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Stealing 50 Billion Dollars; AKA-The shortest DNC majority in US history?
Topic Started: Dec 13 2008, 10:12 PM (208 Views)
Franko
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List of potential victims grows in NY fraud case



NEW YORK – Investors who put their fortunes in the hands of arrested New York money manager Bernard Madoff are waiting to hear how much of their stake is left.

The roster of potential victims in what prosecutors said was a $50 billion Ponzi scheme has grown exponentially longer in the past few days.

Madoff, 70, said in regulatory filings that he only had around 25 clients, but it has become apparent that the list of people who lost money may number in the hundreds or even thousands.

Among those who have acknowledged potential losses so far: Former Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services.

A charity in Massachusetts that supports Jewish programs, the Robert I. Lappin Charitable Foundation, said it had invested its entire $8 million endowment with Madoff. The organization's executive director said she doesn't expect it to survive.

Other institutions that believed they had lost millions included The North Shore-Long Island Jewish Health System and the Texas-based Julian J. Levitt Foundation.

Hedge funds and other investment groups looked like big losers too. The Fairfield Greenwich Group said it had some $7.5 billion in investments linked to Madoff. A private Swiss bank, Banque Benedict Hentsch Fairfield Partners SA, said it had $47.5 million worth of client assets at risk.

The losses may have extended far beyond the coffers of the wealthy and powerful.

The town of Fairfield, Conn., said it placed nearly 15 percent of its retiree pension fund with Madoff. Officials were scrambling to determine how much of the $42 million remained.

Harry Susman, an attorney in Houston, said he represents a group of clients who had unknowingly become entangled in the scandal by investing in a hedge fund managed by Merkin, which then put almost all of its $1.8 billion in capital in Madoff's hands.

"They had no idea they had exposure," Susman said. He said his clients were now dumbfounded as to how the fund came to invest all of its holdings with just one man, especially since concerns had been circulating for years about Madoff's operations.

For decades, Madoff had dual reputations among investors. Many wealthy New Yorkers and Floridians considered him a reliable investment whiz. Others, more skeptical, had questioned whether his returns were real, pointing to the firm's secrecy and lack of a big-name auditor.

But when he met privately with a family member at his firm earlier this month, something clearly was amiss.

First, federal authorities say the 70-year-old Madoff surprised the unidentified family member by saying he wanted to pass out hefty annual bonuses two months earlier than usual, court papers said. Then, when challenged on the idea, he said he "wasn't sure he would be able to hold it together" if they continued the discussion at the office, and invited him to his apartment.

It was the beginning of a stunning meltdown for the former Nasdaq stock market chairman.

Madoff himself described his investment business as an unsophisticated "Ponzi scheme," according to investigators who interviewed him.

Perhaps more startling than the loss was that it apparently caught regulators and investigators off guard, only coming to light last week when Madoff's own family turned him in.

The core of the scheme — taking investments from one client to pay returns to another — "has been around since the beginning of time," said Marc Powers, a former Securities and Exchange Commission enforcement chief and head of the securities practice at Baker Hostetler.

The firm somehow pulled off the fraud despite being subject to examination by the SEC, Powers added. "You wonder how these things escaped the normally careful review of these regulatory organizations."

The latest dose of bad news in the world of finance has left Madoff's clients "panicked," said Stephen A. Weiss, a lawyer for several dozen investors. "These people are sorrowful. These people are angry. And many are now destitute."

The wave of ill will — fuel for inevitable lawsuits — was aimed at a man who had cultivated an image as a straight-shooter with a personal touch.

The day after his arrest, his company's Web site still boasted that "in an era of faceless organizations ... Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner's name is on the door."

It went on to say "Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."

Madoff's resume was the stuff of Wall Street legend: He founded his company in 1960 with $5,000 he earned in part working as a lifeguard on Long Island beaches while putting himself through Hofstra University Law School. It eventually became one of five broker-dealers that spearheaded the formation of the Nasdaq Stock Market, where he served as a member of the board of governors in the 1980s and as chairman of the board of directors in the early '90s.

By 2001, Madoff's firm was one of the three top market makers in Nasdaq stocks and the third-largest firm matching buyers and sellers of securities on the New York Stock Exchange, according to Baron's.

Investigators say Madoff's crime originated in a separate and secretive investment-advising business.

