...http://www.sec.gov/answers/ponzi.htm Who is Bernie Madoff? Bernard L. Madoff, who is currently serving a 150-year sentence in federal prison, orchestrated a multi-billion dollar Ponzi scheme that swindled money from thousands of investors. Unlike the promoters of many Ponzi schemes, Madoff did not promise spectacular short-term investment returns. Instead, his investors’ phony account statements showed moderate, but consistently positive returns — even during turbulent market conditions. In December 2008, the SEC charged Bernard Madoff and his investment firm, Bernard L. Madoff Investment Securities LLC, with securities fraud for the multi-billion dollar Ponzi scheme he perpetrated on advisory clients of his firm for many years. The SEC filed emergency motions to freeze assets and appoint a receiver, and worked to return as much money as possible to harmed investors. Madoff had been a prominent member of the securities industry throughout his career. He served as vice chairman of the NASD, a member of its board of governors, and chairman of its New York region. He was also a member of NASDAQ Stock Market’s board of governors and its executive committee and served as chairman of its trading committee. Madoff founded his investment advisory firm in 1960. http://www.time.com/time/business/article/0,8599,1866680,00.html BRIEF HISTORY OF A Brief History Of Ponzi Schemes By Alex Altman Monday, Dec. 15, 2008 Ponzi was a charismatic Italian immigrant who, in 1919 and 1920...
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...Bernard Madoff was either the most ethically void individual or he just had no regard for ethics. He managed to pull off one the largest Ponzi scheme in history with very little help. He had a legitimate stock trading business on one floor and his illegitimate investment management business was on another floor (Ferrell, Ferrell & Fraedrich, 2011). The top executives in the company were family which leads to the question, did they really not know? This paper will examine the origin of the Ponzi scheme, a brief history of Bernie Madoff, and the fallout as a result of his fraudulent business. A Ponzi scheme is “a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from legitimate profits (Fitzpatrick, 2010).” The Ponzi scheme was named after Carlo (Charles) Ponzi who fled Italy for America at the age of 21. In 1919 Ponzi developed a scheme to get investors to buy postage coupons in one country and then sell them for more money in another country (Wells, 2009). Instead of investing the money he used the pooled funds to pay investors. This lasted until 1920 when a federal audit confirmed he was bankrupt, he had scammed investors for more than $4 million (Wells, 2009). According to Wells (2009), the Madoff scheme “...may be the largest single fraud of any kind in history...” The estimated total of the Madoff scheme is $65 billion, it is the largest financial fraud in the history of Wall Street. On...
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...Bernie Madoff: An Issue of Ethics There are many ethical issues in the world’s news today, some bigger than others, and many that get swept under the rug. One particular ethical issue is at the core of a huge story that has dominated the news for months on end and has lead to more trying times on Wall Street. The story is about Bernie Madoff and the massive effect he and his ponzi scheme had on hundreds of people who trusted him. This paper will discuss the ethical issue underlying the conflict, the damage that resulted from it, and the leadership that acted to counter suit his disaster. Bernie Madoff’s ponzi scheme is sure to go down in history as one of the largest business scandals ever and should make every person stop and make sure there ethics are in check. Bernie Madoff exploited ethical theories much like a hawk swooping down to kill its prey. Bernie’s twisting of moral philosophy, virtue ethics, universalism and business ethics controlled both common and upper classes within predominately Jewish investors, prominent social groups, banks, successful foundations and charities. He wielded his genius in investments and securities tantalizing those who could not spot his cabal. Bernie’s acute cognizance of small investors and the ruling classe’s desire to believe in moral philosophic principles, rules, and values let to the contamination of right and wrong with financial deals earning him 50-65 billion dollars. Bernie literally earned the title of greatest Ponzi schemer...
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...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 of dollars from unsuspecting clients...
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...have probably heard of a financial ploy called a Ponzi scheme. However, many may not fully understand the details or how to protect themselves from such a financial risk. A Ponzi scheme is a fraudulent investment plan in which the investments of later investors are used to pay earlier investors, giving the appearance that the investments of the initial participants dramatically increase in value in a short 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...
