Bernard Madoff

[R. Richard]

A boy who ruined the lives of many others now gets free room and board. Comment?

Bernard Madoff gets maximum 150 years in prison

NEW YORK – Bernard Madoff has been sentenced to the maximum 150 years in prison for his multibillion-dollar fraud scheme. U.S. District Judge Denny Chin handed down the sentence in New York on Monday.

Defense attorneys had sought 12 years, while prosecutors wanted the maximum. The federal probation department had recommended 50 years. Chin called the fraud "staggering" and noted that it spanned more than 20 years. He says "the breach of trust was massive."

The 71-year-old former Nasdaq chairman pleaded guilty to securities fraud and other charges in March and has been jailed since.

 

[trysail]

Wall Street exists to separate fools from their money; that is its whole and entire raison d'etre.

"If you've been in the [ poker ] game for fifteen minutes and you don't know who the patsy is— you are."



The average person should always, always insist on Vanguard. In the U.S., if your employer isn't using Vanguard for their 401(k) or equivalent— I promise you one thing: somebody is being paid off.

 

[jomar]

He ruined peoples lives while living large. Suit me if he did harder time than a country club prison.

 

[trysail]

As usual, the mass media has wildly misreported pertinent facts— or simply gotten them dead-flat wrong— and has further served as the unwitting dupe of persons with axes to grind.

(1) The size of the losses has been consistently exaggerated; god only knows where the media gets its numbers but the loss should not include profits that were fake in the first place. More reasonable estimates place the size of the fraud at about 1/4 of that reported— and, of course, headlined— by the mass media,

(2) There are a goodly number of "victims"/morons who are whining that "somebody" ( read "government" ) ought to reimburse them not only for their original investment but for the fabricated "profits." This is, of course, bogus.


_______________________________
Donald Benjamin, a Bernard Madoff victim who knew the con man and his brother through a Long Island, New York, country club, rejected as too low a $229,000 settlement offer from the trustee liquidating Madoff’s defunct business.

Benjamin, 76, declined the money in a June 13 letter filed last week in U.S. Bankruptcy Court in Manhattan. He says trustee Irving Picard is ignoring federal law by calculating victims’ claims based on money deposited minus withdrawals, instead of the sums on final statements that include fake profit.

Picard is paying qualifying victims as much as $500,000 each on behalf of the Securities Investor Protection Corp., or SIPC, a government-chartered agency financed by brokerages that reimburses customers when firms fail. Benjamin said he wants $2 million, based on a maximum payment for each of four accounts held by him and his wife, Anne.

The trustee’s “net-equity” formula, which has already triggered a class-action lawsuit by investors, “is not founded in law,” Benjamin said today in a phone interview. “We have been led to believe all these years that SIPC basically insures your position... [ you're a dope; that simply isn't— and never has been— the case ]

... Benjamin declined to say exactly how much he lost -- only that it was more than $20 million. He said he was a professional baseball player before he built a nest egg from his five car dealerships and a career directing various mutual funds. He placed about 60 percent of his profit with Madoff when he sold his businesses, he said. [ Not very smart dumkopf !! ] ...

... Picard, a lawyer with Baker & Hostetler LLP in New York, has said it would be unfair to newer Madoff investors to allow earlier customers to base their claims on years’ worth of fake profits. Many of the purported trades outlined on the statement never took place, Picard has said...

...The case is In re. Bernard L. Madoff, 09-11893, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

 

[Byron In Exile]

I'd have given him 12 years... in a cell with no windows and no door.

Then in 12 years break it open, cremate his corpse, and flush the ashes down the toilet.

 

[R. Richard]

It's easy to focus on Madoff. However, the number of people he ruined is abominable. Plus, many of the people he ruined were elderly and have no real chance to recover.

In addition, there were many others involved in the fraud. Those other people also need to be prosecuted. However, many of the rest of the people involved in the fraud are powerful and there will likely be no more prosecutions.

 

[jomar]

The size of the losses has been consistently exaggerated; god only knows where the media gets its numbers but the loss should not include profits that were fake in the first place....

... Picard, a lawyer with Baker & Hostetler LLP in New York, has said it would be unfair to newer Madoff investors to allow earlier customers to base their claims on years’ worth of fake profits. Many of the purported trades outlined on the statement never took place, Picard has said...

Still doesn't change the fact he took peoples life savings.

I do think trying to claim fake profits as real is somewhat inspired.

