Financial Crisis

Prosecutors: Ponzi Scheming Art Dealer Bilked McEnroe, DeNiro

Ben Buchwalter | March 31, 2009, 3:24PM

Bernie Madoff isn't the only Ponzi schemer on New York's Upper East Side, at least according to prosecutors. Last Thursday, Lawrence Salander, a prominent art gallery owner, joined Madoff on that illustrious list when he was charged with bilking a slew of high-profile clients, including John McEnroe and Robert DeNiro, out of $88 million on high-priced art deals, over more than fifteen years.

Salander never fired any US Attorneys, or helped bring down the financial system -- so far as we know. But we thought he was worth our attention because the charges against him are part of a surge in Ponzi cases brought by authorities since the start of the year. That uptick appears to be the result, in part, of the financial crisis, which, as in Madoff's case, caused investors to withdraw their money en masse, leaving schemers without enough capital to keep up the charade. Call him another mini-Madoff.

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Bernard Madoff

Report: UK Expects To Soon Charge Others In Madoff Scheme

Zachary Roth | March 27, 2009, 12:21PM

The Madoff trail is shifting, at least in part, across the Atlantic. And investigators are wondering whether the Ponzi scheme was a family affair.

A report from the Wall Street Journal's London bureau contains three important new pieces of information.

1) "U.K. authorities investigating Bernard Madoff's massive Ponzi scheme believe criminal offences have been committed by people other than the New York financier and expect to start filing charges within months, according to investigators."

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Bernard Madoff

Looking For A New Career? Try Fraud Investigator.

Zachary Roth | March 26, 2009, 11:14AM

One of the few growth industries in the current economic climate? Fraud investigators.

Allegations of fraud are increasing, as the financial crisis drags on. As a result, reports the New York Times, people who are skilled at following the money have rarely been more in demand.

The FBI is recruiting new hires to work on a glut of cases -- it had more than 1600 open mortgage-fraud investigations at the end of fiscal 2008, almost twice as many as two years earlier.

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Bernard Madoff

Madoff's Prison Number Is A Lottery Winner

Zachary Roth | March 24, 2009, 2:45PM

At least someone got something out of the Bernie Madoff affair.

Ralph Amendolaro of Queens, New York, used the confessed Ponzi schemer's prison number to play the lottery, after seeing it on the front page of the New York Daily News earlier this month. And a few days later, that number -- 61727-054 -- came up, winning the lucky construction worker $1500.

Amendolaro told the Daily News that he thought at the time: "I'm going to be a winner with this guy even though everyone lost money with him. Somebody had to get a little lucky with him."

He said he plans to spend some of the money on a birthday trip to Vegas with his wife and some friends, and also to take his family out to dinner.

And he added that if Madoff hears about it, "he'll probably want a cut."

Bernard Madoff

Madoff Worth Over $823 Million

Zachary Roth | March 13, 2009, 5:34PM

We knew Bernie Madoff was living large. But maybe not this large.

The Associated Press reports:

Newly filed court documents show Bernard Madoff and his wife had a net worth of more than $823 million at the end of last year.

The document detailing the Madoffs' assets was contained in papers his lawyers filed Friday in an effort to get him freed on bail.

The document shows the Madoffs owned four real estate properties worth $22 million and had $17 million in cash and a $7 million yacht, among other assets.

Bernard Madoff

Madoff's Confession Points Up SEC Failure

Zachary Roth | March 13, 2009, 11:26AM

It's fair to say that the incompetence and fecklessness of the SEC in failing to catch Bernie Madoff's $50 billion Ponzi scheme (merely "alleged" no more!) has already been pretty well established -- by this guy, among others.

But if anything, Madoff's courtroom confession delivered yesterday only makes the extent of the SEC's screwup even more startlingly clear.

Here's what Madoff said:

To conceal my fraud, I misrepresented to clients, employees and others, that I purchased securities for clients in overseas markets. Indeed, when the United States Securities and Exchange Commission asked me to testify as part of an investigation they were conducting about my investment advisory business, I knowingly gave false testimony under oath to the staff of the SEC on May 19, 2006 that I executed trades of common stock on behalf of my investment advisory clients and that I purchased and sold the equities that were part of my investment strategy in European markets. In that session with the SEC, which took place here in Manhattan, New York, I also knowingly gave false testimony under oath that I had executed options contracts on behalf of my investment advisory clients and that my firm had custody of the assets managed on behalf of my investment advisory clients.

And here's how the SEC -- in a memo that recommended closing that inquiry, having found only minor violations -- what appears to be that same piece of testimony:

[I]n the course of a preliminary inquiry into [Markopolos' allegations that Madoff's hedge fund profits were the result of fraud], the staff learned that during a recent examination of BLM by NERO's broker-dealer examination staff, Bernard Madoff, the sole owner of BLM, did not fully disclose to the examination staff either the nature of the trading conducted in the hedge fund accounts or the number of such accounts at BLM.

But of course, it wasn't that he didn't fully disclose the trading information. It's that he wasn't even making any trades, and had directed his staff to create false tickets to fool investors. Presumably, that deception could have been detected had the SEC simply bothered to try to match up those trade with the supposed counter-parties -- who didn't exist.

The SEC had another chance to catch that scheme when Madoff filed reports with the agency that year. Madoff said yesterday:

Another way that I concealed my fraud was through the filing of false and misleading certified audit reports and financial statements with the SEC. I knew that these audit reports and financial statements were false and that they would also be sent to clients. These reports, which were prepared here in the Southern District of New York, among things, falsely reflected my firm's liabilities as a result of my intentional failure to purchase securities on behalf of my advisory clients.

