Bernie Madoff may have begun his scam as early as the 1970's, although he claims that he started defrauding his investors much later than that. He certainly started his investment firm, Bernard L. Madoff Investment Securities LLC, as a reputable investment company in 1960. He began as a penny stock trader with $5,000 of his own money. Later, he received a loan of $50,000 from his father-in-law which allowed him to expand his operations. His company was exceptionally innovative in its use of computer information technology and his firm helped develop the NASDAQ stock exchange. Mr. Madoff was well respected and even sat on the Board of Directors of the Securities Industry Association and served as Chairmon of the Board of Directors of the National Association of Securities Dealers or the NASD.
Perhaps because he was so highly regarded, government investors never looked too closely at his stock records, much to the astonishment of Mr. Madoff himself. As a result, he was able to defraud thousands of investors out of approximately $18 billion. Although his investors received regular statements, all of the investments and gains shown on the statements were completely fabricated. Investigators believe that the asset management branch of his firm may never have been legitimate. It was simply an elaborate Ponzi scheme in which he used the money from new investors to pay off other investors. However, instead of bothering to actually invest the money he took in, Mr. Madoff just put it into a Chase account that he could use when he needed to send money to investors who requested their funds. Some of the individuals and companies that seem to have benefited from the Ponzi scheme were Jeffry Picower and J.P. Morgan Chase & Co., as well as the New York Mets owners Fred Wilpon and Saul Katz. The estate of Jeffry Picower eventually settled the claims against it for $7.2 billion.
Among the Madoff clients who lost money were the Women's Zionist Organization of America, the Elie Wiesel Foundation, Steven Spielberg's Wunderkinder Foundation, and many well-known individuals.
Bernie Madoff's sons were the ones who turned their father in to authorities, after he confessed to them that the asset management unit of his investment firm was a Ponzi scheme. According to his sons, he told them that for years he had been operating "one big lie."
The consequences to Bernie Madoff and his family have been severe. On June 29, 2009, Bernie Madoff was sentenced to 150 years in prison, which was the maximum allowed. He was also ordered to forfeit $179 million in personal assets. His wife, Ruth, gave up $85 million in assets, which left her with $2.5 million in cash. His sons and some of his former employees were investigated, sued, and harrassed. On December 11, 2010, his oldest son, Mark Madoff, committed suicide by hanging himself.
This story is a family tragedy and also a warning to potential investors who discover "investments" that seem too good to be true. They probably are.
You are reading from the blog: http://lies-and-liars.blogspot.com/
Photo courtesy of: www.wikipedia.com/commons
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