 

[silverwhisper]

jomar quoth:
i do think trying to claim fake profits as real is somewhat inspired.

that isn't exactly new: people have been pretty upset about about the imaginary losses of their retirement funds for the better part of a year now, no?

there was never any question he was going to get the maximum, at least in my mind. among the charities that were destroyed by madoff's ponzi scheme was the one run by elie wiesel.

ed

 

[trysail]

Still doesn't change the fact he took peoples life savings.

I do think trying to claim fake profits as real is somewhat inspired.

I am ( most assuredly ) not attempting to defend a swindler, merely pointing out that the media ( once again ) has salient facts wrong.

I spent a lifetime attempting to behave as a fiduciary— the entire financial services industry ( with the sole exception of Vanguard ) is engaged in "taking people's savings." The only difference between Goldman Sachs, Fidelity, Merrill Lynch, Franklin Templeton, Morgan Stanley, T. Rowe Price, et al and Bernie Madoff is one of degree. Bernie took all of their savings, the rest only take smaller amounts.

I grant you that this is reductio ad absurdum; it is, nevertheless apparently acceptable to take small amounts of people's savings ( which, of course, add up over time ).

As long as there are three parties involved ( client/customer, employee and owner ) a conflict of interest will exist. Vanguard's elimination of one of those parties considerably reduces the conflict ( as is reflected by their low fees ).

 

[R. Richard]

Still doesn't change the fact he took peoples life savings.

I do think trying to claim fake profits as real is somewhat inspired.

The problem of investors in a failed scheme trying to base claims on 'phantom profits' is a comman one. The law is, however, cash in is the basis for cash out.

Elie Wiesel, for those who don't recognize the name, is the famous 'Nazi Hunter.'

 

[silverwhisper]

trysail quoth:
the only difference between goldman sachs, fidelity, merrill lynch, franklin templeton, morgan stanley, t. rowe price, et al and bernie madoff is one of degree. bernie took all of their savings, the rest only take smaller amounts.

um...no. madoff was engaged in a ponzi scheme, which is illegal. it's a deceptive and fraud. say what you want about the wall street firms/asset managers, but financial services is still a very highly-regulated industry.

and i think your championing of vanguard as the sole exception is just a smidge goofy, to be frank.



r richard: people may be more familiar with wiesel as the author of night.

ed

 

[trysail]

um...no. madoff was engaged in a ponzi scheme, which is illegal. it's a deceptive and fraud. say what you want about the wall street firms/asset managers, but financial services is still a very highly-regulated industry.

and i think your championing of vanguard as the sole exception is just a smidge goofy, to be frank...

ed

With the massive evidence all but proving that "active management," relatively high fees and lots of turnover are all detrimental to long-term, after-tax ( where applicable ) investment returns, it's doubtful that Goldman Sachs, Fidelity, Merrill Lynch, Franklin Templeton, Morgan Stanley, T. Rowe Price, et al are acting in their client's best interests. While they may not have crossed the line into actual illegality, each of these firms has unquestionably crossed an ethical line.

Buffett has repeatedly said that most people and institutions would be better off in low-cost index funds. If you want to gainsay WEB, be my guest. As for me, I'm not holding my breath waiting for T. Rowe Fidelity Goldman Stanley Lynch Templeton Morgan to recommend passive managment.

Today marks the debut of "Morgan Stanley Smith Barney" with advertising proclaiming the firm to be a "A New Wealth Management Firm With Over 130 Years Experience." This is, of course, utter bullshit. They are and have always been commissioned salesmen and asset gatherers peddling all sorts of garbage ( can I interest you in an IPO? How 'bout a nice MBS? A municipal bond with a nice fat undisclosed spread? ) Good grief! The tobacco companies are more honest than these folk.

By virtue of its absolutely unique structure, Vanguard is the only financial services firm without a built-in conflict of interest.

 

[silverwhisper]

trysail, i used to work in that industry, specifically for one of the firms you mentioned by name. and for a time, i also worked for a company that only sold mutual funds. i'm pretty familiar with the kinds of regulations to control conflicts of interest, and they're pretty good.

while i'm not a fan of actively-managed asset management (the term for excessive trading to profit from the broker fees is "churning"), the industry as a whole takes very seriously the notion of giving an investor a sensible wealth management solution that is appropriate to his or her needs and situation.

note that in saying this, i'm not in the least contradicting what buffett has to say. he's right: for the majority of the investing public, active management makes utterly no sense. steady, fairly constant returns are also a lot easier on the blood pressure than individual securities.

ed

 

[R. Richard]

um...no. madoff was engaged in a ponzi scheme, which is illegal. it's a deceptive and fraud. say what you want about the wall street firms/asset managers, but financial services is still a very highly-regulated industry.

