...Bernie Madoff: The Makings of a Ponzi Scheme Brent Casebolt Keller Graduate School of Management Abstract This paper explores seven published articles that report on the story of Bernard Madoff. These articles were the results of research conducted on the internet and include well known publications and authors throughout the United States. Some articles paint a picture of the timeline that brought Bernie Madoff to his ultimate demise. From humble beginnings to Federal prisoner in North Carolina, the story is full of interesting facts and unbelievable occurrences. Other articles bring to life the sad story of other players involved in the Ponzi scheme. While others lay out in great detail the failings of our own government to put Bernie Madoff away much sooner than he was. Finally, this paper will explore the role of digital evidence in this Ponzi scheme and the simplicity of computer hardware and software involved. Bernie Madoff: The Makings of a Ponzi Scheme Bernie Madoff has been one of the most interesting and controversial figures in all of American financial industry history. In this paper, I will take you on a journey from his early childhood to his current status as a Federal prisoner in North Carolina. I will discuss all of the major players involved in the Ponzi scheme, the SEC’s failure to catch him on numerous occasions, and the digital evidence that he did or did not leave behind during his life of crime. After examining all of the above, I...
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...Exploring Business September 23, 2012 Bernard Madoff After reading the information on Bernard Madoff, I knew I wanted to learn more so I chose to write this paper pertaining to that article. According to the information provided, Madoff promised over 9,000 investors steady returns of 10-12 percent on their investments but never invested any of the money. He used new clients’ deposits to pay off older investors asking for withdrawals. His goal was to fund a second company and his family’s extravagant lifestyle. This showed to work for quite a while but only as long as he attracted new investors. Ponzi schemes work in ways that many people tend to fall for. I would describe how a Ponzi scheme works by saying it revolves around the process of paying old investors with the money one gets from new investors. All someone has to do is convince someone else to get in early on a big time opportunity business venture and then they get promised with fantastic returns on their investments. Once the schemer gets more investors, the earliest ones will pay off the returns of the oldest ones and so on. An individual can avoid being a victim of a Ponzi scheme by making sure to thoroughly research and find out everything about the company one is about to invest in. If something seems “too good to be true”, more than likely something is not right. Be a smart business man or women. According to the U.S. Securities and Exchange Commission the SEC Post-Madoff Reforms began taking decisive and comprehensive...
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...Abstract This report allows the facts to be known concerning the still mysterious case of Bernard L. Madoff and his longtime investment securities activities, which eventually turned into an enormous fraud of incomparable size. In this report, you will begin to understand how Bernard Madoff was able to execute such an elaborate fraud. The illegal business behavior found in this case is too numerous to count however, quite a few will be identified. In addition, the roles of the perpetrators, accomplices, and their involvement in this scheme will be made known. This fraud had such an enormous impact on the victims, we will examine several implementations that the private investors could have implemented to protect themselves. An assessment of the perpetrators motives and the identity of some internal controls that could have deterred or prevented the fraud from occurring will be explored also. We will discover the action of the SEC and document how the fraud was discovered and investigated, including what should have been identified as “red flags”. And finally, a variety of legal actions arose when the Madoff fraud was uncovered, which is leading to more litigation currently and in the future. The Bernard Madoff’s Fraud Introduction Bernard L. Madoff was the mastermind and the admitted operator of the biggest Ponzi scheme in American History. His Ponzi scheme is considered to be the largest financial fraud in U.S. history. He stole millions maybe billions...
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...Accountants: Fraud Busters Strayer University Business 508 August 11, 2013 Abstract The paper will determine the five important skills a forensic accountant must possess and describe their role within a courtroom environment. It will also analyze the legal responsibility of the accountant while serving its clients business. Giving two examples where a forensic accountant played an important role in aiding attorneys in presenting fraudulent bookkeeping records of company’s who ultimately committed white-collar crimes. Have you ever heard the figure of speech a “needle in a haystack” when referring to finding a small object in a large setting? The task of performing a very detailed search seems impossible. Leaving no stone unturned and demanding hours and hours of mental and manual labor. This is what a forensic accountant faces. By definition, a forensic investigation of any kind is conducted with the purpose of obtaining evidence that will be used in a court case. Forensic accounting is simply the analysis of financial documents use as tax returns, bank statements, canceled checks and the like, in search of proof of a criminal act, be it tax evasion, running numbers, embezzlement, money laundering, fraud by wire or securities fraud (DiGabriele, 2009). These crimes exists for the sole purpose of illegally making money. Leaving a paper trail pointing to criminal activity producing money coming into and leaving the organization. This is one...
