Bernard L. Madoff

This report digs into Bernard Madoff's mysterious case and his long time investment securities activities that ultimately resulted in a massive fraud of unequalled magnitude. A number illegal business behavior are clearly identifiable, as well as three groups of persons who got impacted through Madoff’s actions. Scrutiny into risk management follows; through describing three internal behaviors that if implemented, could have assisted prevent the growth of Madoff’s business empire. Also, one looks into triple ways through which investors could have avoided Ponzi schemes such as those of Bennie Madoff. Finally, various legal actions in the wake of the Madoff fraud discovery are uncovered, but with more litigation looming.


Bernie Madoff had a reputation as an enigmatic innovator in the investment business. He was the former chairman of NASDAQ, which is an electronic forum for penny stocks, or over-the-counter stocks too petty to be noticed on the New York Stock Exchange. Term split-strike conversion to describe an investment strategy that purportedly offered an extra edge to one’s portfolios got coined by him. Yet much of what is known of Bernard Madoff Investment Securities and its owners side business remains encapsulated in mystery, as a result of the tight-lipped confession of the accused, about his crimes. Bernie declined to implicate friends and family members, claiming that he committed the biggest investment fraud in history by himself. Since his incarceration, details have been eventually surfacing suggesting that Bernie Madoff may have had accomplices. Maybe there are more charges than can be filed against him, although Madoff’s many offences may already be enough to keep him in prison for the rest of his life.

Three types of illegal business behavior by Madoff

Charges against Madoff included fraud, deceptive practices and theft. There were clear signs that Madoff's activities were fraudulent. Madoff made his reputation and his millions through delivering intact returns of one or two percent per month to his investors’ month in and month out from the day he started the advisory business investment as an adjunct to his brokerage company. Hedge fund operators and wealthy investors marveled as Madoff worked his "magic" in bear markets and bull markets alike, regardless of the gyrations on the stock market.

Eleven charges got filed by federal prosecutors against Madoff. Securities fraud included the first charge and entails false claims of investment security holdings, and misinformation concerning brokerage and stocks advice. Also, considered part of this criminal activity is is divulging insider information. The other major charge composed of three counts of laundering money, domestically and through international accounts. Money laundering refers to the funneling of illegally acquired revenue into new monetary configurations, with the intention of hiding this revenue's original origins. In connection with both his investments and securities adviser businesses, prosecutors charged Madoff with wire and mail fraud. Such offences involve coming up with schemes utilizing either the telephone systems or the United States Postal service towards obtaining property or money in an unlawful or false manner.

Three types of parties that were impacted

Those hugely affected by Madoff's actions include investors, employees, banks and business partners. Wealthy and prominent individuals including Fred Mepon, who is the principal owner of the New York, MET lost millions of dollars through Madoff's unethical business behaviors. Hedge funds and banks around the world, in US, France, Britain, are reporting losing billions. Charities, university endowments and other institutions, which entrusted their monies to Madoff, or to hedge funds, which invested in Madoff's company are shocked by the news that their investments have been rendered worthless. The fallout of the scandal by Madoof could result in other investment firms leading to thousand more business and individuals being impacted. Losses from Madoff's fraud exceeded $50 billion.

Inextricably connected to Bernie Madoff’s rise to prestige and power are Madoff's family, Bernie’s father-in-law Saul alpern loaned $50,000 to assist him unravel Bernard L Madoff Investment Securities in November of 1960. Saul had founded his own accounting firm in partnership with Sherman Heller, with their office in East 40th Street in Manhattan would double as Bernie’s business address during its early stages. In the meantime, Bernie’s mother Sylvia was operating a brokerage firm named Gibraltar Securities out of her home, and it lasted until the Securities and Exchange Commission started an investigation of 48 such bucket shops in August of 1963. Amazingly, the SEC did not prosecute any of them; Issued the following January, a litigation release strongly suggested that an outside court settlement had moved these small operations out of business for not filing financial reports.

The firms admitted violation, but requested that their registrations be withdrawn; and in this connection, they represented that they are no longer hooked to the Securities business and do not owe customers any securities or cash. The court concluded that the public interest would be served by allowing the withdrawal, and discontinued its proceedings.

People who had worked under Bernie Mudoff but were non related, also became tainted from the association following Madoff's arrest. This group of employees includes those who may have had direct dealings through Mudoff subsidiaries such as Cohmad Securities Corporation. The idea also applied to those directly employed, such as former executive assistants Elaine Squillari and Eleanor Solomon.

