Madoff Kept Double Books To Hide Losses

(CBS/AP)  Investors poring over fraudulent money manager Bernard Madoff's books have discovered that he falsified documents to hide massive losses from investors.

A federal judge has ordered Madoff's investment business to be liquidated under a court-appointed trustee, who is in the process of mailing out paperwork to customers to assess the extent of each client's losses.

The case that could take months to unravel, an official helping to oversee the firm's liquidation said.

Stephen Harbeck, chief executive of the Securities Investor Protection Corporation, told The Associated Press that there are different sets of books that investigators are sorting through.

One set keeps track of the losses at Bernard L. Madoff Investment Securities LLC's investment advisory arm, while the other is what investors were shown.

"It is obvious that the documents that customers see don't reflect the reality of what the brokerage firm had," said Harbeck, whose organization is helping oversee the liquidation. "We've only scratched the surface."

Separately Tuesday, the Securities and Exchange Commission Chairman Christopher Cox admitted that the Madoff scandal reflected a major breakdown by his agency.

Cox said the SEC failed many times over a decade to fully investigate credible allegations of wrongdoing by Madoff. He said he is "gravely concerned by the apparent multiple failures" by staff to look into the claims to seek formal authority to investigate.

Cox said in a statement he has asked the SEC's inspector general to conduct a full review of the agency's handling of the Madoff case.

Madoff, 70, was arrested last Thursday in what the Securities and Exchange Commission is calling one of the biggest Ponzi schemes on record. Investors of all sizes - from major banks to small charities - may record losses of more than $50 billion.

The SIPC, which was created by Congress and funded by the securities industry, can give customers up to $500,000 if it is determined their money was stolen. Harbeck said SIPC will sort through the claims, with some investors losing into "the hundreds of millions of dollars," and begin making settlements.

It is not known how many customers Madoff's firm had. SIPC has about $1.6 billion to make payouts - an amount that could quickly be depleted.

Harbeck, who has been with SIPC for 33 years, said this will likely become the biggest fraud case that SIPC has handled. He's fielded dozens of calls since Madoff's confessed the scam and was taken into custody, and projects is office will continue to be flooded with questions from investors.

"This is absolutely heartbreaking," he said. "Their faith was abused, and investors who put virtually all of their financial assets with Madoff are near ruin. The simple fact of the matter is there is no precedent for this."

A variety of investors have been identified as having lost money in the scam, including Spain's Grupo Santander SA, Britain's HSBC Holdings PLC and New York Mets owner Fred Wilpon. More victims emerged Tuesday, including Rye Investment Management, of Rye, N.Y., which lost $3.1 billion, almost all of its clients' funds, and Austria's Bank Medici, which had two funds with $2.1 billion invested with Madoff.

[impeach_o]

the liberals thinks that this man whom they mocked and ridiculed as STUPID, CHIMP, etc etc for 8 years pulled this off...

I wonder who is the biggest moron

[impeach_o]

this is happening way to often..

TIME SOMEONE''S HEAD LITERALLY GETS BITTEN OFF.

[pepperwood2]

Posted by greeneyes222: You''re ignoring the fact the whistle-blowing started under Clinton''s administration.

You''re right about that but Clinton took it to greater heights or depths just ask Monica.

Even under Bush we''ve had both Republican and Democratic whistle - blowers as you would call them. The Franks & Craigs; where were their oversight committees? Good Question??

Our new President is going to CHANGE all that, once we get beyond the Blago''s & Jacksons of Chicago. Caroline & Uncle Ted have the inside track on Hillary''s position ehhhhhhhh, you know what I mean.

[whitemale08]

It''s ridiculous that Madoff is the ''fall-guy'' in this PONZI scheme because the entire securities market is a PONZI scheme.

If you haven''t listened to me before folks, I beg you to listen to me now...WE HAVEN''T EVEN SEEN THE BEGINNING FALL-OUT OF THIS CRISIS YET!!!

PULL YOUR MONEY OUT OF THE STOCK MARKET NOW AND SHUT-DOWN ALL PONZI SCHEMES, THE HEDGE-FUNDS, THE BUY-OUT-FIRMS, PRIVATE-EQUITY-FIRMS, EVERYTHING!!!!

[getoffmine1]

this is one case where i would approve of the use of torture. Find out who knew what and arrest them all and shoot them like dogs.

[nycgirlnaz]

Posted by usadvisor101 at 10:47 AM : Dec 17, 2008

Thanks for posting the truth about Bush and his partners in crime!!!! The delusional ones who supported him and still do will have to live with his lies and corruption for a long time to come. Unfortunately, the REST of America will have to live with it too! Hopefully, Obama will be able to reverse all the so-called midnight regulations Bush has been signing into law over the last 8 years but especially over the last few months that are aimed at destroying this country further environmentally.

[jtdev1]

So is our government going to bail all the stupid morons that "Invested" in this scheme?

I say let them all learn a lesson from this. After all, they "Invested" into it because it was paying out pretty good. in fact, too good.


If they get bailed out, then I want bailed out for my "Investing" in my 401K that has tanked...

[jsl45]

George Bush, the Herbert Hoover of the 21st Century....what a disaster he''s been for the American People.

[closethippy1]

The fact that Bush run a government with a majority of Republicans in the House and the Senate and they were completely unable to do the basics as far as seeing how things are going and making sure everyone is following the ruels shows how incompetent Bush and his ilk are.
The Democrats made as much noise as possible about the need for regualtion but Emperor Bush and his minions decided to ignore everyone.
Bush supporters are too blind to see any of this. I pity the fools.

[greeneyes222]

"This administration has violated laws and gotten away with it in terms of not following laws requiring inspections and regulation in many areas."

You''re ignoring the fact the whistle-blowing started under Clinton''s administration. It was ignored then, too.

These are systemic problems that go beyond party and go beyond one particular president. Bush has a lot to answer for, but an awful lot of bad happened before he ever took office. Even under Bush we''ve had both Republican and Democratic Congresses; where were their oversight committees?

Quit trying to turn everything into Bush-bashing, you can''t fix any problem with an incorrect diagnosis. If the core problems aren''t fixed, a new President isn''t going to help much.