No One Would Listen

11 November 2016

There was no explanation of the continuous one percent yield in over forty five stocks that Madoff dealt with. Madoff took advantage of the laxity by the SEC officials in failing to follow up complains with an investigation, and the trust bestowed upon him by the high and mighty. As long as the public saw paper trail provided by Madoff that the stocks were continuously yielding dividends, there was no cause for alarm. The few people that realized that Madoff was actually pushing a Ponzi scheme alerted the appropriate authorities which in turn let Madoff off with a slap on the wrist.

The SEC went to investigate Madoff in his building on the 18th and 19th floor but missed a whole 17th floor where the scam was mainly doing its operations. Over a period of nine years Markopolos alerted the SEC five times about the Ponzi scheme that Madoff was running, but they caught up with him when most of the money was already spent lavishly in gifts and exorbitant parties. One of the reasons Madoff was able to perpetrate his fraud for so long was his preference for marketing his investment business by word of mouth. Until the scam’s later years, people heard about it from friends.

No One Would Listen Essay Example

It was a private club, one that, famously, became only more desirable because of Madoff’s seeming reluctance to admit new investors. One of the tacit conditions, as we know now, was an understanding that information about Madoff investments — including their existence was to be held closely. Most investors complied. Who would want to anger Madoff and risk losing their privileges? When Barron came up with an article raising questions about Madoff nothing happened. The employees and traders shrugged it off. As it would later turn out, Madoff’s illegal investment business was indeed subsidizing his legal trading operation.

Among the charges to which Madoff pleaded guilty in March were three counts of money laundering, which involved transferring millions of dollars from Madoff’s fraudulent business through his London operation to his legitimate New York business. At least $250 million was transferred in this manner, according to the charges. In 2006 when the SEC launched an investigation into Madoff’s dealings it was from persuasion from Markopolos that Madoff was running a Ponzi scheme and he was also a key source for the Mar/Hedge article.

The SEC also examined whether Fairfield Greenwich, a giant feeder fund, was properly disclosing the extent of its reliance on Madoff. According to research by Harry Markopolos, it grew from as much as $7 billion in 2000 to as much as $50 billion by the end of 2005. What had started decades before as a small-time recruiting effort by Madoff agents at country clubs had gone global. Massive international institutions such as Grupo Santander, Fortis Bank, and Union Bancaire Privee were all funneling billions — sometimes through intermediaries — to Madoff, lured by the call of steady 10% to 12% returns.

Even one of the world’s biggest sovereign funds, the Abu Dhabi Investment Authority, ended up sinking tens of millions of dollars into the Ponzi scheme via its investment in one of the big feeder funds. The storm broke in 2008. The markets began a calamitous and accelerating decline. With their non-Madoff investments pulverized, more and more customers turned to what they thought were their most solid holding: They began requesting withdrawals from Madoff’s fund. Madoff was keeping up his facade at work. But at home his desperation had begun to show.

In November and early December, he asked his wife to make two transfers totaling $15. 5 million from a brokerage account to her personal bank account so that the cash would be at hand. Madoff had never made such a request before, two sources say. Ruth has insisted her husband didn’t inform her of the fraud until the day before he was arrested. She maintains, according to one of these sources, that Bernie said he needed the cash to pay customer redemptions. By this point, $15. 5 million was a pittance compared with what he needed. As of early December, investors had demanded the return of some $7 billion.

If Madoff truly withdrew his wife’s money for that purpose, he had reached the point where he was rooting around in the sofa cushions for loose change. When the SEC arrived with dozens of agents from the FBI, and the Securities Investor Protection Commission, the 17th floor was abuzz with activity. The 17th floor was designated a crime scene, and guards were posted. The staffers who worked on 17 were herded to a small conference room near the coffee machines on the 18th floor, where they sat nervously in what some of them called “office arrest. One by one they were taken to be questioned by the FBI. The company’s computer and e-mail systems were shut down, so dozens of staffers passed the time watching movies, playing cards, and talking. Madoff managed to preserve a modicum of dignity, even as he pleaded guilty to 11 charges of fraud, theft, money-laundering, and perjury and absorbed the anger directed at him from the audience, where his victims watched. One of them addressed Madoff directly: “I don’t know whether you had a chance to turn around and look at the victims,” he said angrily.

Madoff hesitated and then wheeled awkwardly in his seat as the judge admonished the victim for speaking to Madoff rather than to the court. When the judge remanded him to custody that day, Madoff silently pulled his shoulders back and allowed him to be handcuffed. The cuffs, which gleamed as if freshly polished, seemed somehow suited to the fastidious elegance of the defendant. Madoff was gone, likely never to take another step on free soil. And even if he doesn’t get the maximum 150 years, whatever he does receive will effectively be a life sentence for a 71-year-old.

As the sun set down on Madoff and his operations that embezzled more than 60 billion of the public’s money, I believe the SEC would’ve caught up with Madoff years earlier if they were more vigilant in his activities. Markopolos brought out some of the laxities of the SEC and am hoping these events will forever change the SEC and all laws should be followed to the letter when trading stocks. Bibliographic citation Kiobbo, Joseph. “No one would listen” Review of Harry Markopolos “No one would listen: A True Financial Thriller”. A casebook, ed. Harry Markopolos (2010).

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