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...Bernard Madoff and the 2008 Financial Crisis On December 11, 2008, the Securities and Exchange Commission (“SEC”) charged and arrested Bernard Madoff and his investment firm, Bernard L. Madoff Investment Securities LLC, with securities fraud for a multi-billion dollar Ponzi scheme. On March 12, 2009, Madoff pled guilty to an 11-count criminal complaint admitting to running an international Ponzi scheme and defrauding thousands of investors. The SEC defines a Ponzi scheme as an investment fund that involves the payment of purported returns to existing investors from funds contributed by new investors (SEC). In the 1920s, the originator of the Ponzi scheme, Charles Ponzi, conned thousands of New England residents into investing in a postage stamp speculation scheme. Ponzi promised his investors returns of 50% in 90 days, which, at the time, was exceptionally high considering the annual interest on bank accounts was only 5% (SEC). Unlike Ponzi, who targeted average people and was very open with his scam, Madoff was very private and targeted wealthy individuals promising them steady returns of 8 – 12% each year. Madoff was perceived as a successful Jewish investor in the financial community and his investment fund was considered as an exclusive membership club. The key to running an ongoing Ponzi scheme is an unlimited supply of new investors because without new incoming money the entire system would collapse. Unlike most Ponzi schemes, which usually fail due to a lack of new...
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...12 MADOFF SECURITIES Synopsis A childhood friend summed up the driving force in Bernie Madoff’s life: “Bernie wanted to be rich.” As a youngster growing up in New York City, Bernie realized that Wall Street was the greatest wealth creation machine the world had ever known. So, after graduating from college in 1960, he set his sights on joining the exclusive fraternity that ran Wall Street by organizing his own one-man brokerage firm, Madoff Securities. Madoff was one of the first individuals to recognize that computer technology provided the means to “democratize” Wall Street by establishing a system that made securities trading much more efficient and much cheaper. In the early 1970s, Madoff and several other individuals organized the NASDAQ exchange, which was destined to become the world’s largest electronic stock market. Years later, the NYSE would be forced to follow suit and switch to electronic securities trading. Literally millions of investors have benefitted from the lower transaction costs of electronic securities trading that were in large part a result of the pioneering efforts of Bernie Madoff. Unfortunately, Bernie Madoff will not be remembered as a pioneer of electronic securities trading. Instead, the word “Madoff” will always be associated with the phrase “Ponzi scheme.” Although his stock brokerage firm was extremely lucrative, Madoff eventually established a parallel business, investment advisory services. Over a period of several decades, Madoff became...
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...(2012). Honors Theses. Paper 100. This Senior Honors Thesis is brought to you for free and open access by the Student Scholarship at University of New Hampshire Scholars' Repository. It has been accepted for inclusion in Honors Theses by an authorized administrator of University of New Hampshire Scholars' Repository. For more information, please contact scholarly.communication@unh.edu. An Analysis of Fraud: Causes, Prevention, and Notable Cases University of New Hampshire Honors Thesis in Accounting Kristin Kennedy ADMN 799 Professor Le (Emily) Xu Fall 2012 Table of Contents I. II. III. IV. V. VI. VII. Background……………………………………………………………........1 a. What is accounting and what role does financial reporting serve?..........1 b. History of accounting standards………………………………………..2 c. Role of auditing………………………………………………………...5 Fraud……………………………………………………………………….6 a. Two types of fraud……………………………………………………..6 i. Misappropriation of Assets…………………………………….7 ii. Misrepresentation of Financial Statements…………………….7 b. Fraud Triangle………………………………………………………….8 c. What to look for in a fraudster…………………………………………9 Past Cases of Fraud……………………………………………………….10 a. WorldCom…………………………………………………………….11 b. Tyco International Ltd………………………………………………..15 c. Adelphia Communications Corporation…………………………....…17 Sarbanes-Oxley Act of 2002………………………………………...…....20 a. Analysis of SOX: Costs vs. Benefits…………………………………34 i. Interview of...
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...Licensed to: iChapters User Licensed to: iChapters User Fraud Examination, Fourth Edition W. Steve Albrecht Chad O. Albrecht Conan C. Albrecht Mark F. Zimbelman VP/Editorial Director: Jack W. Calhoun Editor-in-Chief: Rob Dewey Sr. Acquisitions Editor: Matt Filimonov Associate Developmental Editor: Julie Warwick Editorial Assistant: Ann Mazzaro Marketing Manager: Natalie Livingston Marketing Coordinator: Nicole Parsons Content Project Management: PreMediaGlobal Sr. Manufacturing Buyer: Doug Wilke Production House/Compositor: PreMediaGlobal © 2012, 2009 South-Western, Cengage Learning ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced, transmitted, stored, or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, 1-800-354-9706. For permission to use material from this text or product, submit all requests online at www.cengage.com/permissions Further permissions questions can be e-mailed to permissionrequest@cengage.com Library of Congress Control Number: 2010940986 ISBN-13:...
