DOCSLIB.ORG

The World's Largest Hedge Fund Is a Fraud

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The World's Largest Hedge Fund Is a Fraud 76.` yul.- v\l - ~S,rs:4~~P:7~\.-i~,C~p~.t~ \rltjii~·,~2·~~ ajC WL~L,I\ISG~ ~1~(~!~.!L~~r~5 The World's Largest Hedge Fund is a Fraud E~s·i~"T'4~''LC November 7, ~005 Submission to the SEC MBdoff Investment Securities, LLC www~.mad~ff.com Opening Remarks: I amthe original source for the information presented herein having first presented my rationale,both verbally and in writing, tothe SEC's Boston oflice in May, ~1999 before any publicinformation doubting MadoffInvestment Securities, LLC appe~-e~ain~-~e press.Ihere was no whistleblower or insider involved in compilingthis report. I usedthe Mosaic Theory to assemble my set of observations. My observations were collected firstfirst-handby li~-~ninnto furfund~s ~`'P~Y`IJ ~ffundinvestors talk about their investments in a hedgefund ran bi----2~------`yMadoffInvestment Secu~Lfi~s; ,a equityderivative trading desks and every single ~ii·ealsoone spokenqfthe senior tothe managersheads of various I spoke Wallwith Streettold me ~~~ ~·r~c~i. that Beriie Madoffwas a fraud. Of course, no one wants to take undue career risk by sticking theirhead up andsaying the emperorisn't wearingany clothes but.... ·"`~.~~·3*".rc I am a~--- derivatives expert and have traded or assisted inthe trading ofseveral billion $US in I~L" optionsstrategies forhedge funds arld institutional clients. I have experience managing split- strikeconversion products bothusing index options andusing individual stockoptions, bothwith andw;,thout index puts. Very few people in the world have the mathematical background needed to managethese types of productsbut I am oneof them. I haveoutlined a detailedset of Red Flags that make me very suspicious that BemieMadoffs returns aren't real and, if theyare real, thenthey would almost certainly have to be generated by front-runuing customer order flow from the broker-dealerarm of:MadoffInvestmentSecurities. LLC. Due to the sensitive nature of the case I detail below,its dissemination within the SEC must be limited to those with a need to know. The firm involvedis locatedin the New YorkRegion. As a result of this case, several careers on Wall Street andin Eursp2:will be ruined. '~herefore,I havenot signednor put my narlle·on this report. I requestthat my namenot be releasedtoanyone other than the Branch Chief andTeam Leader in the New York Region who are assigned td the case, withoutmy express written permission. The fewer people who know who wrote this report the better. I am-woniedabout the personal.safety of myselfand my family. Under no circumstances is this reportor its contentsto besharea with any other regulatorybody without my express permission. This report has been written solely for the SEC's internal- use. As far as I know, noneof the hedge fund, fund of funds (FOF's) mentionedin my reportare engaged·in a conspiracy to commit fraud. I believe they are ndive men and women with a / notablelackof derivatives e~pertise andpossessing littleor no quantitative financeability. ~ ~vL~~~ // /a,~~ ~, Thereare 2 possiblescenarios that involvefraud by MadoffSecurities: 6~~C~'3 ~ve I. Scenario# 1 (Unliltely): I am submitting this case under Section 21A(e) of the 1934 Ac~t inthe event that the broker-dealer and ECN depicted is actuallywovidina the stated MADOFF EXHIBITS-04451 returnsto investorsbut is earningthose retumSby fiont-runningcustomer order flow. Front-runningqualifies as insider-tradingsince it reliesupon material, non-public information that is acted-upon for the benefit of one party to the detriment of another party. Section21A(e) of the 1934Act allows,the SEC to pay up to 10%of the total fines leviedfor insider-trading.We have obtainedapproval from the SEC's Officeof General Counsel, the Chairman's Office, and the ~bountyprogram administrator that the $EC is able and willingto pay Section21A(e) rewards. This case shouldqualify ifinsider- trading is·involved. 