Austria Takes Over Bank Crushed By Madoff

Bank Medici's $3B Loss Blamed On Swindler; SEC Checking Claims That Complaints About Madoff Were Ignored

(CBS)  Written by CBS News investigative producer Laura Strickler.

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An Austrian bank suffering more than $3 billion in losses from the collapse of Bernard L. Madoff’s investment scheme was taken over by the Austrian government today, according to a statement on the Web site of Austria’s financial regulator Finanzmarktaufsicht.

Bank Medici’s CEO Peter Scheithauer also resigned.

Messages at Bank Medici’s offices in Vienna were not immediately returned.

In Washington, lawmakers on Capitol Hill are preparing for the first Congressional hearing on Madoff’s $50 billion Ponzi scheme on Monday.

One of the key witnesses will be the Securities and Exchange Commission’s (SEC) top internal cop, David Kotz, the agency’s Inspector General.

CBS News has learned Kotz’s investigation will include an examination of possible conflicts of interest with the SEC’s New York office. The agency has been sharply criticized for ignoring complaints about Madoff’s investments.

Kotz’s first investigative report will be out in a few months and may be closely followed by a series of reports. If Kotz’s investigators find serious problems with the way the SEC’s New York office responded to complaints about Madoff, the IG’s office will consider recommending changes to the SEC’s current Madoff investigation.

On Wednesday, Madoff’s lawyers turned over a complete list of Madoff assets to the SEC’s New York office.

More victims of the Ponzi scheme continue to emerge. The latest are in Montana, more than 2,000 miles from Madoff’s Upper East Side penthouse.

“We have a 94 and a 95-year-old widow, these are not sophisticated investors - they relied on an investment advisor who invested their money in a Ponzi scheme,” Lynne Egan, Montana’s Deputy Securities Commissioner, told CBS News.

Egan said she received a call on Monday from an investment adviser in Bozeman who told her 33 of his clients lost over $18 million. Egan claims the adviser, who she will not name, lost millions personally in addition to his clients’ funds and is “shell-shocked.”

The adviser told Egan he was alerted to the Madoff collapse by a phone call from one of his clients who had seen the news on television. Egan said the adviser placed millions in the Madoff feeder fund Tremont Capital and another unidentified feeder fund since 2002. Egan added that her office will conduct a parallel investigation into Madoff to see what can be done in the future to prevent this kind of fraud.

Meanwhile, the hunt for Madoff money overseas continues. The Cayman Islands Monetary Authority posted a statement indicating, “An initial check of the Companies Registry shows no Madoff-related entity incorporated in the Cayman Islands.”

But there are registered Cayman entities matching the names of feeder funds that are now being sued by their investors, such as: Ascot Fund Limited, Ariel Fund Limited and Maxam Absolute Return Fund.

However, CBS News has learned the main Madoff-related vehicles for Fairfield Greenwich Group, a major Madoff feeder fund, are registered in the British Virgin Islands.

[martin9p2]

May the guilty rot in hell.

[ladyephesus1]

Morphndol8, I see that you didnt take your medicine today!! lol

[credibility2]

The SEC is at fault here and could''ve avoided this had it done its job years ago when the first tip-off involving Madoff was reported to them. The SEC turned away since one of its own was involved and subsequently married a relative of Madoff. The SEC should be held duplicitous and criminally accountable.

[amurguz]

Fraud, fraud, fraud. That''s all that this country''s investment institutions seem to be capable of; anymore. Geesshh!!! The mattress is looking like the best bet, and that''s pretty sad.

[creeper00]

It beats the h*ll out of me how these people could possibly have concluded that Madoff''s company was secure. Did they think he...and only he...had the key to high rates of return?

If it sounds too good to be true, you can bet the farm it is. If you''re greedy enough to invest anyway, you deserve what you get.

[hober_mallow]

Meanwhile, after ripping off clients for $50 billion, Madoff continues to live in his luxury apartment.

[alphaa10000]

CBS reports, "... Kotz%u2019s investigation (examines) possible conflicts of interest with the SEC%u2019s New York office. The agency has been sharply criticized for ignoring complaints...
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"Dat ol'' debil" of GOP DEregulation, again.

Back in 2000, Sen. Phil Gramm (R, TX) and his GOP counterparts pushed measures creating the financial derivatives market-- but a market without SEC regulation normally protecting investors, Predictably, their market mutated like a creature from outer space, generating toxic securities and the Wall Street meltdown.

Gramm and the GOP loved the idea of deregulation. As Gramm and bankers explained to Clinton, deregulation eased pressure on lenders to engage in risky behavior.

That, of course, is the opposite of what actually happened. After Bush was sworn in, the banks hotdogged their way past, over and around every prudent rule of prudent risk-taking.

No, it was not the Community Reinvestment Act which reeked of sulfur, but the bankers, themselves. Bernanke, himself, praised the CRA in 2007 testimony to congress for its beneficial effect on the mortgage banking industry. Bernanke said CRA-sponsored mortgages did not pose undue risk.

