...The Madoff investment scandal broke in December2008. Which consider to be the largest financial fraud in U.S. history. Former NASDAQ Chairman Bernard Madoff admitted that the wealth management arm of his business was an elaborate Ponzi scheme. SEC had previously conducted investigations into Madoff's business practices, but drops the ball to uncover the massive fraud. Investors question SEC that over 20 years of periodic investigation, tip received from outsider, SEC fail to recognize the red flag and detect the fraud. I believe there are too many firms to watch and SEC fail to catch fraud has direct relationship with SEC understaff. The SEC is responsible for overseeing registered broker-dealers, transfer agents, clearing agencies, investment companies and investment advisers. A paper written by Bill Tarrant, he says that “the weakness in the SEC’s existing examination approach can be best highlighted by the fact that, in the last 16 years, while Madoff’s firm was investigated 8 times, no fraudulent activities were ever uncovered” Some news reports have suggested that a marriage between a Madoff relative and a former SEC official may have been a factor in the SEC’s failure to investigate red flags and complaints lodged against Madoff. Bernard Madoff Investment Securities was essentially a family operated business. His brother Peter Madoff was the chief compliance officer. His son Andy Madoff was the director of trading, and his son Mark Madoff was the director of proprietary...
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...Ponzi Scheme: A key element to comprehending the “Bernie” Madoff Scandal is understanding the concept of a ponzi scheme and how they are spotted on the markets. The operations of a ponzi scheme are complex and are reliant on the joint effort between multiple scam artists to be successful. Unlike common market schemes where a company or organization attempts to gather victims in mass for a large return, a ponzi scheme focuses solely on a small group or individual. The idea behind a ponzi scheme is to promise large returns to the small group of investors over a period of time. A key issue behind convincing a small group of investors to give up their money is proving that the investment and the return is legitimate and not fraud. So, during that time period that the scam company promised the return on investment, it needs to find another set of more investors to pay off the previous group with interest....
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...The Madoff investment scandal affected a lot of people in the late 2008 over $70 billion vanished and thousands of innocent people were affected. The part of the documentary that is the main focus today is on the whistleblower Harry Markopolos. It started in 1999 Markopolos was a young financial analyst and he informed the SEC that it was legally and mathematically impossible to achieve the gains Madoff was promising. In the documentary he said that it took him five minutes to know that Madoffs number did not add up and four hours to try and replicate Madoff success to conclude that it was a fraud. Plotting Madoff success on a graph it showed that the returns rose steadily with only a few dips. Overall Madoff loss was only four percent in...
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...were riddled with corruption and fraud. At the beginning of the decade we saw the likes of Enron and WorldCom become insolvent due to accounting frauds of epic proportions. The one case that stands out amongst all of them is the Bernard Madoff case, which is considered to be the largest fraud case of all time. “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. He did so by claiming extraordinary returns (generally in the low double digits). His scheme eventually reached a staggering $50 billion under "management" (Armstrong, 2008). Mr. Madoff was born on April 29, 1938; he graduated from Far Rockaway High School in 1956. He then enrolled in Hofstra University Law School from which he did not graduate. In 1960 he created Bernard L. Madoff Investment Securities (BMIS) with initial capital of $5000 (Gagnier, 2008). In the years to come his firm became ranked as “one of the top money markets on the NASDAQ” (Gregoriou, et al, 2009). He was described as “a man that had an impeccable reputation on Wall Street. Investing with him was an exclusive privilege, a clear sign that one had made it socially. Bernard Madoff was a legend” (Gregoriou, et al, 2009). His persona and BMIS came crashing down on December 11, 2008, when he was arrested by the FBI on securities fraud charges. The night prior to the 11th, he confessed to his two sons, who were top employees...