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...Bernard Madoff Research Paper Bernard (Bernie) Madoff committed this century’s largest Ponzi scheme to date. First we will define Ponzi Scheme – it is a fraudulent pyramid scheme where original investors are paid their gains out of new investors money so it would appear to old investor that the scheme (business) is producing an unusually large return (Albrecht, 2009). The Ponzi scheme that Madoff created and pulled off for years was quite intricate. In a standard pyramid scheme each victim unknowingly brings in more and more victims, where as a Ponzi scheme has a single entity (group or individual) to keep up with and organize the fraud. The operator of the Ponzi scheme then will take new money brought in from recent investors and pay off previous investors. For this to continue on there must be a constant influx of new investors so there must be someone working that angle on a regular basis. Eventually the group of new investors will run out because the funds dry up. In a lot of Ponzi schemes when they begin to run low on victims things seem to fall apart and investors loose it all. In some cases the perpetuator escapes the area with all the money he / she have scammed. When or if they are caught the perpetuator will have to face prosecution and / or repayment of all money to victims and possible jail / prison time or pay restitution to the government. In some cases there are assets seized to reimburse victims and pay restitution (Smith, 2011). Madoff committed...
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...Bernie Madoff Fraud Case Bernie Madoff Fraud Case Introduction One of the largest fraud cases of all times is that of the “Bernard Madoff Case.” According to Armstrong (2008), “for a number of years Madoff managed to lure billions of dollars away from huge charities, as well as wealthy individuals in both the United States and Europe by getting them to invest in his hedge fund. This he did by offering extraordinary returns to investors, until his scheme eventually reached a staggering $50 billion under “management.” Within this paper, efforts will be made answer a number of questions, including how was this fraud executed; who were the perpetrators, accomplices and victims; how was the fraud discovered; what were some of the possible red flags; and what role did the SEC play in discovering the fraud. In addition to this, mention will be made of how the case was resolved and what are some of the measures that could have deterred or prevented the fraud from occurring in the first place. Given these harsh economic times which we live in, all efforts have to be made to enforce strict rules and regulations within financial institutions – so that investors and other stakeholders’ interests are protected. Had there been closer attention given by the Securities Exchange Commission and other regulators to the ‘red Flags’ associated with Madoff and his firm, then so many persons would not have lost billions. Bernard Madoff Investment Securities (BMIS) Founded in 1960...
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...For over 50 years forensic accountants have exist. In the most recent years the need for them has increase due to the creativity of white collar crime and the use of technology. Forensic accountants are specialists who work with financial information such as business records, bank statements, and tax returns for the purpose of finding valid data. This data is used to prepare their reports. The report is prepared in a manner that will be easily understood by the attorneys to use in research, negotiations or court proceedings. In the business world forensic accountants are used to help clarify and resolve a wide number of legal disputes, including shareholder disagreements, malpractice claims, insurance claims, business dissolutions, bankruptcy proceedings, and divorce proceedings, as well as fraud and embezzlement. ("Forensic accounting,") Determine the most important five (5) skills that a forensic accountant needs to possess and evaluate the need for each skill. Be sure to include discussion regarding the relationship between the skill and its application to business operations. Depending on the nature of the case, the skills necessary of the forensic accountant may vary. However, there are skills that all forensic accountants should have; • Oral communication skills- having the ability to effectively communicate and explain the findings of a case, especially in a courtroom environment is important. The FA should be able to disseminate information about company’s...