Madoff apparently kept the loss a secret even from his two sons and other family members who work at the firm until he and two of them retreated to his apartment occupying the entire 12th floor of an Upper East Side building on Dec. 9, according the complaint drawn up by an arresting FBI agent.

"It's all just one big lie," he told his family. He confided he had blown the money in what was "basically, a giant Ponzi scheme," the complaint added.

Several attorneys representing investors, however, have questioned how he could have acted alone, given the size of the alleged fraud and vast holdings of his firm.

According to the court complaint, Madoff told his family he expected to end up behind bars, but wanted to execute his own version of a bailout package by doling out $200 to $300 million he had left to family, friends and employees. After the meeting, a lawyer for the family contacted regulators, who alerted the federal prosecutors and the FBI.

Madoff was in a bathrobe when two FBI agents arrived at his door unannounced at 8:30 a.m. on Dec. 11. He invited them in, then confessed after being asked "if there's an innocent explanation," the complaint said.

Responded Madoff: "There is no innocent explanation."





As if the market melt-down wasn't bad enough. Such a lovely year for investors, many of them who thought their stake was pretty secure and safe with reputable investment firms and brokers.

You wonder just how the investment world, including communities, organizations, and ordinary people are ever going to recover their confidence in investment after all this stuff that's gone on.

We still need the markets and investment to make our world work, but it seems we need to come up with a renewal of method.



Edited by Franko, Dec 13 2008, 10:14 PM.
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Sgt. Jaggs
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How about a Voyager Movie
Wow. Which comes to mind first in the "Old Sayings"?

Robbing Peter to pay Paul?

P.T. Barnum's "There's a sucker born every minute."

Maybe the delight of such things can be found with the concept of a Bank.

The Banker: Give me your money.

The Citizen: Why?

The Banker: You can't handle all that trouble of handling or managing it. Just give it to me and I'll let you use it whenever you want to.

The Citizen: Okay.........

Later on down the road. . .

The Citizen: Hey I would like to but a house, do you think I could get a loan?

The Banker: No. The Economy sucks right now. Normally we would ripp you off with an obscene interest rate but right now even that is out of the question due to fear in the markets. Besides, you credit is not perfect.

The Citizen: No its not, but my credit to debt ratio is great. I have no student loans, no bankrupcies, no child support and no repossesions EVER. Also you have been my bank for over eleven years and I have been gainfully employed since I was 17 years old and now I am 39.

The Bank: You were late on something one time.

The citizen:
Yeah but I paid a :censored: :censored: late fee.

The Bank:
There was also that time you had that overdraft.

The Citizen:
Yeah but I paid you another :censored: :censored: huge overdraft fee.
You still earn interest off handling my money all of my life.

The Bank: You are a loser. Go :censored: yourself, actually translated. . . we cannot extend you a loan at this time.

People with money who do not need credit can get it and people who NEED credit can't get it, credit becomes useless. Good Bye Bank!

Add to the mix the ARMs which suckers sign and banks pass to other suckers and some :censored: :censored: banker gets stuck with the pooch.

Would this all happen in Mayberry? Nope. But it will in Wall street.

Edited by fireh8er, Dec 14 2008, 12:58 AM.
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Dwayne
Profanity deleted by Hoss
I came across this article recently. Surprisingly, I had never heard of this scandal until I read about it this morning...
Quote:
 
Financial world still amazemed over at Madoff's downfall

By David Lieberman, Pallavi Gogoi, Theresa Howard and Kevin McCoy in New York; Matt Krantz reported from Los Angeles

NEW YORK — The financial world begins this week still in a daze over the spectacular collapse of an alleged Ponzi scheme by onetime Wall Street legend Bernard Madoff — possibly the biggest swindle ever committed by a single person.

It's "a stunning fraud that appears to be of epic proportions," Andrew Calamari of the Securities and Exchange Commission's New York Regional Office said in a statement after the FBI arrested Madoff last week.

It's unclear how many institutions and individuals will suffer from losses that federal authorities say Madoff privately pegged at $50 billion.

The repercussions could affect the entire investment industry if lawmakers decide they must try to prevent additional losses on such a massive scale. "It's a good thing, because cases like Madoff will lead to tighter and more oversight," says Roland Eberhard, who oversees $500 million in investments for Basel Asset Management.