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...First Name Surname Instructor Course Date Recent Corporate Scandal Meltdowns - Bernard Madoff Bernard Madoff also known as Bernie is a previous Chairman of the NASDAQ stock exchange. Madoff founded an investment advisory firm called Ascot that later brought about the famous Ponzi scheme (Rhee 363). The project led to defrauding of many investors. The investors lost over $50 billion in the project over a period of around two decades. It all started in early December 2008 when there was the financial crisis in the United States (Vagts 684). Madoff was not in a position to honor the investors' requests for cash. He had to come out in the open and confess what he was doing. He had to admit to the Ponzi scheme and Wall Street together with other parts of the world was shocked (Hansen & Movahedi 368). There was massive investment fraud and many people fell victims even high profile investors. The financial community had a lot of respect for Madoff. The trust they had made some investors give their life savings to the scheme. Those who came to invest included charitable organization that got its funding from Steven Spielberg, Kevin Bacon, who is an actor, New York Mets owners, and others (Vagts 684). Madoff got investments from large banks and pension funds, for example, Royal Bank of Scotland, Banco Santander from Spain and many others. Many investors lost all they had in the scheme. After his tricks were exposed he pled guilty of securities fraud among others. He was then...
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...The Madoff scandal 16 December 2008 The repercussions from the collapse of Bernard L. Madoff Investment Securities LLC, whose founder and owner was arrested last Thursday after admitting that his $17 billion investment advisory business was "a giant Ponzi scheme," continue to widen. According to a criminal complaint filed by the FBI and a civil action brought by the Securities and Exchange Commission (SEC), the elderly Madoff estimated that the losses from his fraud exceeded $50 billion. The tally of losses already reported by banks, hedge funds and wealthy investors climbed over the weekend to nearly $20 billion. Banks and hedge funds around the world—in the US, Britain, Italy, Spain, France, Switzerland and Japan—are reporting hundreds of millions and even billions in losses. University endowments, charities and other institutions that entrusted their money to Madoff or to hedge funds that invested in Madoff's company are reeling from the news that their investments are worthless. Prominent and wealthy individuals—including J. Ezra Merkin, the chairman of GMAC, Fred Wilpon, the principal owner of the New York Mets, Norman Braman, the former owner of the Philadelphia Eagles professional football team, Frank Lautenberg, the multimillionaire Democratic senator from New Jersey, and Mortimer Zuckerman, the owner of the New York Daily News—are among those who have lost millions. Among the thousands and even tens of thousands of individuals likely to be affected is no small...
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...Conclusion---------------------------------------------------------------- Page 11 Reference----------------------------------------------------------------- Page 12 Executive Summary This report is through the case analysis about the collapse of Baring Bank, to talk about how the corporate social responsibility influences a company. Through the related CSR problems in Baring bank and trying to find what matters that the organization lack of. In addition to know more about how CSR effect the global business environment, depends on the Sarbanes-Oxley Act, the report talk about the five acts can possibly prevented Leeson to destroy the company. And also discuss why the SOX act is not effective which lead to the Madoff investment scandal and could not prevent the 2008-2009 financial melt down using the ethical decision making process. \ Introduction Barings Bank was the oldest merchant bank in London until its collapse in 1995 after one of the bank's employees, Nick Leeson, lost £827 million ($1.3 billion) due to speculative...
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...The Fraud of the Century: The Case of Bernard Madoff The fraud perpetrated by Bernard Madoff which was discovered in December, 2008 is based upon a Ponzi scheme. Madoff took money from new investors to pay earnings for existing customers. The greater the payout to retiring and withdrawing customer, the more revenue or clients he would need to start and “investment relationship” with Madoff. The Ponzi scheme was named after Charles Ponzi who in the early 20th Century, saw a way to profit from international reply coupons. International reply coupons were a guarantee of return postage in response to an international letter. Charles Ponzi determined that he could make money, legally, by swapping out these coupons for more expensive postage stamps in countries where the stamps were of higher value. While making a significant profit with this system, Ponzi got the idea of enticing investors to provide him more capital to trade coupons for higher priced postage stamps. His promise to investors was a 50% profit in a few days. Touted as a financial wizard and the ‘Warren Buffet’ of his day, Ponzi lived outside Boston, he had a fairly opulent life bringing in as much as $250,000/day. Part of Ponzi’s success came from is personal charisma and ability to con even savvy investors. The promised payout was supported by the new investors anxious to take advantage of these robust returns because he appeared to create an image of power, trust, and responsibility. In July of 1920...
