There is a fast disappearing philosophy that goes you have to pay top rates to get the best talent..... First prize goes to this genius for making a monkey out of those who adhere to this abject nonsense.
Bernard L. Madoff has been accused by federal officials of running a US$50b investment fraud known as a “Ponzi Scheme” in one of the largest investor frauds ever.
Bernard Lawrence Madoff was born 29 April 1938 in New York City. He was a pupil of the Far Rockaway High School and then graduated from Hofstra University in 1960, with an Ordinary degree in Political Sciences. He is married to his high school sweetheart Ruth Madoff; the couple have two sons, Mark and Andrew, who both work in the family’s business.
Madoff started his investment firm, Madoff Securities, in 1960 with a US$5k investment that he earned working as a lifeguard and from doing various other odd jobs.
The company soon turned into a successful trading firm which was known for its reliable returns of over 10% each year. He was also the Chairman of the NASDAQ stock exchange. By the 1980s the company was one of the largest trading firms in the United States and by the year 2000 had accumulated cUS$300m in assets. Madoff created a luxurious lifestyle for himself and his family which included membership of the exclusive Palm Beach Country Club, various homes and condo’s across the United States with generous estates and land-holdings in Europe and other parts of the world; fast luxury cars were like tins of beans and US$2000.00 a bottle champagne were like soda pop.
On 11 December 2008, federal agents arrested Madoff at his Manhattan apartment and charged him with securities fraud. This occurred after Madoff admitted to his sons that he had been running a massive financial fraud. Following this revelation, Madoff’s sons advised the relevant authorities of his theft and the rest is has made is continuing to make history.
The charge, following a full financial audit, has turned out to be worth more than a staggering US $50b and is, so far, the largest fraud of its kind in modern financial history. The extent of the fraud is still being investigated but has affected people such as film director Steven Spielberg and actor, Kevin Bacon.
It has been announced that Mr. Madoff had been running a Ponzi Scheme (the name Ponzi comes from an Italian immigrant, Carlos Ponzi who, for twenty years, ran a similar fraudulent scheme during the 1920s.
A Ponzi Scheme is a complex plan that pays returns to investors from their own money or money paid by subsequent investors other than from profit. The term "Ponzi scheme" is used primarily in the United States, the rest of the world knows this colloquially as a “pyramid scheme”.
A Ponzi Scheme usually offers abnormally high short term returns in order to attract new investors. The continuity of high returns that a Ponzi Scheme advertises and pays, requires a constantly and increasingly high flow of money from investors in order to keep the conspiracy going. The system is destined to fail and collapse because the earnings, if any, are less than the investments. These schemes are more than likely to be caught through subversive investigation by the taxation and excise authorities and through fraudulent financial reporting and astute banking practises.
By the time it becomes apparent, it’s generally too late to do anything for the investors and the likelihood of reimbursing the sum of each investment is poor. The scheme is named after Charles Ponzi, an Italian immigrant to the United States who became notorious for using the technique between 1910 to 1930, covering the period of the Great Depression and World War I.
Madoff used similar tactics to Ponzi; He attracted his first investor by saying that he could get them a good rate of return on their investment. Madoff’s strategy was to then use the money for himself; he then attracted more investors paying off the initial investor with the money that he received from his second to third investors, and again, using the balance for himself. He then paid those investors with money he attracted from subsequent investors and so the so called “investment” continued to spiral. The result we now see is a US$50b pyramid scheme without any investment being made.
Madoff has told investigators that the money just was not there to repay shareholders and patrons. The maximum prison sentence for such a crime is 20 years in prison and it has also attracted a US$5m fine for what is thought to be the largest ever Wall Street scam. The domino effect has ricocheted throughout the financial markets with some businesses reporting multi billion US $ losses. The repercussions have largely escaped the banking fraternity but the effects are having a disastrous effect on the world economy.
To conclude, Bernard Madoff will remain the black sheep of the financial world for many decades to come. It is almost inconceivable to believe that any one person could create a house of cards to the extent of collapsing billion dollar turnover and blue chip organisations. Many smaller investors have lost everything; a 20 year imprisonment, a fine of US$5m and disbarment from investment/shareholder trading does not constitute the penalty that many massively broken shareholders had anticipated.
Though in true fashion for the close knit "mafia" that run the US financial markets;
- $65,000 million greenbacks has been defrauded,
- several thousands of the wealthiest folks on the planet involved,
- blue chip money market practitioners on the paper trail,
- involving many of the Hedge Funds which had proactively destabilised the global financial markets for profiting from "spread betting"which has lead to a slump in the credit cycle and so to a recession which has brought misery to hundreds of millions of the newly un-employed; impoverished pensions and £401k - so the rapacious damage goes on..... and guess what; barely a soul knew about it!?
"Omerta" and all that.