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...Comm101 Principles of Responsible Commerce Topic: The Historical Development of Modern Business Enterprises Objectives for this lecture • Consider a brief historical account of the development of modern national and multinational business organisations. • Consider, in particular, the benefits and costs of two major characteristics of such organisations: increased size and separation of ownership and control. • Discuss some of the processes by which firms have tried to reduce the incidence of opportunistic behaviour by management. • Briefly consider a recent Australian example of a significant business management failure. 2 Why is knowledge of historical developments important? • Understanding historical developments helps us to: • Apply lessons from the past: are there commonalities between past and the present? • Understand the importance of path dependency, i.e. that some past decisions have had long term ramifications (e.g. convict settlement of Australia), and so current period decisions may also affect future generations (e.g. CO2 emissions). • Appreciate the inevitability of continual economic and social evolution, but understanding that we have some influence on how and when such changes should occur. • So a sound understanding of history brings empowerment to 3 the debate about current business practices. 1 Important historical developments • Pre about 1850, in industrialising UK, the typical business firm was: • Small scale, mostly catering to local demand...
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...Understanding the Financial Times Brooks Financial Management: Core Concepts* Copeland/Weston/Shastri Financial Theory and Corporate Policy Dorfman/Cather Introduction to Risk Management and Insurance Eiteman/Stonehill/Moffett Multinational Business Finance Fabozzi Bond Markets: Analysis and Strategies Fabozzi/Modigliani Capital Markets: Institutions and Instruments Fabozzi/Modigliani/Jones/Ferri Foundations of Financial Markets and Institutions Finkler Financial Management for Public, Health, and Not-for-Profit Organizations Frasca Personal Finance Gitman/Joehnk/Smart Fundamentals of Investing* Gitman/Zutter Principles of Managerial Finance* * denotes Gitman/Zutter Principles of Managerial Finance— Brief Edition* Goldsmith Consumer Economics: Issues and Behaviors Haugen The Inefficient Stock Market: What Pays Off and Why Haugen The New Finance: Overreaction, Complexity, and Uniqueness Holden Excel Modeling and Estimation in Corporate Finance Holden Excel Modeling and Estimation in Investments Hughes/MacDonald International Banking: Text and Cases Hull Fundamentals of Futures and Options Markets Hull Options, Futures, and Other Derivatives Hull Risk Management and Financial Institutions McDonald Fundamentals of Derivatives Markets Mishkin/Eakins Financial Markets and Institutions Moffett/Stonehill/Eiteman Fundamentals of Multinational Finance Nofsinger Psychology of Investing Ormiston/Fraser...
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...Understanding the Financial Times Brooks Financial Management: Core Concepts* Copeland/Weston/Shastri Financial Theory and Corporate Policy Dorfman/Cather Introduction to Risk Management and Insurance Eiteman/Stonehill/Moffett Multinational Business Finance Fabozzi Bond Markets: Analysis and Strategies Fabozzi/Modigliani Capital Markets: Institutions and Instruments Fabozzi/Modigliani/Jones/Ferri Foundations of Financial Markets and Institutions Finkler Financial Management for Public, Health, and Not-for-Profit Organizations Frasca Personal Finance Gitman/Joehnk/Smart Fundamentals of Investing* Gitman/Zutter Principles of Managerial Finance* * denotes Gitman/Zutter Principles of Managerial Finance— Brief Edition* Goldsmith Consumer Economics: Issues and Behaviors Haugen The Inefficient Stock Market: What Pays Off and Why Haugen The New Finance: Overreaction, Complexity, and Uniqueness Holden Excel Modeling and Estimation in Corporate Finance Holden Excel Modeling and Estimation in Investments Hughes/MacDonald International Banking: Text and Cases Hull Fundamentals of Futures and Options Markets Hull Options, Futures, and Other Derivatives Hull Risk Management and Financial Institutions McDonald Fundamentals of Derivatives Markets Mishkin/Eakins Financial Markets and Institutions Moffett/Stonehill/Eiteman Fundamentals of Multinational Finance Nofsinger Psychology of Investing Ormiston/Fraser...