Three Business safeguards which ought to have been adopted

An overall lack of diligence practiced not only on the part of the company’s employees, but also investor intermediaries and clients alike, proved to be the most glaring failure of the Mudoff case. Due diligence involves detailing and identifying the various risks that could be encountered within a given organization’s business operations. Only few questioned the abnormality in return rates on statements on Madoff’s investment, even though the math validity could be duplicated outside the firm. Intermediaries or clients themselves did not conduct research, but merely assumed that Bernard Madoff Investment Securities operated in an ethical business environment. They ought to have insisted on seeing the company activities independently reviewed by outside auditing firms. Bernard L. Madoff Investment Securities, on their end, should have been more transparent and forthcoming on their whole business operations. Fiscally astute accountability measures should have been practiced by the firm also in order to better safeguard the revenues of clients’ accounts.

The inept failure of the Exchange Commission and the Securities to properly investigate the many allegations of fiascal abuse was another incredible revelation of the Madoff fraud, which according to General Christopher Cox, the Inspector General, had dated back to the year 1999. Numerous allegations were totally assumed: with the few investigations ever conducted getting handled incompetently by neophyte SEC staffers with little prior experience. The most remarkable case of SEC negligence began in 2006, a nearly two-year investigation responding to charges by a whistleblower Harry Markopolos. At a sworn testimony, with Bernie Madoff on May 19th, representatives for SEC asked whether equity trades were being conducted in Europe. Madoff cheated in the affirmative, and nobody at the SEC bothered with any verification of the fraudulent claim. Bernie was also asked for his account number, yet no one at the SEC called to verify whether that number had actually been issued. An SEC staff attorney astonishly concluded that the agency found no evidence of fraud in November 2007.

Controlling people liability should have been the third business abuse safeguarded against by Madoff organization concerns. Too many immediate members of Bernie Madoff’s family held controlling positions, and none of them could be held accountable by any other employee in the firm. Such rampant nepotism made a wall of operational secrecy that often seemed to be impenetrable even by close associates of the Madoffs. Under such circumstances, no organizational insight could be considered effective. Built in security mechanisms and regulatory compliance managed by non-family associates may have provided a powerful check on collusion by members of the Bernie family.

Three ways Private Investors could have Protected Themselves from Risk

There were means, for invest to arguably protect themselves at their disposal from Madoof's elaborate confidence game, while some investors may yet believe they were duped into it. One such method would be due diligence whenever one is provided with new overtly auspicious financial opportunities. Many of the investors got led astray on the poor advice by friends and family, which fiascally a sound mode of verification. Despite a company being reputable on the surface, independent research needs to be conducted on the working of any financial organization, albeit its being reputable. Third party custodial relationships at the investment firms ought to be investigated, and their auditing practices reviewed. Actively requesting documentation is another way to avoid fraud. Highly suspicious evidence that revenue is being transacted in a professional manner is handwritten notes from intermediaries. This must be coupled with verifiable account numbers for auditing.

Legal Action

On June 29th 2009, Bernard L. Madoff was convicted of eleven counts of criminal activity, with a combined sentenc3e of one hundred and fifty years in prison. I t seems highly unlikely that any other charges will ever need to be filed against him for, at his age, Bernie seems destined to be incarcerated for the reminder of his life. However, his family and business associates could still face pending law suits, litigations and accusations of wrong-doing as new details surface through a plea bargain cooperation by former Madoff chief Deputy Fraank DiPascali. The man allegedly in charge of operations on the organizations secretive seventeenth floor of the Lipstick building DiPascali pleaded guilty in August of this year for his long time role in the Madoff Ponzi scheme. His cooperation with investigators to help identify those who could be held accountable for the fraud has managed to delay DiPascali’s own sentence for securities fraud, money laundering and more. Reporters familiar with the case have suggested that DiPascali’s combined charges could bring him up to one hundred and twenty five years in prison. He is currently free on bail after posting ten million dollars. At first, prosecutors in the case had suspected that Bernie’s wife Ruth Madoff may also have been directly involved with the firm; but so far, no specific role has been clearly defined as of this writing. Stories among former employees had circulated that Ruth enjoyed regular access to the company’s book keeping records. But Ruth never held an official title with the company, even though she did manage an office on the 19th floor of the same building, next door to the firm’s trading area.


Bernard Madoof engaged himself in unethical business behavior among them deceptive practices, theft and fraud. This impacted businesses, investors and institutions of charity among others. Strategies could have been set to stop the illegal activities of Madoff through auditing among others. Madoff has had to pay for his illegal activities through a 150 years jail term. Bernard L.Madoff defrauded investors and companies a lot of money but will leave to pay for his unethical business practices.

US-Iranian Attitudes US Marshals Service
Related essays
to our service and get 10% from every order
Chat with Support