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...Cynthia Knox RES/351 July 29, 2013 Ross Jackson Bernard Madoff’s ponzi scheme In this paper I am going to show hoe Bernie Madoff’s scheme people out of thousand and even million’s dollars of money. I will address the unethical behavior the injury that her people by taking their money and trust from them. What Bernie did hurt people not a company by making up fake investment company? How this could have been avoided is that people do research on the companies over even the person that is asking for large sums of money. These are the things that I will be addressing in this paper. Who is Bernie Madoff Bernie Madoff was born on April 29, 1938, in Queens, New York, Bernard was born to polish immigrants, work for many years as a plumber. Bernie married Sylvia his wife they had one daughter, son. Bernie had hard times during the Great depression so in 1950 he got involved in finance. Ponzi scheme The unethical research behavior was involved was the hedge funds scheme were he would have to sell or liquidate holding from one hedge funds to keep down pressure on the stock prices. When doing this it will keep the negative pressure off the stock exchange. Berine had celebrity connections from Kyra Sedwick, Kevin Bacon, Tom hanks, and many more people that invested in the hedge funds at first they were getting returns back at 10% return. The company was growing and he was hiring more family members. The person that was hurt by this scheme was his family...
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...Unit 3 Research Paper Government Regulation and Corporate America Kaplan University Online All companies in the United States have to abide by many rules and regulations set in place by our government. It seems as if there are so many if you are just learning about them but once you know and understand them, they all make sense and seem logical. If we had less regulation, there would be more people committing fraud and getting away with it. There are plenty of regulations in place right now and no more are needed unless people are continuing to abuse the system and new ones need put into place. As long as everyone continues to do their job properly, there is no need for any more government regulation. Securities Acts of 1933 and 1934 The Securities Acts of 1933 and 1934 ensure that companies are not misleading in their financial statements that investors base their opinions on. If an investor sees any financial statement to a company, and believes they are in good shape and that they should invest in that company, the company is held liable for any loss the incur. The Securities Act of 1933 requires that before selling securities publicly, a company must register them first. Companies must go through the Securities Exchange Commission and file a registration statement. When they file, they must include their audited financial statements (Beatty & Samuelson, 2010). After this is done, a company may offer their securities on a public market for investors which may include...
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...amount of time. These types of financial schemes promise investors large interest returns if they provide money as a loan. As more new investors participate, the money that is contributed by later investors is paid to the initial investors, allegedly at the promised interest on their loans. This method works initially, but will then fold as more investors participate and choose to take withdrawals. Though these types of schemes have happened before, the first of this caliber was documented in the 1920’s by its namesake, Charles Ponzi. In 2008, Bernard “Bernie” Madoff was exposed for running the largest Ponzi scheme to date, conning investors out of over $65 billion over thirty years. INTRODUCTION Bernard Madoff was responsible for the largest reported Ponzi scheme in history. How did this happen? Who else knew about it? Why did it take so long for him to be exposed? This paper will endeavor to answer all of those questions and more. This paper will offer dialogue into how Madoff’s scheme differed from a traditional Ponzi scheme and understand the ethical, emotional and financial fallout to those closest to him. It is also important to understand the psychology involved in those who choose to construct a financial scheme. I will also provide some discussion around the issues concerning the SEC and how they...
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...Contemporary Business Professor Chris Lin Sarah Reid August 12, 2012 Forensic Accountant 2 1. Determine the most important five skills that a forensic accountant needs to possess and evaluate the need for each skill. Be sure to include discussion regarding the relationship between the skill and its application to business operations. A document for the Skills needed for Forensic Accounting (2012) suggests that Forensic Accountant needs to possess is computer skills, “since document and financial statements have taken a more electronic format, forensic accountants must demonstrate computer skills in finding the paper trials left behind by corporate criminals. A forensic scientist will use computer software, known in their profession as computer-aided tools and techniques CATT to detect white –collar crimes. Some software includes data extraction, spreadsheet and data mining analysis.” According to forensic Accounting (2012) suggests that Forensic Accountant’s investigative skills involve collecting and analyzing the audited information for possible discrepancies. The investigations delve into both missed by ordinary accounting and auditing methods. A forensic accountant bases his finding on criminology specifically centered on regulatory and ethical issues. According to Poole (2002) “forensic accountant must also be open minded and skeptical. In most...
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...there are business leaders and philosophers that object to the belief or need of exhausting time, money or resources for the welfare of its people, be it consumers or employees, data indicates that those who do recognize their noblesse oblige will prosper (BP, pg 149). Practicing ethical business operations has been a talked about subject since the eighteenth and nineteenth centuries. Whether it is sustainability or social responsibility, approaches to business ethics have yet to be standardized. At the peak of today’s ethical environmental dilemmas stands Monsanto, the organization that prides itself on the ability to create sustainable agriculture. There are also scandals with regard to scrupulous or fraudulent investors, such as Bernard Madoff, who prosper at the expense of trusting individuals. Lending institutions have also taken advantage of the financially ill-informed consumers who have lost their homes and in some cases their families and lives as a result of subprime lending practices (cite). Toyota, who was once known as one of the world’s fastest growing auto makers (cite) deliberately ignored the safety of its consumers in effort to continue maximizing its profits. Organizations lacking business morals must understand that responsibility does not rest on one source, but rather it should be a collaborative effort between the companies, governments, and individuals (Business Ethics). Until standardized practices are followed at home and abroad, leaders will continue...
