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Business Model: Bernie Madoff Scandal

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When looking at Madoff’s business model, his investments, his books, and overall his whole operation Markopolos saw the red flags and did the math and found out that Madoff was in fact committing fraud. At the start he was not certain without a doubt that Madoff was scamming these people but none the less with what he found he filed a report with the SEC, he said what he had found and although he did not have concrete evidence he wanted to have them investigate, his report was ignored. Over the years he gathered more evidence and more certainty and filed reports 4 more times. All of these were in essence ignored, at one point a case was opened, and later closed, without investigation 11 months later. With all of the evidence and all the investigation …show more content…

Madoff along with other financial scandals of the time; Enron in 2001 and the Lehman Brothers in 2008, all led to major reform. After the Madoff scandal the Security and Exchange Commission (SEC) has revamped the way tips and complaints are handled, by creating a “centralized information technology system for tracking, analyzing, and reporting on the handling of the tips and complaints.” If this had been in place back in 1991 or anytime there after till he was caught, Markopolos’ tips would have led to his investigation. Another very important change in the workings of the SEC is the corporation with those on the inside. In order to promote those inside a fraudulent company to report the fraud the SEC has created agreements that will be entered into with inside tipsters. Related to this is the Dodd-Frank Act, this is a program to protect whistleblowers “and prohibits retaliation by employers against individuals who provide the Commission with information about potential securities violations.” This is a very important addition, because it gives real motivation for people to come forward in order to save their own necks and allows people to do so without fear or retaliation. In addition to influencing whistleblower programs, and tips, Madoff’s scandal also influenced the way that companies are …show more content…

In 2009 in response to Madoff’s scandal the SEC created new regulations to help protect those who invest money, in hopes of preventing anything like this happening again. Among these new regulations are surprise exams, and companies and financial advisors must “hire an independent public accountant to conduct an annual "surprise exam" to verify those assets actually exist,” this is an important step in order to avoid false assets as in the Bernie Madoff case. In the Madoff case, an auditor named David Friehling was hired by Madoff’s company and misrepresented the company helping the scam continue, in order to avoid unethical behavior by auditors the SEC has added regulations. Among these are requiring companies to have audits preformed in order to make sure they are in compliance using “a Public Company Accounting Oversight Board-registered public accounting firm.” By requiring this the SEC can confirm that the auditors and accountants are reputable and ethical. In addition to all of these the SEC has gone further and has upped the requirements and regulations of those who work as accountants or other similar “Back-Office” jobs. Not only have all of the new regulations and changes been implemented as a result of the Bernie Madoff Ponzi Scheme, but in order to try and prevent anything similar again, the SEC continues to hire the best people

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Madoff had Complicit knowledge of the fraud that he was obtaining on doing on his client base that they were oblivious to his actual fraudulent Securities, that there actually was no project nor any Securities that they were trading on the behalf of these clients that in an sense it was almost like a pyramid scheme that he would obtain funds from the individual to pay off those investors with the 20% that he guaranteed to give them and then obtained the other 20% from new clients. Explain to them the operation and from the market of how mr. Madoff had actually set out to defraud the clients as well as the Trade Commission U.S. Securities from Bernie L Madoff in the defendants forward from the chairman and head Of the board directors for the NASDAQ stock market interest in in the marketing and maintaining it on Operating the records of fair deals and higher ethics standards that he had been tricking them with Giving them fraudulent information on the firm's activities. The supervisor also advised FBI that on January 7th, 2008 That Mr. Madoff Misrepresented His Holdings and its client base to the SEC Stating that he had between 11 and 25 clients and total approximately 17.1 billion dollars and assets under his management However, he had less clients and he only had approximately 7

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Madoff was borrowing money, and was having a hard time paying off investors. The Global Financial Crisis of 2008 was the worst financial crisis since the Great Depression, and since the global economy was crashing, many investors were looking to liquidate their assets. Since investors were pulling their money from the scheme, and investors were uncertain about the market, new investors were skeptical about investing with Bernie Madoff. Since money began to fall out of circulation, obligations were unable to be paid. This unveiled Bernie Madoff’s Ponzi Scheme to the Securities and Exchange Commission.

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In this paper I will be talking about Bernard “Bernie” Madoff and his Ponzi scheme which is known as the worst example of investor fraud in history involving his investment business which ended up all being a huge scam. This scheme is known as the worst in history because of how much money Madoff cost the people who used his investment system. The entire scandal was heard around the world because of just how extreme it was to comprehend. Bernard Madoff “Bernard “Bernie’ Madoff was born on April 29, 1938, in Queens, New York.