2. Scenario# 2 CHighlylikely) Madoff Securities is the world's largestPonzi Scheme. In thiscase there is no SECreward payment due the whistle-blowerso basicallyI'm turning this-case in becauseit's the right thing to do. Far betterthat the SEC is proactivein shutting down a Ponzi Scheme of this size rather than reactive. ~p~ PC~Ye~S/I~I~P~B1J~ Who: The politically/powe;-fUlMadoff family owns and operates a New York City based broker- dealer, ECNTan;l~-h3~t'E~i;;~Hkctively the world's largest hedge fund. Bernard "Bemie" Madoff, the family patriarch started the firm. Accordingto the www.madoff.comwebsite, "BernardL. Madoff was one ofthefive broker-dealersmost closely involved in developingthe NASDAeStock Market. He has been chairmanof the board of directors ofthe NASDAeStock Market as wellas a memberofthe boardofgovernors of theNASD and a memberof numerousNASD committees. Bernard Madofj~ was also afounding memberof the InternationalSecurities Clearing Corporation in London. His brother,Peter B. Madoff has servedas vice chairmanofthe NASD,a memberof its board ofgovernors,and chairmanof its New Yorkregion. He also has been activelyinvolved in the NASDAe Stock Market as a member of its board of governors and its executivecommittee and as chairmanof its tradingcommittee. He also has beena memberof the boardofdirecCors gftheSecurity Traders Association ~fNew Yorle He is a memberoffhi board o~direcrors ofthe bepositolyTrust Corporation. ~at: .I. The familyruns what is effectivelythe world's largesthedge fund virithestimated assets undermanagement of at least $20 billionto perhaps$50 billion,but no one ~nows exactlyhow much money.BMis managing. That we have what is effectivelythe world'slargest hedge-fund-operating underground is plainlyput·shocking. But then again,we don't' evenknow thesize of the hedgefund industryso none of this shouldbe surprising.A super-sized~aud of this magnitudewas boundto happengiventhe lack of regulationof theseoff-shore entities. My bestguess is thatapproximately $30 billion is involved. 2. Howeverthe hedgefund isn't organizedas a hedgefund by BernardMadoff(BM) yet it actsand trades exactly like one. BMallows third party Fund of Funds(FOFls) to private labelhedge fUnds that provide his firm,Madoff Securities, with equity tranch funding. In returnfor equitytrench funding, BM runs a tradingstrategy, as agent,whose returns flowto the thirdparty FOF hedge funds and their investors who put up equitycapital to MADOFF EXHIBITS-04452 -f~F`~SPo~sRcr? 7~ fund BM's.broker-dealer and ECN operations.BMtZlls investors it earnsitsSees by chargingcommissions onall oj~fhe trades done intheir accounts. RedRag # i: Whywould a USbroker-deaIer organize andfund itselfinsuch an unusual ~D`IIJ~P~L~ _ manner?Doesn 'I~his seem to be an unseemly wayoSoperaling under the regulator : radarscreens? Why aren't the commissions chargedfully disclosed toinvestors RSJm -~ ~d~a SECRegistered Investment Advisor charge both commissions andcharge a principlefee ,·I~r4 for trades?MOSTIMPORTANTLI~ whywouldBMsertlefbr charging only IFVE"4~LSj~~U~S or undisclosedcommissions whenhecould earn standard hedgefundfees ofI%~~ fleet~s~t~srse L·l~- manngementfee+ 20% offhe profits? Doing some simplemafh onEMS 12% average ~p~hCPo4 annual return stream to investors, fhehedgefund beSorefees, would have to be earning averageannual returns oS16~ Subtractout the I% managemencSeeand investorsare downto 15%. 20% oftheprofits would amount to 3% ~20 x 15% 3%profit 'participaiion)so investorswould be left with the stared 72% annual returns listed in AttachmentI (Fairjieli~ Sentry Ltd Performance Data). Toralfees tothe thirdparty FOF'swouldamount to 4% annuallL. Now why would BM leave 4% in average annual fee revenue on the table unless he were a PonziScheme?· Or, is he charging a whole lot more. than 4% in undisclosed commissions? 3. Thethird parties organize the hedge fUnds and obtain investors but 100% of the money raised is actually managed by MadoffInvestment Securities,LLC in a purported hedge fundstrategy. ~The investors that pony up the money don't know that BM is managing theirmoney. That Madoffis managing the money is purposelykept secret from the investors.Some prominent US basedhedge fund, fund of funds,that· "invest" in BMin this manner include: A. FairfieldSent~~Limited (Arden Asset Management) which had $5.2 billion 5, a ;I i~nlu~vr investedin BM as of May 2005; 1 i" Floqr,919 Third Avenue; ~P=-~i~, NY ~Jr 100?2;Telephone 212~-3I~T~i36; TheFairfield Greenwich Group isa globalfamily of ~.ulE)7" ~-~cZ. companieswithoffices inNew York. London andBermuda. andrepresentative officesinthe U.S.. htEn,-T" Europeand Latin America. Local operating entities are authorized orregulated bya varietyof ~3LU ~ 7 governmentagencies; including Fairfield Greenwich Advisors LLC,a U.S. SEC registered B.