Bernie Madoff

Introduction: Bernie Madoff was a well-respected financier, his company Bernard L. Madoff Investment Securities, LLC was very well known and even helped launch the Nasdaq stock market. Madoffs company was well trusted and he even had celebrity cliental such a Steven Spielberg, Kevin bacon, and Kyra Sedgwick. Madoff came from a low income family however, he was able to start his company from getting a $50,000 loan from his in-laws and he using money that he had saved from side jobs such as lifeguarding and installing sprinkler systems to found his company. The successfulness of Madoff’s company came from the company’s ability to adapt to change and us modern day computer technology. As his business grew he stated employing family members to help “His younger brother, Peter, joined him in the business in 1970 and became the firm 's chief compliance officer. Later, Madoff 's sons, Andrew and Mark, also worked for the company as traders. Peter 's daughter, Shana, became a rules-compliance lawyer for the trading division of her uncle 's firm, and his son, Roger, joined the firm before his death in 2006”(Bernard Madoff Biography 2016) Unfortunately on December 11th 2008 Bernie Madoff became well known for a whole new reason. He had been accused of performing an elaborate Ponzi scheme and he had been reported to the federal authorities by his own sons. A year later he admitted to the investigators that he had lost $50 billion dollars of his investors’ money and pled guilty to 11

Bernie Madoff, son of Ralph and Sylvia Madoff, grew up in a modest three-bedroom home in Laurelton, a small middle class area outside of Queens, New York. Little is known about Bernie’s parents, except each had one or more issues with the government. Ralph, had a tax debt in excess of $13,000, placing a lien on his home, assessed in 1956 and not paid until 1965. Sylvia was part of Securities and Exchange Commission (SEC) proceedings in 1963 to determine if broker-dealers of Gibralter Securities failed to report financial conditions, which could revoke their registrations. However, in 1964, the SEC dismissed the proceedings with what appeared to be a deal for these identified individuals to stay out of the business.

In December 2008, one of the largest Ponzi scheme surfaced when Mark and Andrew Madoff reported the works of their father, Bernard Madoff to the federal authorities. A Ponzi scheme is an investing scam that promises high rates of return with little risk to investors. The operator generates returns for older investors by gaining new investors. Bernard was arrested on December 11, 2008 and charged with securities fraud. He pled guilty to 11 counts and was sentenced to 150 years in federal prison-the maximum possible prison sentence. A reported $17.3 billion was invested into the scam by Bernie’s clients and only about $2.48 billion have been returned to these victims as of September 2012.

What is right or wrong? People base their values of right and wrong on what they have learned from their experiences (Ferrell, Fraedrich, & Ferrell, 2018). What one person sees as wrong, may be a normal for another. Most people are taught to work hard, save money, and invest for a future retirement. However, when it comes to money, some people lose all principles and standards of behavior. There were several ethical issues in the Madoff case. They include: stealing, cheating, lying, misrepresentation, and deliberate deception. Madoff used the Ponzi scheme or the money pyramid to make his money. In the Ponzi scheme, money was taken from new investors and given to existing customers as earning without being invested. Was this right or wrong? Throughout this case study ethical concerns can be seen on both sides, the investors and Madoff’s.

BMIS engaged in three different operations, namely investment advisor services, market making services and proprietary trading. Bernard Madoff conducts certain investment advisory business for clients that are separate from the BMIS proprietary trading and market making activities. Bernard Madoff has been conducting a Ponzi-scheme through the investment advisor services of BMIS, and through their scheme have defrauded investors out of monies estimated to exceed $50 billion. When a senior employee was told by Madoff that there had been a request from clients for approximately $7 billion in redemption and he was struggling to obtain the liquidity necessary to meet those obligations. Madoff also told another employee on December 9, 2008 that he wanted to pay bonuses to employees of the firm. This was earlier than bonuses were paid, and also with another employee admitting that his investment advisory business was a fraud that it’s all just one big lie and that it was basically giant Ponzi scheme. Bernard Madoff also informed employees that he planned to surrender to the authorities but before he does that he had approximately $200-300 million left and planned to use that money to make payments to certain selected family and friends. Madoff would make people believe that BMIS was a legitimate enterprise engaged in the lawful brokerage and sale of investment securities, when BMI

In 2006 when the SEC launched an investigation into Madoff’s dealings it was from persuasion from Markopolos that Madoff was running a Ponzi scheme and he was also a key source for the Mar/Hedge article. The SEC also examined whether Fairfield Greenwich, a giant feeder fund, was properly disclosing the extent of its reliance on Madoff. According to research by Harry Markopolos, it grew from as much as $7 billion in 2000 to as much as $50 billion by the end of 2005. What had started decades before as a small-time recruiting effort by Madoff agents at country clubs had gone global. Massive international institutions such as Grupo Santander, Fortis Bank, and Union Bancaire Privée were all funneling billions -- sometimes through intermediaries -- to Madoff, lured by the call of steady 10% to 12% returns. Even one of the world's biggest sovereign funds, the Abu Dhabi Investment Authority, ended up sinking tens of millions of

At first, Madoff was in a broad sense unusual Ponzi manipulator. The extraordinary model was social, connecting with, and set out to bewilderment others with his cerebrum, his thoughtfulness, his thriving. Madoff sharpened a sort of energized spirit about his character, turning that radiant speculation that people would overlook: He won trust not by endeavoring to influence people that he was gorgeous making to move, yet expected that they were well-known. People who may never have fallen for the excellent Ponzi progressive were totally debilitated by Madoff's hypothesis.