The SEC, cursed shall be their name, managed to review Madoff's operations several times. Per Madoff, he made essentially no trades. However, the SEC people apparently didn't think the absence of trading slips was odd(???). If what the SEC did is high regulation, I would hate to ask about low regulation.

 

[silverwhisper]

low regulation would have us yawning about this news story b/c it isn't all that uncommon, don't you think?

ed

 

[jomar]

I am ( most assuredly ) not attempting to defend a swindler, merely pointing out that the media ( once again ) has salient facts wrong.

I spent a lifetime attempting to behave as a fiduciary— the entire financial services industry ( with the sole exception of Vanguard ) is engaged in "taking people's savings." The only difference between Goldman Sachs, Fidelity, Merrill Lynch, Franklin Templeton, Morgan Stanley, T. Rowe Price, et al and Bernie Madoff is one of degree. Bernie took all of their savings, the rest only take smaller amounts.

I grant you that this is reductio ad absurdum; it is, nevertheless apparently acceptable to take small amounts of people's savings ( which, of course, add up over time ).

As long as there are three parties involved ( client/customer, employee and owner ) a conflict of interest will exist. Vanguard's elimination of one of those parties considerably reduces the conflict ( as is reflected by their low fees ).

Reminds me of that quote in Vanity of the Bonfires about the protagonist getting the crumbs that fall off of other people's money.

I Vanguard.

 

[WRJames]

Any ideas as to how much money is unaccounted for and where it all went?

Lets say there was really only twenty billion lost -- that is still a whole lot of money. No matter how large Bernie lived, how could he consume that much? Where is it all?

 

[Dragonlipz]

Any ideas as to how much money is unaccounted for and where it all went?

Lets say there was really only twenty billion lost -- that is still a whole lot of money. No matter how large Bernie lived, how could he consume that much? Where is it all?

In carefully hidden accounts for his wife and kids.....

 

[TE999]

Any ideas as to how much money is unaccounted for and where it all went?

Lets say there was really only twenty billion lost -- that is still a whole lot of money. No matter how large Bernie lived, how could he consume that much? Where is it all?

That is the $64,000,000,000.00 question. I'm guessin' a lot of it is scattered across the globe in a web of dummy accounts. Living like an oil sheikh can only burn so much cash...and you don't put the rest in the mattress.

150 years in the razor wire Hilton is a joke for that old coot. He should have to work in a Wal-Mart stocking shelves until he croaks.

 

[Boxlicker101]

Does it occur to anybody else that his name is highly appropriate? After all, Bernie made off with a lot of money.

 

[trysail]

Any ideas as to how much money is unaccounted for and where it all went?

Lets say there was really only twenty billion lost -- that is still a whole lot of money. No matter how large Bernie lived, how could he consume that much? Where is it all?

Regulators and law enforcement are "following the money" right now. There is a paper trail.

The reported size of the fraud is vastly exaggerated. It is a big mistake and a common misconception that ALL of the dough is sitting around somewhere. A not insubtantial portion of the capital was paid out to EARLY investors in order to create and maintain the illusion of a legitimate operation. The liquidating trustee is likely to seek the return of funds paid out to those early investors.

Almost needless to say, litigation will result.

 

[R. Richard]

Regulators and law enforcement are "following the money" right now. There is a paper trail.

The reported size of the fraud is vastly exaggerated. It is a big mistake and a common misconception that ALL of the dough is sitting around somewhere. A not insubtantial portion of the capital was paid out to EARLY investors in order to create and maintain the illusion of a legitimate operation. The liquidating trustee is likely to seek the return of funds paid out to those early investors.

Almost needless to say, litigation will result.

Actually, there may not be a paper trail. There is concern that records were destroyed.

It's not illegal to receive/take money out of an investment, even if the investment is a fraud, if the receiver didn't know the investrment was a fraud. If someone took, say $3 million, out to buy a house five years ago, that money is a legitimate withdrawal. If the money was taken out with the knowledge that the investment was a fraud, then the receiving of the money is illegal. As you point out, there will be a lot of litigation.