~S39 investmentadviser, Fairfield Heathcliff Capital LLC. a U.S.~ NASD member broker-dealer, and theFairfield UnitedOreenwichKingdom. (UK) Limited. authon~zed andregulated bythe Financial Services Authority in B. AccessInternational Advisors; www.aiaRrou~.com; a SEC registered investment advisor,telephone # 212.223.7167; Suite2206; 509 Madison Avenue, New York, NY 10022which had over $450 millioninvested with BM as of mid-2002.The majorityofthis F9F's investors areEuropean, even thoug~l thefirm is US registered. C. BroyhillAll-Weather Fund, L.P. had ~350 million invested with BM as ofMarch 2000. D. TremontCapital Management, Inc. Corporate Headquarters is locatedat 555·Theodore FremdAvenue; Rye, New York 10580; T: (914) 925-1140 F:(914) 92'113499.Tremont oversees on an advisory and fi~llydiscretionary basis over $10.5 billion in assets. Clients include institutional
Load more

Recommended publications
  • Interviewed Bernard L. Madoffat the Metropolitan Correctional Center, 150 Park Row, New York, NY
    This document contains information that has been collected in connection with an investigation conducted by the U.S. Securities and Exchange Commission Office of Inspector General (OIG). It contains confidential, privileged and sensitive information and should not be recopied or distributed without the express consent of the GIG. Interview of Bernard L. Madoff At approximately 3:00pm on June 17, 2009, Inspector General H. David Kotz and DeputyInspector General Noelle Frangipaneinterviewed Bernard L. Madoffat the Metropolitan Correctional Center, 150 Park Row, New York, NY. Madoff was accompanied by his attorney, Ira Lee Sorkin of the firm of Dickstein Shapiro, LLP, as well as an associate from that firm, Nicole DeBello. The interview began with IG Kotz advising Madoff of the general nature of the OIG investigation, and advising that we were investigating interactions the Securities and Exchange Commission (SEC) had with Madoff and his firm, Bernard L. Madoff Investment Securities, LLP (BLM), going back to 1992. At that point, Sorkin advised Madoff that his only obligation was to tell the truth during the interview. The interview began with Madoff stating that the prosecutor and trustee in the criminal case "misunderstood" things he said during the proffer, and as a result, there is a lot of misinformation being circulated about this scandal, however, he added, "I'm not saying I'm not guilty." 2006 Exam: Madoff recalled that with respect to the 2006 OCIE exam, "two young fellows," (Lamore and Ostrow) came in "under the guise of doing a routine exam;" He said that during that time period, sweeps were being done of hedge funds that focused on ~-ont- running, and that was why he believed Ostrow and Lamore were at BLM.
    [Show full text]
  • UNITED STATES DISTRICT COURT SOUTHERN DISTRICT of NEW YORK ------X
    Case 1:09-cr-00213-DC Document 230 Filed 06/04/20 Page 1 of 16 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x UNITED STATES OF AMERICA : - v - : MEMORANDUM DECISION BERNARD L. MADOFF, : 09 Cr. 213 (DC) Defendant. : - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x APPEARANCES: BRANDON SAMPLE PLC Attorney for Defendant By: Brandon Sample, Esq. P.O. Box 250 Rutland, VT 05702 AUDREY STRAUSS, Esq. Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515 By: Drew Skinner, Esq. Louis A. Pellegrino, Esq. Assistant United States Attorneys One St. Andrews Plaza New York, NY 10007 CHIN, Circuit Judge: On March 12, 2009, defendant Bernard L. Madoff pleaded guilty to 11 counts of securities fraud and related crimes. On June 29, 2009, I sentenced him to a term of imprisonment of 150 years. Mr. Madoff now moves for a reduction in sentence and "compassionate release" pursuant to 18 U.S.C. § 3582(c)(1)(A), as modified by the First Step Act (the "FSA"), Pub. L. No. 115-391, 132 Stat. 5194 (Dec. 21, 2018). He Case 1:09-cr-00213-DC Document 230 Filed 06/04/20 Page 2 of 16 contends that he suffers from "end-stage renal disease" and other serious medical conditions and that, as a consequence, he has a life expectancy of less than 18 months. Def. Motion at 2-3. Accordingly, he asks that the Court show him "mercy and compassion" and release him so that he is not incarcerated for "his final months on this earth." Id. at 25, 26. For the reasons set forth below, the motion is denied.