Officials allege that Madoff falsified reports from a secretive money management service that he owned — run separately from his main stock transaction firm — to make it appear to be more successful than it was. Madoff allegedly kept it going by taking cash from unwitting new investors to pay customers who wanted to redeem their holdings.

In a January SEC filing, Madoff said he managed $17.1 billion in assets for 23 clients. But potential victims could number in the hundreds and possibly thousands and include major banks, hedge funds, charities and pension funds (story, right).

Responding to an SEC lawsuit, on Friday, U.S. District Judge Louis Stanton in New York froze the assets and accounts of Madoff's investment business and appointed Lee Richards, an attorney at Richards Kibbe & Orbe, as receiver.

Madoff's lawyers have denied the charges but did not return calls for comment. Madoff was released after posting $10 million in bail. He faces up to $5 million in fines and up to 20 years in jail if convicted. The SEC and U.S. Attorney's office say their investigation is continuing and declined to comment.

For now, many are amazed at the abrupt collapse of a financier considered so innovative and successful that wealthy individuals and blue-chip firms sought his investment services and advice.

A Hofstra Law School graduate who started his career with $5,000 saved working as a lifeguard, Madoff spent 48 years cultivating a reputation as a pioneer of electronic trading and the development of the Nasdaq Stock Market. He was its chairman in the early 1990s and served on the boards of the National Association of Securities Dealers and the Securities Industry Association. He's "considered a statesmen in our industry," says Marianne Brown, CEO of Omgeo, a firm that helps to affirm trades.

Madoff's tightly run firm — which treats employees and their families to a weekend outing each year at his oceanfront home in Montauk, N.Y., the easternmost point of Long Island — was the sixth-largest market maker for Standard & Poor's 500 stocks this year through October, executing trades on $1.86 billion of shares, SEC data show.

Madoff also is credited with creating a vibrant market for small investors by helping lower the cost of trading, which led to firms such as E-Trade, Ameritrade and Charles Schwab in the 1990s.

Homes in New York and Florida

He lived well. He has an expansive prewar co-op on Manhattan's Upper East Side, real estate records show. An apartment similar in size to his unit sold for more than $5.7 million in 2006. In addition to his Long Island home, he has a waterfront home in Palm Beach and a 55-foot yacht there named Bull, Florida records show.

He was politically active, donating $25,000 a year to the Democratic Senatorial Campaign Committee as well as recent races by New York Sens. Charles Schumer and Hillary Clinton and New Jersey Gov. Jon Corzine. Madoff has also been an active donor — through the Ruth and Bernard Madoff Foundation — to New York philanthropies including The Doe Fund and Girls Inc.

Many were stunned that someone so prominent could commit such a massive alleged fraud. "It's like you find out the Tooth Fairy died," says Robert Battalio, professor of trading at University of Notre Dame's Mendoza College of Business.

The end came after Wednesday when, according to the SEC complaint, Madoff told two unnamed senior employees that his fund was "all just one big lie" and "finished" with "absolutely nothing." Madoff allegedly said that he still had as much as $200 million that he wanted to distribute to family, friends and employees— for example, paying bonuses two months early — before he turned himself in. The employees alerted authorities.

His arrest was "a shocking development," Fairfield Greenwich Group, a firm that directs investors to hedge funds, said on its website. It added that it's "working with counsel to assess the situation and take all steps necessary and appropriate to protect our investors and the firm."

But others were skeptical. "Bernie's results were just too unbelievable," says David Henry, an executive of a private company that invests in hedge funds. "He rarely had any negative results. It didn't make sense. He had regular returns of about 10% for years. It was like finding the Holy Grail."

Madoff said much of his success was due to a strategy called "split strike conversion" that used a combination of stock options to enhance the upside and limit the downside of a basket of stocks.

But Jeremy Bach, a Philadelphia-based consultant who helps investors evaluate fund managers, says he helped conduct a 2005 analysis of Madoff's results. "We were not able to identify a single factor that was driving the returns," says Bach.

Michael Ocrant wrote a story in 2001 for MARHedge, which covers the hedge fund industry, about how some traders, money managers and financial consultants questioned Madoff's record of 72 winning months in a row. "When I spoke to them about something not being right … they were adamant — there's no way this could be real," says Ocrant, now at Institutional Investor. "There's no one in history with that kind of results." He says Madoff smoothly dismissed the questions when he interviewed him at the time. "You could see why people would trust him, particularly since he'd been running a successful business for years."