 

[trysail]

Actually, there may not be a paper trail. There is concern that records were destroyed.

It's not illegal to receive/take money out of an investment, even if the investment is a fraud, if the receiver didn't know the investrment was a fraud. If someone took, say $3 million, out to buy a house five years ago, that money is a legitimate withdrawal. If the money was taken out with the knowledge that the investment was a fraud, then the receiving of the money is illegal. As you point out, there will be a lot of litigation.

It's essentially impossible to move that kind of money around without leaving a trail— either paper or electronic. If Bernie-boy destroyed records, there are bank files.

I fully grant you that the success or failure of the bankruptcy trustee's efforts to recover funds paid to early investors will not be uncontested. Some of the "investment consultants" and "feeders" like Fairfield Greenwich who received substantial fees over the years are also going to be targets.

As to the trustee's effort to "clawback" some of the dough paid out to early investors:


http://www.npr.org/templates/story/story.php?storyId=104104561
Suits Filed Against Those Who Profited From Madoff

All Things Considered, May 13, 2009 · The court-appointed trustee looking into disgraced financier Bernard Madoff's operations is suing investors who made large profits in the Ponzi scheme, hoping to get some of the money into the hands of investors who were fleeced.

The trustee, Irving Picard, is targeting investors who made withdrawals from the Madoff firm in the months and years before it collapsed.

"The allegations are that these entities knew or should have known there was a fraud going on. So all the money that they withdrew — the billions of dollars that they withdrew — should come back," says Amir Efrati, who is covering the story for The Wall Street Journal.

Efrati tells Robert Siegel, however, that it might be a problem to collect because much of the money may have already been distributed to other investors who took the money in good faith.

The entities that are being sued say they, too, were victims of Madoff's scheme. Picard counters that though they lost a lot of money, they also made billions.

"These suits were filed against very sophisticated individuals who should have known a lot about the market," Efrati says, "and according to bankruptcy laws, if you didn't notice these red flags or act on these red flags that were in front of your face ... then you might have to give away some of the money that you withdrew."...

AND:

http://www.bloomberg.com/apps/news?pid=20601170&sid=a0ZiTTho30hU
Defense Lawyer Says Losses in Madoff Case Are Miscalculated
June 29 (Bloomberg) -- Bernard Madoff’s defense attorney challenged the government’s claim that his client’s fraud has so far led to $13.3 billion in losses.

Ira Sorkin said that amount should be offset by $1.3 billion held by the trustee for Bernard L. Madoff Investment Securities LLC; by $1.3 billion already recovered by the trustee; and by letters sent by the trustee, Irving Picard, seeking to “claw back” $735 million from Madoff investors.

Sorkin also cited the $10 billion demanded in various other “clawback” lawsuits as an offset, in a letter filed with the court yesterday. Madoff is to be sentenced this morning in Manhattan federal court.

“Thus, if the trustee is successful in his lawsuits, losses will be substantially reduced,” Sorkin wrote. “The media hysteria that the Ponzi scheme was approximately $65 billion and that Mr. Madoff lined his pockets with billions is simply not correct.”...

 

[WRJames]

Wasn't the SEC asked to investigate several times? Didn't they give Bernie the thumbs up a few times? If that's true, how could you possibly claim that individual investors "should have known" that there was fraud?

 

[trysail]

Wasn't the SEC asked to investigate several times? Didn't they give Bernie the thumbs up a few times? If that's true, how could you possibly claim that individual investors "should have known" that there was fraud?

Harry Markopolos did everything short of leaving a trail of bread crumbs. He was ignored. The SEC didn't give Madoff a "thumb's up;" it simply didn't investigate thoroughly. The SEC is, was, and always will be a bunch of bureaucratic lawyers and brain-dead zombies. There are folk who will want to and attempt to politicize this. That's a mistake. The SEC is a bureaucracy. They can't analyze their way out of a paper bag and they move at the pace of a garden slug. This has nothing to do with politics; it's the nature of bureaucracy, a highly legalistic environment and the fact that "a bureaucrat has no upside."

In the end, people HAVE to protect themselves. If you think the SEC or god or your idiot stockbroker son-in-law is going to save you from yourself, you're smoking something.
"If it's too good to be true..."

Anybody who put all their eggs ( or a substantial portion of their eggs ) in a basket like this one was probably going to lose all their money eventually in one way or another. There were lots and lots of red flags and warning signs.