    [Show full text]
  • Heuristics & Cognitive Biases
    McCombs Knowledge To Go November 11, 2014 Corporate Governance and Corporate Fraud by Grace Renbarger Lecturer, Department of Business, Government and Society Agenda . What is Corporate Fraud? . What are the Consequences? . How Big is the Problem? . Who Commits Corporate Fraud? . Why do People Engage in Fraud? . How can Fraud be Prevented? . What is the Role of Corporate Governance in Preventing Corporate Fraud? What is “Corporate Fraud”? What is “Corporate Fraud”? . Concept of “fraud” is very broad . Legal Definition: A false representation of a matter of fact—whether by words or by conduct, by false or misleading statements, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to his or her legal injury. Type of “White Collar” crime . Usually committed for personal or institutional gain. What is “Corporate Fraud”? . Occurs in wide variety of ways: . theft of cash, physical assets or confidential information . misuse of accounts . procurement fraud . payroll fraud . financial accounting misstatements . inappropriate journal vouchers . suspense accounting fraud . fraudulent expense claims . false employment credentials . bribery and corruption . money laundering . Can be committed by individuals employed by the corporation (internal) or by outsiders (external) . Victims can be the corporation itself or others (e.g., investors) What is “Corporate Fraud”? Focus today is on internal fraud Source: Chartered Institute of Management Accountants Consequences of Fraud . Criminal liability . Securities fraud . Insider trading . Tax evasion . Racketeering/RICO . Mail and wire fraud . Bribery . Money laundering . Obstruction of justice Consequences of Fraud . Individual officers, employees and agents criminally prosecuted for their own conduct .
    [Show full text]
  • Merging the SEC and CFTC - a Clash of Cultures
    Florida International University College of Law eCollections Faculty Publications Faculty Scholarship 2009 Merging the SEC and CFTC - A Clash of Cultures Jerry W. Markham Florida International University College of Law Follow this and additional works at: https://ecollections.law.fiu.edu/faculty_publications Part of the Banking and Finance Law Commons Recommended Citation Jerry W. Markham, Merging the SEC and CFTC - A Clash of Cultures, 78 U. Cin. L. Rev. 537, 612 (2009). This Article is brought to you for free and open access by the Faculty Scholarship at eCollections. It has been accepted for inclusion in Faculty Publications by an authorized administrator of eCollections. For more information, please contact [email protected]. +(,121/,1( Citation: Jerry W. Markham, Merging the SEC and CFTC - A Clash of Cultures, 78 U. Cin. L. Rev. 537 (2009) Provided by: FIU College of Law Content downloaded/printed from HeinOnline Tue May 1 10:36:12 2018 -- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at https://heinonline.org/HOL/License -- The search text of this PDF is generated from uncorrected OCR text. -- To obtain permission to use this article beyond the scope of your HeinOnline license, please use: Copyright Information Use QR Code reader to send PDF to your smartphone or tablet device MERGING THE SEC AND CFTC-A CLASH OF CULTURES Jerry W. Markham* I. INTRODUCTION The massive subprime losses at Citigroup, UBS, Bank of America, Wachovia, Washington Mutual, and other banks astounded the financial world. Equally shocking were the failures of Lehman Brothers, Merrill Lynch, and Bear Steams.
