Madoff Once Bragged Of Profits To SEC
The money manager accused of duping investors in one of Wall Street's biggest Ponzi schemes once boasted to the Securities and Exchange Commission about how much money he earned and formally advised the U.S. government on ways to protect investors from scam artists.
Now Bernard Madoff stands accused of being one.
Seventy-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested last week in what prosecutors say was a $50 billion scheme to defraud investors, including the world's big banks, the rich and the famous.
The financial fallout from Madoff's multi-billion-dollar scheme continues to spread across the U.S., Europe and Asia, touching everyone from the anonymous rich in ritzy Palm Beach to A-list Hollywood directors, Nobel Laureates and former NFL owners, reported CBS News chief investigative correspondent Armen Keteyian.
The victims of Madoff's scheme are not just retired Floridians who invested their life savings. Rather, financial institutions, charities and savvy investors - who supposedly knew what they were doing - were all taken in by the fiendish scam. (Click here for more on who was swindled.)
As the scale of the alleged scheme was realized, attention turned quickly to Madoff's connections to Washington regulators responsible for monitoring investment funds like the one Madoff operated. He knew everyone, former SEC chairman Arthur Levitt said in an interview with The Associated Press. Levitt said he did not invest any money with Madoff.
The director for enforcement at the SEC, Linda Thomsen, said the government was working with federal prosecutors and the FBI to understand the case, "to pursue the case we've got, to preserve assets to the extent we were able and to bring everyone who was responsible for the conduct at the Madoff firm. It's justice," she said Monday.
At one SEC hearing in April 2004 - during the period when Madoff is accused of carrying out his $50 billion fraud - he joked with then-commission chairman William Donaldson about his own extraordinary profits and teased that he wasn't inclined to provide any advice that might help his business rivals.
"Our firm has made a fairly decent living as a fast market competing with a slow market," Madoff said, "so I'm not sure it's in our own best interest for everyone to become a fast market." Commissioners laughed openly as Madoff agreed "to take off our selfish hats here and speak for the public good."
Financial analysts raised concerns about Madoff's practices repeatedly over the past decade, including one letter to the SEC as early as 1999 that accused Madoff of running a Ponzi scheme, but the agency did not conduct even a routine examination of the investment business until last week, The Washington Post reported on its Web site Monday night.
Questions have been raised in two earlier cases about the SEC's handling of investigations involving influential figures on Wall Street or powerful investment firms.
The agency's inspector general, in a report issued this fall, said there were "serious questions" about the impartiality and fairness of the SEC's insider-trading investigation in 2004 and 2005 of hedge fund Pequot Capital Management. A former SEC attorney who worked on the probe and was fired by the agency told Congress he was blocked by agency superiors when he tried to question John Mack, now chairman of the Morgan Stanley investment house.
The SEC took no enforcement action in the Pequot case. The hedge fund and Mack have denied any wrongdoing.
In another report, the inspector general, H. David Kotz, determined the head of the SEC's Miami office failed to properly enforce securities laws in the investigation of now-defunct Bear Stearns' pricing of complex investments it sold, and found that he shouldn't have closed the inquiry in the summer of 2007 without enforcement action.
Bear Stearns nearly collapsed into bankruptcy in March and was purchased by rival JPMorgan Chase with a $29 billion federal backstop.
Last month, an administrative law judge at the SEC rejected Kotz's conclusions and his recommendation for disciplinary action against Thomsen, the agency's enforcement director, and two other officials in the matters. The judge, Brenda Murray, wasn't acting in her capacity as an administrative law judge but rather as an SEC official asked by the agency's executive director to assess the inspector general's findings.
© 2009 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report. Now Bernard Madoff stands accused of being one.
Seventy-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested last week in what prosecutors say was a $50 billion scheme to defraud investors, including the world's big banks, the rich and the famous.
The financial fallout from Madoff's multi-billion-dollar scheme continues to spread across the U.S., Europe and Asia, touching everyone from the anonymous rich in ritzy Palm Beach to A-list Hollywood directors, Nobel Laureates and former NFL owners, reported CBS News chief investigative correspondent Armen Keteyian.
The victims of Madoff's scheme are not just retired Floridians who invested their life savings. Rather, financial institutions, charities and savvy investors - who supposedly knew what they were doing - were all taken in by the fiendish scam. (Click here for more on who was swindled.)
As the scale of the alleged scheme was realized, attention turned quickly to Madoff's connections to Washington regulators responsible for monitoring investment funds like the one Madoff operated. He knew everyone, former SEC chairman Arthur Levitt said in an interview with The Associated Press. Levitt said he did not invest any money with Madoff.
The director for enforcement at the SEC, Linda Thomsen, said the government was working with federal prosecutors and the FBI to understand the case, "to pursue the case we've got, to preserve assets to the extent we were able and to bring everyone who was responsible for the conduct at the Madoff firm. It's justice," she said Monday.