"Were there sufficient red flags for SEC to have caught this?" asked Ross Albert, a former SEC senior special counsel, asked in an interview with TPMmuckraker last December. "Absolutely, without a doubt."

Since then, that conclusion has become only more indisputable. And the case for those additional SEC funds has grown only stronger.

Bernard Madoff

Madoff's Statement

Zachary Roth | March 12, 2009, 4:14PM

Here's the full text of Bernad Madoff's statement made in court this morning, in which he admitted his crimes and described them in detail.

Madoff pleaded guilty to all 11 counts on which he was charged, in connection to a multi-billion dollar financial fraud.

Bernard Madoff

Madoff: "I Am Deeply Sorry And Ashamed"

Zachary Roth | March 12, 2009, 10:53AM

The moment that many of Bernard Madoff's victims have been waiting for has arrived: He has publicly described his crimes.

At the court proceeding this morning at which he pleaded guilty, Madoff declared: "I cannot adequately express how sorry I am for what I have done."

CNBC describes the scene:

As the proceeding began, Madoff asked if he could have some water.

Judge Denny Chin swore Madoff in and asked him for his plea. After Madoff said he was pleading guilty, Chin explained that he would ask a series of questions before deciding whether to accept the plea.

"Mr. Madoff, you can be seated; pour yourself some water," Chin told him.

Chin went on to ask Madoff, "Do you understand parole has been abolished?" Madoff said, "Yes." Chin is due to sentence Madoff at a later date.

In his plea, Madoff made these statements:

"Your honor for many years ... I operated a ponzi scheme."

"I am grateful for this opportunity to speak" and explain that "I am deeply sorry and ashamed."

"I cannot adequately express how sorry I am for what I have done."

Madoff went on to say, "The victims of my schemes included individuals, charities, pension funds and hedge funds."

Madoff made a distinction between his investment business which was the fraud and the other businesses which he said were legit. "The other businesses were legitimate, profitable ...in all respects and those businesses were run by my brother and my sons," said Madoff.

Bernard Madoff

Madoff Pleading Guilty This Morning, But Not Playing Ball On Conspiracy

Zachary Roth | March 12, 2009, 9:13AM

The Bernard Madoff probe could be expanding, as we told you yesterday. But it doesn't look like prosecutors are getting any help from the man himself.

Bloomberg reports that Madoff, who will plead guilty in a Manhattan federal courthouse today, has not agreed to a plea deal, because prosecutors were demanding he admit to a conspiracy, meaning admitting he worked with others.

Madoff, 70, will plead guilty to all 11 counts he faces, and could receive up to 150 years in jail.

Prosecutors have not at this point alleged a conspiracy, in which two or more people agree to commit an illegal act, nor have they charged anyone except Madoff. But according to Bloomberg's sources, they have said Madoff didn't act alone. And in court documents, they alleged he told employees to create false account documents and trade confirmations, and to create false financial statements to fool regulators.

The Daily Beast reported Tuesday evening that the investigation had widened to include co-conspirators, but it remain unclear exactly what that means, or what evidence prosecutors have compiled.

Bernard Madoff

Is Madoff Probe Expanding?

Zachary Roth | March 11, 2009, 2:22PM

Bernard Madoff is set this week to plead guilty to orchestrating a massive Ponzi scheme. But could we be in line for more guilty pleas before this is all over?

The Daily Beast reports:

[T]he [Madoff] investigation ... has broadened to include a number of suspected co-conspirators, according to federal officials involved in the case.

The Daily Beast story -- written by Lucinda Franks, whose byline identifies her as a Pulitzer-Prize winning journalist who was formerly on the staff of the New York Times -- also reports that, according to sources, "several members of Madoff's inner circle transferred assets to their wives, transactions thought to be laundered through an English bank."

There are said to be three groups of possible co-conspirators, who could potentially be charged either criminally by the Justice Department, or civilly by the SEC.

In the first group are employees of Madoff's firm who concocted false trades and sent out phony statements to thousands of unsuspecting clients.

The second group is comprised of principals in feeder funds such as Cohmad Securities Corp. and Fairfield Greenwich Group, which funneled investor dollars to Madoff and received large fees for steering this business. If they were aware of Madoff's fraud, they could face criminal charges; if they were not, they could be hit with civil charges for a lack of due diligence.

The third group is the target of an investigation that's still in its early stages into money laundering through British banks, in which US and British authorities are cooperating. This group consists of solicitors, accountants, and others in London who may have assisted Madoff in transferring funds from client accounts to a Madoff entity that lists Ruth Madoff, brother Peter Madoff, and sons Mark and Andrew Madoff among its board members.

It's not clear from any of this that any specific members of Madoff's family, or his inner circle, are in immediate legal jeopardy.

But the Wall Street Journal appears to be thinking along similar lines (sub req). It notes:

Prosecutors alleged Tuesday that Mr. Madoff hired numerous employees with "little or no prior pertinent training or experience in the securities industry" and caused them to "communicate with clients and generate false and fraudulent documents."

Its report doesn't go as far as the Daily Beast's. The Journal says it's still unclear whether prosecutors believe these people knew they were involved in a fraudulent scheme, and doesn't explicitly say that the investigation has broadened beyond Madoff himself.

But it's noticeable that the paper does take the time to lay out what's known about the possible involvement in the scheme of five of Madoff's relatives and associates -- including his wife Ruth, who has hired her own lawyer, and his brother Peter, who was the chief compliance officer for Madoff's firm.

With Madoff's guilty plea soon to be safely in the bag, are these reports an indication of where prosecutors are going next?