BA 310 Case Study #1 In any business instances whether it be directly dealing with money, or any type of contract or agreement it is imperative to have trust between the two parties. This is to ensure that the process is successful and handled correctly. In the case study Madoff gained an insane amount of investors by promising them they would have a guaranteed return on their investment. Later on, the investors figured out that the money they invested was in fact put towards a fake company resulting in no return on the investment after all. Greed is very apparent in this study as shown all throughout the case. Greed is the obsessive desire to want money far beyond the basic survival and comfort. This definition sums up Madoff and his ill intentions completely. Ponzi schemes are still very prevalent in today’s society. Although the consequences of the scheme are very harsh and scary, the con artist still believe they are able to come out with a better outcome if they follow through with the scheme. Ponzi scheme’s are a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors. Charles Ponzi first introduced the Ponzi scheme to the American public. Simplicity] is the trait that seems to make all of this easier and more gullible to believe. There have been several people that attempted to this act of scheming. Martin Frankel AKA David Rosse AKA Eric Stevens absconded with $335 million after he found out that laxly regulated insurance companies are the perfect targets for scam artists as they collect regular cash premiums that are paid out only as policies come due. Despite being banned for life from securities trading in 1992 - after complaints that $1m had disappeared from a fund he managed - Frankel was able to set up Liberty National Securities, an unlicensed brokerage. He took over Liberty National, which sold burial policies, then, using its assets, went on to gain controlling stakes in insurance firms in Arkansas, Mississippi, Missouri, Oklahoma and Tennessee. By issuing false statements to company trustees he siphoned off $208 million in cash reserves for an extravagant lifestyle consisting of jets, lavish parties and a bevy of live-in ladies. A college dropout, obsessed over the financial markets, he also bought side-by-side mansions in Greenwich Conn. worth $3 million each with proceeds from his scheme. Charles Thomas Brown, age 66, DBA Preferred Trust Company, was sentenced to 17 ½ years for operating a $23,000,000 Ponzi scheme that involved over 300 victims. He pled guilty to one count of Fraudulent Schemes and Artifices and one count of Theft, both class two felonies. He issued investors six month "promissory notes" that were to earn a return of between 8% and 18%. At the end of a six-month term, he simply sent the investor a new promissory "note" that canceled the previous one, which automatically "rolled over" for another six-month term. Unless the investor contacted him and requested that the investment be paid back he had control of all deposits on which no interest was actually being generated. CNC was a Ponzi scheme where salespeople sold investment "contracts" for approximately $25,000 each and then supposedly used the money to make monthly food products purchases for subsequent sale to food wholesalers and supermarket chains. CNC paid its sales staff a monthly commission for each contract they sold for as long as the investor kept the principal invested in CNC. This commission generally amounted to $150 per month for each contract. They helped some of their investors evade federal income tax on the CNC "dividend" income because CNC did not report it to the IRS. They also accepted cash investments from some of its investors, who received their monthly dividends in cash, rather than by check as other investors did. The head of CNC fled to the Cayman Islands but returned and pleaded guilty to mail fraud and money laundering for which he was sentenced to 10 years in prison for a scheme, which created over $67 million in losses. Although employees ran Madoff’s company, he handled all of his illegal dealings and financials solely by himself. Even his sons were blind to their father’s scam. His children new nothing about it, Madoff stated himself in an exclusive interview, “his business strategy was too complicated for anyone else to understand how it operated.” In fact, his children were the ones who turned him in after finding out about his illegal doings. Some ethical issues with having a family owned business include, favoritism between family employees and regular employees, improper salary for family and illegal activity that might go unnoticed simply because they are apart of your family. In the Madoff case however, these issue weren't prevalent because he was so private with this business. This proved that Bernie treated his family employees just as regular employees.