Routine regulator questions

Regulators' questions were fairly routine and centered only on the broker-dealer business. The SEC completed an examination in 2005 that resulted in three violations of "best execution" rules. The SEC also completed an investigation in 2007 that did not include any referral for enforcement action. The Financial Industry Regulatory Authority took five disciplinary actions against the firm since 1975, according to filings, the most recent on Aug. 27, when it accused the firm of not reporting accurate trading information. The firm was fined $25,000 and didn't admit or deny the findings of the action.

But it was the other part of Madoff's firm — the advisory investment management unit — that was at the heart of the alleged scandal. And there was little oversight of that business until Sept. 12, 2006, when it was registered with the SEC.

Investors didn't seem to care. Marketers of investment funds told potential clients that part of their money would be put under Madoff's care if they invested in four relatively unknown funds.

"Madoff was the carrot to get people in other funds," says Jon Najarian of option trading research firm OptionMonster. Meanwhile, current investors with Madoff were nervous to pull their money out, fearing they wouldn't be able to get back in later.

The stickiness of investor funds gave Madoff a pool of cash to play with until the redemptions hit amid the credit crunch. "He was a brilliant marketer in an evil way," Najarian says.

It all started to unravel, according to the SEC complaint, in the first week of December when investors asked for $7 billion in redemptions. That was the one variable Madoff couldn't mitigate.

The alleged Ponzi scheme lasted so long and became so huge because of Madoff's sterling reputation, says Barry Minkow, co-founder of the Fraud Discovery Institute, who served time in prison after defrauding investors as founder of ZZZZ Best. "It's always the last person you'd expect."

Contributing: Del Jones in McLean, Va.

Bernard Madoff

Age: 70

Role: Founded New York-based Bernard L. Madoff Investment Securities in 1960. The company has a market-making operation and separate money-management business.

History of firm: Founded by Madoff after leaving law school. His brother, Peter B. Madoff, joined after graduating from law school in 1970. Opened a London office in 1983.

Nasdaq relationship: Chairman of Nasdaq Stock Market in 1990, 1991 and 1993. Former member of the nominating committee of Nasdaq OMX. The committee suggested board members for the company.

http://www.usatoday.com/money/markets/2008-12-14-madoff-ponzi-downfall_N.htm

With all the new DNC scandals, it's really hard to keep track of them all. Let's see, we have;
* Blago - Pay for Play
* Rangal - Tax Cheat
* Dodd - Quid Pro Quo
* Numerous DNC pols (plus a few RINO's) - Freddie Mac and Fannie Mae

And that's just the beginning.
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HistoryDude
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Shaken, not stirred...
Mod Action

Two threads on same topic combined.
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Dwayne
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Cool... didn't read that post. One thing though, Franko's article doesn't explicitly (or otherwise) spell out Madoff's connections to the DNC.

Simply put, this is way bigger than Enron, and we know how the left beat that dead horse.
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Dandandat
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Time to put something here
Sgt. Jaggs
Dec 13 2008, 10:59 PM
Add to the mix the ARMs which suckers sign and banks pass to other suckers and some banker gets stuck with the pooch.


Actually ARMs historically on average save the lendee on interest as opposed to fixed rate loans. They do however require more maintenance than a fixed rate loan which make fixed rates more appealing to many home buyers; the money they would save in an ARM is not worth the hassle of having to refinance every few years when interest rates are low.

Those "suckers" you are referring to where by and large not suckered by the banks at all; they bit off more than they could chew; that makes them stupid not suckers. They attempted to use ARMs to buy more home than they could afford with the wish full thinking that in the future they would be making more money (through raises and better job prospects) and would be able to cover the payment when the ARM reset.

Edited by Dandandat, Dec 15 2008, 10:14 AM.
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Dandandat
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Time to put something here
This may change the face of hedgefunds – that would be an interesting thing to see.
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Admiralbill_gomec
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Dandandat
Dec 15 2008, 10:21 AM
This may change the face of hedgefunds – that would be an interesting thing to see.
Agreed.
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Admiralbill_gomec
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Dandandat
Dec 15 2008, 10:13 AM
Sgt. Jaggs
Dec 13 2008, 10:59 PM
Add to the mix the ARMs which suckers sign and banks pass to other suckers and some banker gets stuck with the pooch.