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Bernie Madoff’s reputable stock trading business, venerable reputation as a Wall Street insider, and ingenuity as a fraudster enabled him to dupe experienced wealthy investors and bilk them for billions of dollars (Ferrell, 2009). Madoff understood how to leverage the currency of relationships to establish trust, the significance of exclusivity to attract wealthy clients, and how to covertly appeal to people’s greed (Frontline, 2009). As a result, Madoff leveraged his credibility as a Wall Street insider to disarm investors, insisted that his services could only be contracted by invitation only, and failed to charge fund management fees. Subsequently, Madoff enable feeder fund managers to make more money in fees, which resulted in more aggressive

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The Investment Advisors Act of 1940 is one of the four laws that got in their way. According to an article in the Rolling Stones Magazine that was published in May 2013, a lawyer named Kathleen Furey worked at the New York Regional Office, which is the agency with jurisdiction over Wall-Street. Furey could not investigate investment managers, like Madoff. Under this law her Regional Director told her “we do not do IM cases” (“Bernard Madoff Biography,” 2017). Madoff feel under the Investment Act of 1940 and the Investment Company Act of 1940.

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In the Bernie Madoff case, those who were aware of irregularities

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Ferrell too pointed out that “with the large financial portfolio Madoff managed, many indicated at least one red flag would have been the fact that he would have overtaken the market had he traded the options in the volumes necessary to meet his financial goals” (Ferrell 4). Many complaints about Madoff were reported to the SEC and each case became fruitless with lack of evidence or negligence. It would be easy to conclude that Madoff had some connections within the SEC that made sure that he was always found innocent of all charges. It was already established that Madoff had close connections with Jeffrey Tucker who served as an attorney at the SEC for eight years. Madoffs connections with Tucker could’ve have been a possible reason that Madoff fraud went undetected and unresolved for so long (Ferrell

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He was gotten in December 2008 and accused of 11 tallies of extortion, tax evasion, prevarication, and burglary. On the off chance that Madoff hadn 't confronted $7 billion in recoveries, this Ponzi plan won 't not have been found. Beside the effect on stocks in general, the introduction of misrepresentation on a huge scale is additionally destroying to people who trusted Madoff with their fortunes and to charitable associations like Yeshiva University, which depended on Madoff 's indicated mystery exchanging framework to work its foundations. Sterling Equities, the speculation vehicle of the Wilpon family, which possesses the New York Mets baseball group, had $300 million supposedly put resources into Ascot.

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The Bernie Madoff case had several red flags. Mr. Madoff wife Ruth Madoff was the biggest red flag of them all. It’s amazing to me how she was not aware of the Ponzi scheme that was being committed by her husband every day. Something of this magnitude would be very difficult to hide. Mr. Madoff already had a legal investment business.

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He appears to have put profits ahead of mine safety and health in violation of Federal mine standards. Mr. Blankenship could go to prison for 31 years. (See NBC News) CEO Stewart Parnell of Peanut Corporation of America was sentenced to 28 years in prison in connection with a 2008 salmonella outbreak that killed nine people and sickened 714 others across the U.S. Bernard Madoff is serving 150 years jail time for engaging in a multi-billion dollar Ponzi scheme that claimed many celebrity victims. Even former Fed chairman Ben Bernanke had some reservations about prosecutions for the 2008 Great Recession. Individuals were responsible for that debacle not abstract firms.

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Madoff displays one of the worst unethical acts in the history of the world. Also, because of his unethical acts, there has now been new laws passed that govern the way people can invest and that govern investment agencies. Also, not only did Mr. Madoff’s fraud affect himself, his investors, and his family, it also affected charities (Ferrell, Fraedrick, & Ferrell, 2015). Due to Mr. Madoff’s unethical actions, charity companies now have agencies that govern their donations to ensure they are in fact, legal donations. Mr. Madoff is now in prison for the rest of his life while his family tries to rebuild from the unethical attributes brought to them.

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To believe a 70-year-old industry expert who knew exactly what he was doing was easy. When the economy is doing well then no one complains and therefore regulation isn’t taken seriously, making it easy for Ponzi schemes to exist. Investors such as Steven Spielberg’s charity, billionaire publisher Mort Zuckerman and Nobel peace prizewinner Elie Wiesel’s foundation for humanity are some of the victims (Bernard Madoff $50Bn Ponzi Scheme Scam Scandal, 2008). People thought they were lucky to be able to invest with Madoff because they were promised high returns between 10%-12% (Bernard Madoff $50Bn Ponzi Scheme Scam Scandal,

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The anonymity, in Markopolos view, was also failing. He believed that his tips were ignored because someone within the SEC was associated with the fraud, so they were able to sweep the tip under the rug. This also led to Markopolos feeling paranoid that there might be an attempt on his life. An individual will not want to report any fraud or other misconduct if they believe there will be any type of repercussions. With the extensive media attention, the Madoff fraud received, there was also much attention on the faults of the SEC.

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They have produced a flood of various regulatory and legislative responses. Along with the Sarbanes-Oxley Act of 2002 and other similar regulations issued by the SEC now the New York Stock Exchange and the NASD both compel corporate CEOs and CFOs to certify the accuracy of financial statements filed with the SEC. This requires listed companies to genuinely adopt corporate governance guidelines or codes of ethics which specifically address the conduct of senior management, directors or officers. It forbids corporations to extend unnecessary credit to their directors or officers and also provides for forfeiture of profits and bonuses from sale of company stock if in case restatements have been made solely as a result of “misconduct” in financial reporting.

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