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...The Effectiveness of Business Ethics in Education and Today’s Workplace October 13th, 2012 Introduction What do Bernard Madoff, Kenneth Lay and Rob Blagojevich all have in common? They all operated with no apparent ethical behavior even though each had received educational backgrounds in which ethical business practices were taught. As L. Zingales states, “While every firm can have its bad apples, when these apples are at the top, it suggests that a company has either a corrupt culture or a defective selection process, or both.” (Zingales, Jul 16, 2012). In Madoffs case, the Ponzi scheme had been going on since the early 1990’s (Morrissey, Aug 11, 2009). Under the direction of Kenneth Lay, Enron- once one of the largest companies in America- collapsed in bankruptcy and ruined the lives of thousands of people (McLean & Elkind, May 18, 2006). The Chicago Tribune reported that the Illinois House of Representatives was sending to the Illinois Senate a “13 point article of impeachment-a political form of indictment-alleging Blagojevich has abused the power if his office” (Pearson & Long, Jan 9, 2009). The purpose of this paper is to gauge the Effectiveness of Business Ethics in Education and Today’s Workplace. As business students they graduate from the university setting and enter the business environment they study the ethics in their workplace culture and often find that educational ethics training does not have any value in the work world. “Studies...
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...the SEC To Uncover Bernard Madoff's Ponzi Scheme Executive Summary The OIG investigation did not find evidence that any SEC personnel who worked on an SEC examination or investigation of Bernard L. Madoff Investment Securities, LLC (BMIS) had any financial or other inappropriate connection with Bernard Madoff or the Madoff family that influenced the conduct of their examination or investigatory work. The OIG also did not find that former SEC Assistant Director Eric Swanson's romantic relationship with Bernard Madoffs niece, Shana Madoff, influenced the conduct of the SEC examinations of Madoff and his firm. We also did not find that senior officials at the SEC directly attempted to influence examinations or investigations of Madoff or the Madofffirm, nor was there evidence any senior SEC official interfered with the staffs ability to perform its work. The OIG investigation did find, however, that the SEC received more than ample information in the form of detailed and substantive complaints over the years to warrant a thorough and comprehensive examination and/or investigation of Bernard Madoff and BMIS for operating a Ponzi scheme, and that despite three examinations and two investigations being conducted, a thorough and competent investigation or examination was never performed. The OIG found that between June 1992 and December 2008 when Madoff confessed, the SEC received six! substantive complaints that raised significant red flags concerning Madoff s hedge fund operations...
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...Case Study Bernie Madoff’s Ponzi Scheme: Reliable Returns from a Trustworthy Financial Adviser By Denis Collins Denis Collins is a professor of management in the School of Business at Edgewood College in Madison, Wisconsin. His research interests include business ethics, management, and organizational change. Contact: dcollins@ edgewood.edu A [person] is incapable of comprehending any argument that interferes with his revenue. Rene Descartes Overview This case study is a chronology of the largest Ponzi scheme in history. Bernie Madoff began his brokerage firm in 1960 and grew it into one of the largest on Wall Street. While doing so, he began investing money as a favor to family and friends, though he was not licensed to do so. Over a period of fifty years, these side investments became an investment fund that mushroomed into a $50 billion Ponzi scheme. Bernie1 pled guilty without a trial on March 12, 2009, and was sentenced to 150 years in prison. Thousands of wealthy clients, philanthropic organizations, and middle-class people whose pension funds found their way into Bernie’s investment fund lost their life savings. What to Do? Bernie Madoff, at age 69, owned three very successful financial companies—a brokerage firm, a proprietary trading firm, and an investment advisory firm. On December 10, 2008, the brokerage and proprietary trading firms, managed by his brother and two sons, were performing as well as could be expected in the middle of a deep recession. His investment...
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