The Control Environment Of Bernard L. Madoff Investment Securities Llc

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

The design and implementation and objectives of company controls are not adequate to meet the control objectives. The control environment control objective is ineffective. This control objective lacks a written policy on ethical conduct, is lacking oversight from the board of directors and audit committee, lacks a consistent style and philosophy from management, and lacks a strong commitment to competence. The risk assessment control objective is effective but lacks any antifraud program and controls. The information and communication control is ineffective. A virus has been detected and is affecting the files of the company. This control is lacking a strong IT department. The general controls financial reporting control objective is effective but is weak in detecting or preventing material misstatement. The monitoring control objective is ineffective; this control has need of an internal auditor.

Overall Strength: in general, the article provides structure to a concept that is very intangible by: (a) describing the nature and the functions of control; (b) segregating the MCS into categories: core control system, organizational structure, and organizational culture; (c) illustrating how to apply the control model (satisfied my approach) (d) provides a basis for designing and evaluating the system. The manner, in which the model is presented, with its use of figures, further emphasizes the structure of the model. See below on further emphasis on parts (a) -(c).

Bernie Madoff began his career as an investment broker in 1960, where he legally bought and sold over-the-counter stocks not listed on the New York Stock Exchange (NYSE). From the 1960’s through the 1990’s, Madoff’s success and business grew substantially, mainly from a closed circle of known investors and friends through word of mouth. In the 1990’s Bernard L. Madoff Investment Securities traded up to 10 percent of the NASDAQ on any given day. With the success of the securities business, Madoff started an illegal money-management business, promising his investors consistent returns from 10-12 percent, unheard of returns at the time, which should have tipped off most investors that something was amiss.

The Internal control system plays an integral role in an organization’s success, whether for-profit or not-for-profit, and regardless of size. As health care organizations becoming more

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.

Most people, when they hear the word “crime,” think about street crime or violent crime such as murder, rape, theft, or drugs. However, there is another type of crime that has cost people their life savings, investors’ billions of dollars, and has had significant impacts of multiple lives; it is called white collar crime. The Federal Bureau of Investigation defines white collar crime as

The first component mentions, control environment sets the tone of an organization, influencing the control consciousness of its people, (Cleverly, Song, & Cleverly, 2011). The authors mention of this rule being the foundation for all the components providing discipline and structure for all other internal control components. The next interrelated internal control is risk assessment is the entity’s identification and analysis of relevant risks to achievement of its objectives, forming a basis for determining how the risks should be managed, (Cleverly, Song, & Cleverly, 2011). Then, there is the information and communication are the identification, capture, and exchange of information in a form and time frame that enable people to carry out their responsibilities, (Cleverly, Song, & Cleverly, 2011). This is very helpful for health care organizations to implement and follow through carefully in their departments and especially billing and coding. The last internal control rule states, monitoring is a process that assesses the quality of internal control performance overtime, (Cleverly, Song, & Cleverly, 2011). These internal controls related to the corporate compliance program are all impertinent to health care

It is very clear that Bernard Madoff’s corporate governance wasn’t effective at all. They didn’t have any governance mechanism for identifying risks and for planning for recovery when mistakes or problems occurred.

Bernard Madoff had full control of the organizational leadership of Bernard Madoff Investments Securities LLC. Madoff used charisma to convince his friends, members of elite groups, and his employees to believe in him. He tricked his clients into believing that they were investing in something special. He would often turn potential investors down, which helped Bernard in targeting the investors with more money to invest. Bernard Madoff created a system which promised high returns in the short term and was nothing but the Ponzi scheme. The system’s idea relied on funds from the new investors to pay misrepresented and extremely high returns to existing investors. He was doing this for years; convincing wealthy individuals and charities to

Control Weakness: CEO conceals information from the Audit Committee. The Director of Internal Audit also does not feel that the Audit Committee is friendly. Internal Audit has been steered away from the manufacturing process and the reconciliation process by the CEO. Although there is a code of conduct, a monthly newsletter and an open door policy according to the CEO, these efforts do not appear to be successful because of management override. Employees interviewed lack of awareness of these programs. All of these issues are signals of a deficiency of the Control Environment aspect of the COSO framework.

“Sixty-five of the one hundred thirteen victim's' statements were examined. These sixty-five statements were from victims who invested directly with Bernard L. Madoff Investment Securities. We analyzed the data using the victim's 'language as presented in their statements. Though thirty-four victims (52%) indicated that they had lost "everything they had" or their life savings, we cannot determine whether losses for the remaining victims (who indicated an amount) represented all or a portion of their entire wealth.” (David Glodstein)

The purpose of this paper is to analyze a case study related to issue of control and how organizations can utilize different approaches of control in order to improve quality and performance in all arenas, domestic and global. The focus of this case revolves around Lincoln Electric, an Ohio based company that has set the bar for how to develop and implement a successful management system. This paper will use the Lincoln Electric case analysis to present recommendations on how managers can use control methods to enhance employee performance, increase employee participation and empowerment, and improve organizational quality in

Operated through a complex, cryptic structure Bernie Madoff, CEO of Bernie L. Madoff Investment Securities (BMIS), perpetuated the most embellished Ponzi scheme the world has ever seen. The basis of the securities fraud that took place approximately between 1991 – 2008 was influenced by Bernie Madoff’s reliance upon an unqualified staff, outdated software, organizational seclusion, a personal halo effect, and weaknesses in the regulating body. Madoff had the confidence of the public, yet to pull off such an elaborate scheme, he relied on a startling number of family members, vital accomplices working on the illegal trading floor such as Frank D. Pascali, IT staff members, and a separate BMIS branch of international employees

COSO cites the control environment of the organization as the foundation of any internal control structure. The control environment reflects the overall attitude or actions of the board of directors, management, and others concerning the importance of internal controls in the organization. This overall attitude of upper management sends a message to the rest of the organization referred to as the “tone at the top.”For example, if upper management stresses high-quality products, a strong positive message is sent to the organization. This would create a strong internal control environment. On the other hand, if upper management has a reputation of looking the other way regarding policy violations, a negative message is