honorary Membership

July 25, 2009

BERNIE Madoff is in for some interesting fan mail. HotPrisonPals.com, a Web site that helps jailbirds hook up with pen pals, has given the Ponzi schemer an honorary membership.

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Madoff Accountant To Plead Guilty

February 11, 2009

David Friehling the accountant who oversaw Bernard Madoffs accounts for 17 years will plead guilty to criminal charges linked to his role in 65 billion Ponzi scheme next week

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