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...The Fraud of the Century: The Case of Bernard Madoff The fraud perpetrated by Bernard Madoff which was discovered in December, 2008 is based upon a Ponzi scheme. Madoff took money from new investors to pay earnings for existing customers. The greater the payout to retiring and withdrawing customer, the more revenue or clients he would need to start and “investment relationship” with Madoff. The Ponzi scheme was named after Charles Ponzi who in the early 20th Century, saw a way to profit from international reply coupons. International reply coupons were a guarantee of return postage in response to an international letter. Charles Ponzi determined that he could make money, legally, by swapping out these coupons for more expensive postage stamps in countries where the stamps were of higher value. While making a significant profit with this system, Ponzi got the idea of enticing investors to provide him more capital to trade coupons for higher priced postage stamps. His promise to investors was a 50% profit in a few days. Touted as a financial wizard and the ‘Warren Buffet’ of his day, Ponzi lived outside Boston, he had a fairly opulent life bringing in as much as $250,000/day. Part of Ponzi’s success came from is personal charisma and ability to con even savvy investors. The promised payout was supported by the new investors anxious to take advantage of these robust returns because he appeared to create an image of power, trust, and responsibility. In July of 1920...
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...The Madoff investment scandal broke in December 2008, when former NASDAQ Chairman Bernard Madoff admitted that the wealth management arm of his business was an elaborate Ponzi scheme. Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960, and was its Chairman until his arrest.[1][2][3] At his firm he employed his brother Peter as Senior Managing Director and Chief Compliance Officer (Peter has since been sentenced to 10 years in prison), Peter's daughter Shana Madoff as the firm's rules and compliance officer and attorney, and his sons Andrew and Mark (Mark committed suicide by hanging exactly two years after his father's arrest). Alerted by his sons, federal authorities arrested Madoff on December 11, 2008. On March 12, 2009, Madoff pleaded guilty to 11 federal crimes and admitted to operating the largest private Ponzi scheme in history.[4][5] On June 29, 2009, he was sentenced to 150 years in prison with restitution of $17 billion. According to the original federal charges, Madoff said that his firm had "liabilities of approximately US$50 billion".[6][7] Prosecutors estimated the size of the fraud to be $64.8 billion, based on the amounts in the accounts of Madoff's 4,800 clients as of November 30, 2008.[4][8][9] Ignoring opportunity costs and taxes paid on fictitious profits, half of Madoff's direct investors lost no money.[10] It is also the largest accounting fraud in American history. Investigators have determined others were involved...
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...others acting in dangerous or illegal way. The term whistleblowers are people who choose to expose wrongdoings, usually at the expense of their careers (Capozzi, 2008).” Ronald Jeurissen, author of “Ethics and Business,” says that whistle-blowing has moral considerations. For instance, the person should be sure the negative consequences to the company of such exposure do not outweigh the benefit to the public. When professional accounting ethics are breached accountants may expect to lose their job, or may even end up spending time in jail depending on the crime. As part of the largest financial fraud in U.S. history, in March 2009 David Friehling an American accountant was arrested and charged for his role in the Madoff investment scandal. For many years, Bernard L. Madoff Investment Securities LLC books were audited by Friehling & Horowitz, a little-known accounting firm in New City, New York (Wikipedia, 2009). The firm consisted of two principles-Friehling and...
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...Madoff the Mastermind Kory VanSpeybroeck AC 572 April 14, 2012 Bradley Trimble Madoff the Mastermind Bernard Madoff was a widely known investment broker who, for a long time, was able to swindle investors out of their money. He did this by implementing one of the largest Ponzi schemes in history. Discovering the exact details about who was involved, how heavily they were involved, and the extent of the losses incurred may yet take many years. The goal of this research is to attempt to explain how the fraud was executed by explaining various details involved in this Ponzi scheme. These details include how the fraud was executed, parties that were involved positively and negatively, motives of each party, controls that may have prevented or deterred the fraud, any SEC involvement, how the fraud was discovered, and the resolution of the case. It is best for cases like this to start at the top of the pyramid and work down through the pyramid. To begin, one must understand a Ponzi scheme and how it works in order to determine how Madoff conducted his particular scheme. A Ponzi scheme is designed to steal money from investors by promising consistent or large returns that are secured by previous investor’s funds. About.com lists five key elements of this type of scheme consisting of the benefit, the setup, initial credibility, initial returns, and communicated success (Mofatt, 2012). The benefit is the promise of a return at above normal averages or more consistently...
