Madoff Case Study

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Social Responsibility of Organizations
By: Joseph Harcharik
April 6th 2014
Robert Morris University

Bernie Madoff was a well known and a well-liked man on Wall Street. Madoff had an impeccable reputation, not only in the investment market, but socially, too: “Nasdaq made him its chairman; the Securities and Exchange Commission appointed him to industry panels; Madoff was even able to arrange with the Wilpon’s, owner of the New York Mets, for his staffers to play charity softball games on the field at Shea Stadium” (Bandler et al. 52). That is why the nation was stunned to learn that on December 11, 2008, Bernie Madoff was arrested on charges of theft of billions of dollars from his clients over the decades prior
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Two, Madoff feared that the illegitimate business practices could be found. Without a traceable trail of evidence, it would be more difficult to convict Madoff of any fraudulent charges. In the Bernie Madoff Ponzi scheme, three facts were demonstrated. One, investors often lack information needed to make wise investing decisions, and lack procedures to hold companies accountable when the investing decisions are not wise. Two, auditors often have conflicts of interests. Three, the regulatory agencies often lack the necessary expertise, resources, authority, and penalties. Bernard Madoff Investment Securities selected Friehling and Horowitz to audit the company. To an outside spectator, the choice of this auditing firm would seem questionable for a couple of reasons. One, the auditing firm was not heavily utilized within the investment industry. Two, the auditing firm had no check on its quality control. Too add questionability, Friehling and Horowitz had claimed since 1993 that it was not conducting audits (Gregorious and Lhabitant 93). To help further perpetrate the fraud, Bernie Madoff selected an ill-equipped auditing firm. If Madoff had selected a more reputable auditing firm, the fraudulent scheme may have been detected during a routine audit. As a part of the Ponzi scheme, fictitious quarterly statements were sent to the victims of the
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