Madoff Case Study

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Author’s Viewpoint In the case study about the Bernie Madoff scandal, the author makes the point that the motivation to succeed in business can present a conflict with the fiduciary duty that a business person has to the client. There is question whether Madoff was motivated solely by greed, in which case he was engaged in a simple Ponzi scheme, or whether he used the Ponzi scheme to hide his failure to generate returns for his clients. Madoff’s lack of transparency violated the trust of his clients, even if he did not initially intend to defraud his clients. There is some ethical ambiguity in this case. Discussion The lesson of this case is that transparency is the best policy, since secrets only allow the unethical behavior to…show more content…
Two The most famous Ponzi scheme, and which gave rise to the term, involved Charles Ponzi’s sale of international reply coupons to be reimbursed for postage stamps (Grossman, 2012). Like other schemes, Ponzi paid off investors with proceeds generated from newer investors. Ponzi’s scheme is notable because it not only lost investor funds but also brought down six banks. However, this scheme was relatively small compared to the one launched by Allen Stanford, which defrauded investors of more than $7 billion, compared to Ponzi’s $20 million. Three It is almost impossible to believe that Madoff’s sons did not know about their father’s fraud, and thus they were complicit ethically if not legally. They could have simply reviewed the investments that Madoff claimed to have made to generate the returns, which would have revealed no link between investor assets and the investments. Madoff would have had to prevent his sons from reviewing any of the transactions. Madoff’s sons not knowing of their father’s scheme may be far fetched, since his sons were directly involved in trading as the Director of Trading and Director of Proprietary Trading. Four The ethical issues surrounding running a family owned business relate to the ability to remain impartial and transparent to a third party who has the interests of investors, customers, suppliers, and other stakeholders at heart. The family has a single interest that could result in a cover up when wrongdoing occurs. By

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