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...Movie Project: Broken City The movie I choose is Broken City and I choose this movie because even though this movie isn’t related directly to the accounting field the situation that happen in the movie does because is very similar to the ones that happens in big companies. This movie was release in 2013 and is classify as Thriller/Drama. There main characters are Billy Taggart (Mark Wahlberg), Cathleen Hostetler (Catherine Zeta Jones) and the New York City’s Mayor Nicholas Hostetler (Russell Crowe). The biggest issues in this movie are the lack of integrity, abuse of power and corruption. The summarize is that Billy worked as a police in the City of New York but he was fired and then starts working as a private investigator. After 7 years Bill was hired for the Mayor to investigate Cathleen, the mayor’s wife, because the mayor think she was having an affair and he agree to pay Bill 50,000 dollars for the job, so he accept. Bill begins to investigate Cathleen and found out it looks like she was having an affair and give the pictures to the Mayor. But the real problem was not that, it was that Billy was double-crossed by the Mayor because the Mayor hired Billy to find the source that was giving critical information related to him to his wife, so he wanted to find that person before all that information comes to the public and affect him to be reelected for New York Mayor again. After Billy give the Mayor the pictures later that day Paul...
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...Ponzi Scheme Keller Graduate School Forensics Accounting The Bernie Madoff scam truly made history. Bernie Madoff probably would not have been able to prolong this scam without the continued help of the Accounting Firm of Friehling & Horowitz CPAs PC, who at last reported purported to audit financial statements and disclosures of Madoff firm for the last 17 years. Ponzi schemed to help Madoff by trying to go undetected because of Friehling deceiving investors and regulators by declaring that Madoff enterprise had clean audit records. Ponzi’s scheme enabled Madoff by falsely stating in annual audit reports that F & H audited Madoff financial statements pursuant to GAAP, including the requirements to maintain auditor independence and perform audit procedures regarding custody of securities. F & H purported that the financial statements conformed to GAAP and the Friehling reviewed internal controls at Madoff firm. According to SEC complaint, Friehling knew that the firm regularly distributed the annual audit reports to Madoff customers, and that reports were filed with the SEC and other regulators. The complaint alleges these statements were “materially false”. The SEC alleges that Friehling merely pretended to conduct minimal audit procedures of certain accounts to make it appear that he was conducting an audit, and then failed to document his purported findings and conclusions as required under the GAAP. If properly stated those financial statements...
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...Viewpoint In the case study about the Bernie Madoff scandal, the author makes the point that the motivation to succeed in business can present a conflict with the fiduciary duty that a business person has to the client. There is question whether Madoff was motivated solely by greed, in which case he was engaged in a simple Ponzi scheme, or whether he used the Ponzi scheme to hide his failure to generate returns for his clients. Madoff’s lack of transparency violated the trust of his clients, even if he did not initially intend to defraud his clients. There is some ethical ambiguity in this case. Discussion The lesson of this case is that transparency is the best policy, since secrets only allow the unethical behavior to continue. If Madoff had told his clients that his investments had failed, and they had lost their money, rather than engage in the Ponzi scheme, there would have been far fewer victims. The number of victims increased as Madoff was able to use the Ponzi scheme to hide his failure, which gave existing and future investors the impression that he was generating enormous returns for his clients. Questions One Greed and trust were intertwined in a way that makes the Madoff scheme somewhat ethically ambiguous as far as Madoff’s intent is concerned. He probably did not intend to create Ponzi scheme from the outset. By positioning himself among the Wall Street elite and being the former chairman of the NASDAQ, Madoff gained the trust of his clients. Initially, the...
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