Had Bernanke never existed, however, a later congressional study proved that 50 percent of sub-prime lending was completely outside the CRA, and that another 25-30 percent was only partially involved with CRA regulation. Clearly, it was the banks, themselves, which enthusiastically sub-primed their way into trouble.

[jeffp26]

Ira Lee Sorkin is Madoff''s lawyer. He and his large firm will bill millions of dollars defending Madoff. The money to pay those fees and expenses was stolen by Madoff.

Ira Lee Sorkin, Madoff''s lawyer, was the head of the NY bureau of the SEC from 1984 - 1987. During that time Madoff was playing ponzi.

Why would anyone think there were conflicts of interest in the NY office of the SEC???????

And, just a legal question: is Ira Sorkin guilty of receiving stolen property?

[debinok1]

It is a simple fact that State Agencies of any branch of the Federal government can be bought and then will cover up or destroy information before it reaches the Federal level. It happens everyday in every State branch of every government office.

[solarrays247-2009]

Meanwhile, after ripping off clients for $50 billion, Madoff continues to live in his luxury apartment.
Posted by hober_mallow at 04:11 PM : Jan 02, 2009

Yes, it makes me wonder what else is Madoff hiding, and just who is he protecting? Is this a payoff? His smile reminds me of the cheshire cat in "Alice In Wonderland."

[legacyabq]

Its a funny thing about justice.. A poor black guy steals a car, an old one worth jack SH., and he gets5 to 10 years in prison on a felony.

Madoff, and others like him, rich and white, like Enron etc., steal and destroy the wealth of thousands of people. Think about that. The damage: the domino effect: the ripple effect. Every consequence to every person ripples away into uncountable counter-reactions..
In other words, these white collar thieves who steal and ruin corporations affect thousands,nay 100''s of thousands of people..
Do they get 1000''s of consecutive 10-years stints in jail, like the car thief with his 10 years? He only affects ONE person: the owner of the car.
These white collar thieves do DAMAGE TO SOCIETY that adds up to uncountable amounts of harm..
WHY DO THEY NOT PAY THE PRICE??
WHY IS IT OK FOR RICH WHITE MEN TO HARM 1000''s of people, and nothing happensd to them, and then WE TURN AROUND and put 1 out of 100 Americans in JAIL for stuff that pales in comparison to these crimes? (Except for murder and rape of course)
WAR ON THE POOR
THE RICH and the POLICE are a priveledged over-class in this here country.

Happy New Year slaves

[whitemale08]

But not to anyone who matters.


Posted by julesarcher1 at 05:27 PM : Jan 02, 2009

You mean Republicans, Hugo Chavez is loved and embraced by millions if not billions around the world.

Just stop the hatin'', it makes you look bad.

[xlib]

Maybe Austtria can take over our Social Security system since it''s the biggest ponzi scheme going. Oh yea, it''s legal cause the feds run in. AND, they''ll run health care, auto industry (can''t wait to see the cars queen nance and her cour jester harry design for us phlebs). Yep, let the government run everything.

[goosfraba2]

legacyABQ at 09:54 PM : Jan 02, 2009

Spot on, "legacyABQ."

endrepubs at 05:13 PM : Jan 02, 2009

Good one.

[scotch41-2009]

Posted by legacyABQ at 09:54 PM : Jan 02, 2009
~~~~~~~~~~~~~~~~~~~~~~~~~
GET OFF OF THE RACE KICK!!! If you have a legitimate claim, fine....but please!!! Just because you are black doesn''t make you entitled to everything on this planet....I am sooo tired of hearing the race card played when you people have nothing more to offer!!!!!!!!

[cbsblogger]

Madoff obviously had a huge amount of internal and external clout, and it was more than sufficient to keep the SEC at bay, be assured of that. There is no way that the warnings that the SEC received from a few people would have progressed into an active investigation into the Madoff organization. His rich and powerful friends on Wall Street and in Congress would have made sure of that. Even if the SEC had wanted to investigate it wouldn%u2019t have happened.

[hsinco-2009]

Why does this guy still have a luxery apartment? Or luxury anything?

He needs to be kept in a rubber room so he doesn''t have the ability to off himself as we need his knowledge of where stuff is for restitution.

Then if he wants to off himself, who are we to stop him?

[xmissile]

Madoff should do the world a favor and just end it.

[jsilver2th]

Boy and I thought I was a lousy investor-

How could this guy con the Bank of Medici?

What about the complaints to SEC?

I wonder if we will ever see the trail of the money and see where this really leads?

Another warm memory of the Bush years

[incog-nito]

BTW, why are so many "American" companies registered in some tiny island-country? Answer: to avoid paying U.S. taxes. Of course, that doesn''t stop Corporate America from complaining they pay too much tax. The American people truly are suckers.

[benfrenchnyc]

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