At one SEC hearing in April 2004 - during the period when Madoff is accused of carrying out his $50 billion fraud - he joked with then-commission chairman William Donaldson about his own extraordinary profits and teased that he wasn't inclined to provide any advice that might help his business rivals.
"Our firm has made a fairly decent living as a fast market competing with a slow market," Madoff said, "so I'm not sure it's in our own best interest for everyone to become a fast market." Commissioners laughed openly as Madoff agreed "to take off our selfish hats here and speak for the public good."
As a former Nasdaq chairman, Madoff was an expert sought by Washington regulators who asked for advice on any number of regulatory issues over the years. In 2000, Madoff served on the government's Advisory Committee on Market Information, established to protect investors by ensuring accurate and full public disclosure of information to them.
Financial analysts raised concerns about Madoff's practices repeatedly over the past decade, including one letter to the SEC as early as 1999 that accused Madoff of running a Ponzi scheme, but the agency did not conduct even a routine examination of the investment business until last week, The Washington Post reported on its Web site Monday night.
Questions have been raised in two earlier cases about the SEC's handling of investigations involving influential figures on Wall Street or powerful investment firms.
The agency's inspector general, in a report issued this fall, said there were "serious questions" about the impartiality and fairness of the SEC's insider-trading investigation in 2004 and 2005 of hedge fund Pequot Capital Management. A former SEC attorney who worked on the probe and was fired by the agency told Congress he was blocked by agency superiors when he tried to question John Mack, now chairman of the Morgan Stanley investment house.
The SEC took no enforcement action in the Pequot case. The hedge fund and Mack have denied any wrongdoing.
In another report, the inspector general, H. David Kotz, determined the head of the SEC's Miami office failed to properly enforce securities laws in the investigation of now-defunct Bear Stearns' pricing of complex investments it sold, and found that he shouldn't have closed the inquiry in the summer of 2007 without enforcement action.
Bear Stearns nearly collapsed into bankruptcy in March and was purchased by rival JPMorgan Chase with a $29 billion federal backstop.
Last month, an administrative law judge at the SEC rejected Kotz's conclusions and his recommendation for disciplinary action against Thomsen, the agency's enforcement director, and two other officials in the matters. The judge, Brenda Murray, wasn't acting in her capacity as an administrative law judge but rather as an SEC official asked by the agency's executive director to assess the inspector general's findings.
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"Financial analysts raised concerns about Madoff''s practices repeatedly over the past decade, including one letter to the SEC as early as 1999".
From a reader...
"Unfortunately this is one more disastrous illegal event that can only happen under Republican anti-oversight fanatics."
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Must be the math they teach in today''s public education system.
Enron, Worldcom, Madoff.
The list is long and not a proud one but all of these problems have roots that go deeper than 8 years...
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Makes you wonder who in the SEC received the notice in 1999 and how much to HUSH. This is very DEEP not to FLUSH the toilette for more than 8 years until it explodes 50B sewage.
As we shall see, Rubin, a Director of Citibank, profited from the shady practices that destroyed the financial system and sent the world''s economies into a tailspin. Then, to repair the damage, he and his banker friends put the taxpayer on the hook for trillions.
Rubin didn''t get the same publicity as Madoff because of his close connection to Barack Obama.
Please forgive US and give US one more opportunity, this time we chose right.
Bush Crime Family
Posted by pythoncharly at 06:15 PM : Dec 16, 2008
Madoff is another big time Democrat, he gave money to Chuck Schumer Dem NY and Charlie Rangell Dem NY and they weren''t even investors
you should be ashamed of yourself. AIPAC GOT THE MONEY. as well as Dems.
I can honestly tell you, as you mature, you become Republican.
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Posted by LwyrsGnsMuny
Hardly. The SEC has been turned into a paper tiger thanks to Bush and his appointees who took the teeth out of the SEC''s bite. Bush has been remarkably successful at surrounding himself with yes men who saw the iceberg coming at them and pretended it didn''t exist.
since the Israeli bank wasn''t duped, I wonder if they are being investigated?
Among the world''s biggest banking institutions, Britain''s HSBC Holdings PLC, Royal Bank of Scotland Group PLC and Man Group PLC, Spain''s Grupo Santander SA, France''s BNP Paribas and Japan''s Nomura Holdings all reported that they had fallen victim to Madoff''s alleged Ponzi, or pyramid scheme.
I mean really, when did regulation result in a business collapsing...ergo it has to be a bad thing! Look at Enron - no regulation there. Worldcom, another non-regulated business, and of course let''s not forget wall street where the lack of regulation resulting in several curious species of bad debt that was then securitized -- with regulation wall street''s creativity would have been stifled.
Now hedge funds, which were never regulated and look at the results - $50 billion in fraud -- just imagine the creativity, innovation, chutzpah it takes to commit a crime on this scale...I can''t wait for the movie -- it will make Gordon Gecko look like an incompetetent boyscott!
We don''t need no stinking regulation! Just common sense...in another words...buyer/investor BEWARE!