Actually ARMs historically on average save the lendee on interest as opposed to fixed rate loans. They do however require more maintenance than a fixed rate loan which make fixed rates more appealing to many home buyers; the money they would save in an ARM is not worth the hassle of having to refinance every few years when interest rates are low.

Those "suckers" you are referring to where by and large not suckered by the banks at all; they bit off more than they could chew; that makes them stupid not suckers. They attempted to use ARMs to buy more home than they could afford with the wish full thinking that in the future they would be making more money (through raises and better job prospects) and would be able to cover the payment when the ARM reset.

I wish Jag would sit down and think this through rationally. His invective is not helping to get his point across.

ARMS are NOT a bad thing. If you plan on living in a home for four years, selling it, and moving somewhere else, an ARM is a good thing. You have lower payments due to lower interest rates. The only problem comes when you try to sell. If the market is not strong you could have difficulty selling your home, meaning that your low rate expires. You have to either negotiate another ARM at a higher rate or find a fixed rate mortgage that won't break you.

As Dante said, suckers were not taken in by evil, predatory banks. They were taken in by a climate of continually rising home prices, fueled by a media (no, not a liberal media, just the entire media) that raved about how real estate was the best way to invest, further fueled by a raft of television programs showing people just how easy it was to make huge amounts of money by flipping houses, et cetera, et cetera, ad infinitum, ad nauseum. Read up on the Tulip Craze.

I watched a program a few weeks ago. I think it was on the Home and Garden network. Some dingus from Dallas moved to California for the explicit purpose of flipping homes. This d***he was the typical cocky know it all late-20-something with the three day scruff, Ben Stiller in There's Something About Mary hair, and the untucked shirt who bought some dump for way too much money. He spent his budget in renovations, went a touch over, and then asked way too much for it. Realtors came in and told him to drop his price by 40 and 50K, but he wouldn't. He got a mite frustrated until he did drop his price. Realtors were warning that the market was peaking, but he wasn't listening. He wound up making his money back and about a $5000 profit, and he then announced that he had found his calling and was going to stay there and do what he did and make the big bucks. My wife laughed most of her way through the program until the credits. The copyright date was 2006. Oops. Wanna bet he's back in Dallas living with his folks?

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Dandandat
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Time to put something here
I was having a conversation with a fellow on another message board I use, Help.com. This guy was asking people for monitory help because the bank was about to foreclose on his home because he wasn't making his payments on what he called his "investment" property. He couldn’t understand why the bank would take his living home away from him just because he couldn’t make good on his "investment" property and went into tirade about how crooked the banks where. He also went into a tirade about how the government needed to help him out because it wasn't his fault that the housing market was doing so bad and he was losing his shirt.

He didn’t like the fact that I told him that a person in his position should never have had an "investment" property in the first place, that in order to get it he obviously signed his first home over as collateral which is why the "crooked" banks are taking it from him now, and that quite latterly it was his fault that the housing market was not doing too well.

He also didn’t like it that I jokingly suggested he owed me something in compensation for devaluing my homes value through his risky "investment" practices, rather than him being helped by anyone.
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Admiralbill_gomec
UberAdmiral
Dandandat
Dec 15 2008, 12:12 PM
I was having a conversation with a fellow on another message board I use, Help.com. This guy was asking people for monitory help because the bank was about to foreclose on his home because he wasn't making his payments on what he called his "investment" property. He couldn’t understand why the bank would take his living home away from him just because he couldn’t make good on his "investment" property and went into tirade about how crooked the banks where. He also went into a tirade about how the government needed to help him out because it wasn't his fault that the housing market was doing so bad and he was losing his shirt.

He didn’t like the fact that I told him that a person in his position should never have had an "investment" property in the first place, that in order to get it he obviously signed his first home over as collateral which is why the "crooked" banks are taking it from him now, and that quite latterly it was his fault that the housing market was not doing too well.

He also didn’t like it that I jokingly suggested he owed me something in compensation for devaluing my homes value through his risky "investment" practices, rather than him being helped by anyone.
Just shows how greedy some people can be.

He made his bed, and now he must lie in it.
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