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Unlike Dad, Madoff's Sons Used Outsiders To Manage Foundation Funds
We've seen a lot about the philanthropic organizations, many of them focused on Jewish issues, that have taken huge hits after entrusting their money to Bernard Madoff. And Madoff's own philanthropic foundation was managed by its proprietor's investment firm, of course.
But Madoff's sons had their own foundations -- and it looks like they did things differently. Rather than entrusting the money to their father, Mark and Andrew Madoff appear to have relied on Neuberger Berman and Lehman Brothers to manage the funds, according to documents dug up by the blog Cityfile New York. (Until September, Lehman was Neuberger's parent company.)
Even with Lehman's collapse -- which ultimately led to Neuberger being taken over by its top executives, pending approval by a bankruptcy court, the brothers appear to have made a very wise decision*.
That's not to suggest that Mark and Andrew, who both worked for their father's company, supervising the firm's stock-trading desks, knew anything about their father's operation that led them to turn to an outside firm
The New York Times reports today that investigators have so far found no evidence that would contradict Madoff's initial statement, according to a criminal complaint filed last week, that it was "all his fault."
But at the very least, it suggests they perhaps didn't view their father as the omniscient wizard of the market that he often seemed to present himself as.
* This sentence has been corrected from an earlier version.
Josh
Zachary
There's speculation that when the game was up due to redemptions (and driven by the financial meltdown), Madoff moved much of his fortune and company's assets to secret accounts in his children’s name, and then had them “report” him to the feds. Just chatter, you unnerstan'... We can be sure, however, his kids are getting the audit once-overs - now that the ponies have bolted the barn.
December 17, 2008 2:53 PM | Reply | Permalink
Not sure this is that odd. Not saying it couldn't have been sinister, but it seems like a potential conflict of interest to have their own firm handle their foundation's trades. Maybe I'm wrong, but that is the way I see it.
December 17, 2008 3:09 PM | Reply | Permalink
So Mukasaey's son is now working for Madoff? I just heard the AG can't be involved, because his son has been hired to represent a defendant in the Madoff case. What kind of buy off is that? Not that Mukasey would ever investigate a donor anyway.
December 17, 2008 4:14 PM | Reply | Permalink
Kinda curious...
If someone breaks into a home to rob it and the owner dies of a heart attack during the robbery, manslaughter or murder can be added to the crime, since it was due to the crime...
There is no doubt that more than a few people have died directly due to this meltdown from Wall Street (think 3rd world countries).
Can any of these crooks (assuming they are found guilty) have enhanced penalties due to the consequences for some of the victims?
I think I know the answer... just hoping I am wrong...
December 17, 2008 7:05 PM | Reply | Permalink
Zachary, You are not thinking this through. Madoff and his children have had quite awhile to plan for the inevitable.
Do you really think Bernard Madoff only gave his children a one day warning that he was about to rip apart Jewish society in this country by confessing to having stole $24 billion?
Take a look at the financials for the Deborah and Andrew Madoff Foundation at the 990 Finder.
In 2004, the foundation's 990 was only signed by Andrew Madoff. There was no auditor that year.
In 2005, again no auditor.
In 2006, PriceWaterhouseCooper in Pittsburgh signed off as the auditor.
In 2006, the foundation spent $206k on grants and had $5 million in investments.
Andrew Madoff didn't need a Big Four firm for his rinky dink foundation. He was making it look like he was on the up and up. I bet he used the Pittsburgh office because the Pittsburgh office was less likely to know anything about Madoff's investment business than the NYC office.
Mark Madoff also used PriceWaterhouseCooper for his foundation set up in 11/07. The books were closed on 12/31/07 and the foundation's only transaction was a $2 million contribution of stock from Mark.
The Madoffs set up the foundations to make it look like all was well and they used PriceWaterhouseCoopers in 2007 as cover and to buy time.
Be interesting to know if the foundations' Neuberger stock accounts still exist and whether the funds were kicked back to the Madoffs after the 990s were filed.
In any event, the Madoff brothers knew something was wrong with the old man's business in 2006.
Bernard Madoff, btw, used Konigsberg Wolf & Co, a Park Ave accounting firm, for the Madoff Family Foundation 990s.
December 17, 2008 7:12 PM | Reply | Permalink
Mrs. Panstreppon has a keen and cynical eye for potential fraud indicators -- nice! But perhaps the Madoff kids were using the foundations more for ordinary tax scheme purposes rather than as some sort of parking/laundry vehicle for proceeds from any fraud that Big Daddy Madoff had revealed to them years ago. The Mark Madoff 11/07-12/07 "charitable" transaction smells of tax trickery rather than Ponzi crime. But all of this if very worth following up on. Also, I join the many who have noted that the completely captured storefront auditors that Big Daddy M. did use are not going to come out of this unscathed, nor are some of the investment advisor groups like FGG.
December 17, 2008 10:41 PM | Reply | Permalink
The Mark Madoff 11/07-12/07 "charitable" transaction smells of tax trickery rather than Ponzi crime.
One does not preclude the other. Mark Madoff may very well have set up his foundation to take a $2 million tax deduction in 2007.
But we don't know if Mark Madoff came by the $2 million legitimately or if the $2 million stayed in the foundation's account past 12/31/07.
This notion that Mark and Andrew Madoff may not have known what was going on is preposterous. Madoff's investment firm traded through the his brokerage firm where the brothers worked.
Don't you think Andrew and Mark noticed how much money from the investment firm went through the brokerage firm?
The whole frigging Madoff family was in on this thing from the wife on down. I read the accountant is his brother-in-law.
Take a look at Andrew Madoff's 990s. It looks like Andrew filled it out himself. There is no evidence that he contributed $3 million to the foundation in 2003 or that he contributed $500k in cash in 2004.
One thing for sure is that Andrew Madoff didn't contribute very much to charity.
I wonder why Mark's 2007 990 is available but not Andrew's.
December 18, 2008 1:53 AM | Reply | Permalink
BTW, can you explain why the Madoff brothers used the Pittsburgh office of PriceWaterhouseCoopers to prepare the 990s?
The account statements submitted by Andrew could be a cut and paste job for anyone knows.
Bernie's brother, his two sons, his niece, his mother - they all knew.
And what about Cohmad Securities?
December 18, 2008 2:05 AM | Reply | Permalink
From New York to Geneva, corruption is rampant and complex on Wall Street.
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http://pacificgatepost.blogspot.com/2008/12/is-madoff-really-anomaly.html
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MADOFF IS NOT SO UNIQUE
December 18, 2008 2:05 AM | Reply | Permalink
Forget Bernard Madoff, E*Trade Baby Charged in Even Bigger Scandal
http://satiricalpolitical.com/?p=5229
December 18, 2008 8:48 AM | Reply | Permalink