On Dec. 11, 2008, Bernard Lawrence Madoff confessed that his vaunted investment business was all "one big lie," a Ponzi scheme colossal in volume and scope that cost investors $65 billion. Overnight, Madoff became the new poster child for Wall Street gall, greed and

This book talks about how Bernie Madoff was a liar and a cheat to American society where people got used betrayed and lied to because of him in belief they were going to becoming wealthy. Madoff was the world’s biggest thief that stole millions from people and destroyed numerous lives. He made people believe they were going to ‘get rich quick’ and that was his incentive on getting people to participate in his schemes. The book reports how this crook used his legal business as a broker-dealer and his standing as an innovative creator of Nasdaq to attract investors and avoid harsh scrutiny from the Securities and Exchange Commission. It described how he parlayed the reputations of a few valued and respected investors and associates into large followings in high-class communities like the Upper East Side of Manhattan and Palm Beach, and how he used feeder funds, which drove clients’ money to him, to extend his global reach.

According to Investopedia.com, “A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors.” Charles Ponzi was a businessman in the early 1900s. His scheme was promising his client’s 50% return within six months. When in fact, Charles Ponzi was using later investors’ money to give back to the early investors. This financial scheme has been repeated several times since then but in smalls ways changed. The most famous in recent news is Bernie Madoff. Bernie Madoff was a hedge fund investor. As a very famous hedge fund investor, Bernie Madoff was entrusted with individuals’ entire savings (cbsnews). In return, Madoff “cooked” his books and almost always had a positive return. Only in one month out of the year did Bernie Madoff record a down month. According to a 60 minute episode, this is equivalent to a hitter in baseball hitting, .960 (cbsnews). In the end Bernie Madoff lost almost all of his investor’s life savings. So this is another case of the Ponzi except at a bigger scale. These examples prove that although one could be wealthy, they always want

Madoff has lost his freedom, his family has shut him out, and everyone impacted is dealing with the fallout in different ways. The family has lost all assets; as boats houses jewelry and anything of value found by the government has been sold and generated to the plaintiff’s funds. Some items have been sold at a higher value because they were owned by Madoff. The assets were converted to money, and anyone who invested roughly one million dollars or less have received the initial investment back (Chon, 2015).

Investors that took the biggest losses, which was in the billions, because of this scheme are named in the Wall Street Journal; among them are Fairfield Greenwich Group, Tremont Capital Management, Banco Santander, Fortis, and many others.

This paper introduces Bernard L. Madoff a fraudster who orchestrated a multi-billion dollar Ponzi scheme. The paper discusses elements that make up a Ponzi scheme and explains what a Ponzi scheme is. The paper goes on to introduce some of the victim’s and examines some reasons why someone might fall victim to a Ponzi scheme. The paper describes the three elements making up the fraud triangle and how they relate to the fraud and the fraudster. This paper covers Bernard Madoff’s background and history and how he committed the fraud analyzing the fraud triangle. The paper describes ways to correct the issue, accounting principles violated, and recommendations for a fix. Finally, the paper looks at internal and external controls violated and ends with a conclusion.

Madoff reportedly admitted to investigators that he had lost $50 billion of his investors' money, and pled guilty to 11 felony counts—securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the United States Securities and Exchange Commission (SEC), and theft from an employee benefit plan—on March 12, 2009. While the extent of his fraud is still being uncovered, prosecutors say $170 billion moved through the principal Madoff account over decades, and that before his arrest the firm's statements showed a total of $65 billion in accounts.

The illegal construction of the Bernie Madoff securities pyramid scheme grew to preposterous proportions from legal, auditing, and regulatory weaknesses of the Securities Exchange Commission, the designated regulatory body of the U.S. financial markets. The required expertise, authority, and relevant penalties needed to deter management from committing ethical breaches lacked substance in the case study of BMIS (Crews 11). Even after the wake of the Enron and WorldCom scandals that occurred in the early 2000s, the SEC unexplainably revoked provisions created to help avoid fraud. The provision the SEC revoked specifically mandated firms structured like Madoff’s to be audited by accounting firms registered and audited by the Board. By revoking the provision, BMIS was allowed to continue its Ponzi scheme for another half a decade with the aid of utilizing an unregistered, small accounting firm called Freihling & Horowitz (“Madoff’s Jenga”