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...Director Notes From Enron To Lehman Brothers Lessons for Boards From Recent Corporate Governance Failures by Frederick D. Lipman In order for boards to fulfill their oversight obligations, the organizations they serve must have robust whistleblower and compliance policies and programs to encourage reporting that can help identify risk exposures, fraud, or other illegal activity. This report identifies common pitfalls in many current whistleblower and compliance programs, and it offers recommendations on how audit committees can strengthen them. Government investigations, bankruptcy receiver reports, and numerous books provide a rich source of information about the major corporate disasters of the first decade of the twenty-first century. Although the financial implosions, starting with Enron and ending with Lehman Brothers, have significant differences, one common corporate governance theme can be seen: The board, and, in particular, the independent directors, did not have the information required to properly perform their oversight duties, even though such information was known to various members of management. In almost all the cases, the directors claimed they were misinformed or “duped” by the CEO or CFO.1 In this respect, these disasters were partly the result of corporate governance failure and, in particular, a failure to establish a robust whistleblower system as an internal control. Those 1 Frederick Lipman, Whistleblowers: Incentives, Disincentives and Protection...
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...BOB7024 Organizational Behavior & Design, Stephen P. Robbins & Timothy A. Judge, Organizational Behavior, 14th edition, 2011, Pearson Education Chapter 1 Case Incident 1: “Data Will Set You Free” Ford CEO Alan Mulally is known for starting meetings by saying “Data will set you free” and for trying to change Ford’s culture to one that is based on increased accountability, more information sharing, and hard metrics. “You can’t manage a secret,” he is also fond of saying. Although it’s not clear whether Mulally’s approach will work at Ford, which is known for its self-contained fiefdoms where little information is shared, some companies have found that managing people according to hard metrics has paid off. Consider Freescale Semiconductor, a computer chip manufacturer based in Austin, Texas. Freescale has discovered that in order to have the right people at the right time to do the right job, it needs an extensive and elaborate set of metrics to manage its 24,000 employees in 30 countries. Of particular concern to Freescale is retention. “There’s no greater cost than human capital, especially in the technology industry,” says Jignasha Patel, Freescale’s director of global talent sourcing and inclusion. “When you’ve got a tenured employee that decides to walk out the door, it’s not just one person leaving, it’s that person’s knowledge and network and skills.” To manage talent and prevent turnover, Freescale holds line managers accountable for recruiting, hiring, and...
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...Study Guide for the Certification Examination Fifth Edition ACAMS.org ACAMS.org/español ACAMSToday.org MoneyLaundering.com Study Guide for the Certification Examination Fifth Edition a publication of the association of certified anti-money laundering specialists Study Guide for the Certification Examination Fifth Edition Executive Vice President John J. Byrne, CAMS Editor Robert S. Pasley, CAMS Co-Editor Kevin M. Anderson, CAMS Contributors Joyce Broome, CAMS Heather Brown, CAMS Aub Chapman, CAMS Vasilios Chrisos, CAMS David Clark, CAMS Jurgen Egberink, CAMS Michael D. Kelsey, CAMS Saskia Rietbroek, CAMS Nancy J. Saur, CAMS Mansoor Siddiqi, CAMS Daniel Soto, CAMS Timothy White CAMS Production Assistant Catalina Martinez We would like acknowledge the following individuals for their contributions to the CAMS Exam, and the Online and Live Preparation Seminars: Kevin M. Anderson, CAMS Joyce Broome, CAMS Aub Chapman, CAMS David Clark, CAMS Josue Garcia, CAMS Hoi Luk, CAMS Ira Morales Mickunas, CAMS Robert S. Pasley, CAMS Karim Rajwani, CAMS Mansoor Siddiqi, CAMS Saskia Rietbroek, CAMS Ed Rodriguez, CAMS Nancy J. Saur, CAMS Wendy Steichen, CAMS Brian J. Stoeckert, CAMS Charles Taylor, CAMS Will Voorhees, CAMS Natalie Ware, CAMS Peter Warrack, CAMS Amy Wotapka, CAMS Crispin Yuen, CAMS Copyright © 2012 by the Association of Certified Anti-Money Laundering Specialists (ACAMS). Miami, USA. All rights...
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