    [Show full text]
  • Strengthening the Sec's Vital Enforcement
    S. HRG. 111–175 STRENGTHENING THE SEC’S VITAL ENFORCEMENT RESPONSIBILITIES HEARING BEFORE THE SUBCOMMITTEE ON SECURITIES, INSURANCE, AND INVESTMENT OF THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED ELEVENTH CONGRESS FIRST SESSION ON EXAMINING THE IMPORTANT ROLE OF THE SECURITIES AND EX- CHANGE COMMISSION IN PROTECTING INVESTORS BY AGGRESSIVELY ENFORCING FEDERAL SECURITIES LAWS MAY 7, 2009 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html U.S. GOVERNMENT PRINTING OFFICE 53–779 PDF WASHINGTON : 2009 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS CHRISTOPHER J. DODD, Connecticut, Chairman TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama JACK REED, Rhode Island ROBERT F. BENNETT, Utah CHARLES E. SCHUMER, New York JIM BUNNING, Kentucky EVAN BAYH, Indiana MIKE CRAPO, Idaho ROBERT MENENDEZ, New Jersey MEL MARTINEZ, Florida DANIEL K. AKAKA, Hawaii BOB CORKER, Tennessee SHERROD BROWN, Ohio JIM DEMINT, South Carolina JON TESTER, Montana DAVID VITTER, Louisiana HERB KOHL, Wisconsin MIKE JOHANNS, Nebraska MARK R. WARNER, Virginia KAY BAILEY HUTCHISON, Texas JEFF MERKLEY, Oregon MICHAEL F. BENNET, Colorado EDWARD SILVERMAN, Staff Director WILLIAM D. DUHNKE, Republican Staff Director DAWN RATLIFF, Chief Clerk DEVIN HARTLEY, Hearing Clerk SHELVIN SIMMONS, IT Director JIM CROWELL, Editor SUBCOMMITTEE ON SECURITIES, INSURANCE, AND INVESTMENT JACK REED, Rhode Island, Chairman JIM BUNNING, Kentucky, Ranking Republican Member TIM JOHNSON, South Dakota MEL MARTINEZ, Florida CHARLES E.
    [Show full text]
  • JP Jeanneret Associates, Inc. Et Al. 09-CV-03907-Amended Complaint
    UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN RE J.P. JEANNERET ASSOCIATES, INC., et aL Master - . 'vr 3 VI Li \ - 7- '! This Document Relates to: ERISA Actions tLJ u.S. s - D. N.Y° CASHIE'RS FIRST AMENDED CONSOLIDATED CLASS ACT1NCOMPtAT Plaintiffs Boards of Trustees ("Trustees -) of the Buffalo Laborers Security Fund, Welfare Fund and Welfare Staff Fund (collectively, the "Buffalo Laborers Plans -), in their respective capacities as fiduciaries of the plans, allege the following on behalf of the Buffalo Laborers Plans and all others similarly situated: BACKGROUND I. This consolidated class action is brought pursuant to the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq. ("ERISA"), seeking legal and equitable relief, including restitution, for the Buffalo Laborers Plans and similarly-situated ERISA plans (the "Class Members," also collectively referred to herein as the -ERISA Plans" or the "Plans") that, as a result of imprudent and unlawful conduct by Defendants (as defined below), lost substantial amounts of money through the fraudulent investment scheme orchestrated by Bernard L. Madoff ("Madoff") and Bernard L. Madoff Investment Securities, LLC ("Madoff Securities"). 2. This case arises from a massive, fraudulent scheme that was orchestrated by Madoff through his investment firm, Madoff Securities, and others. The scheme was facilitated by Defendants, who, in breach of their fiduciary duties owed to Plaintiffs and to the other Class Members, caused and permitted the ERISA Plans" assets to be invested with Madoff Securities. 1 The fraudulent investment scheme carried out by Madoff and Madoff Securities is well- documented as the largest Ponzi scheme in history.
    [Show full text]
  • The Roberts Court and Securities Class Actions: Reaffirming Basic Principles Eric Alan Isaacson
    The University of Akron IdeaExchange@UAkron Akron Law Review Akron Law Journals October 2015 The Roberts Court and Securities Class Actions: Reaffirming Basic Principles Eric Alan Isaacson Please take a moment to share how this work helps you through this survey. Your feedback will be important as we plan further development of our repository. Follow this and additional works at: http://ideaexchange.uakron.edu/akronlawreview Part of the Litigation Commons Recommended Citation Isaacson, Eric Alan (2015) "The Roberts Court and Securities Class Actions: Reaffirming Basic Principles," Akron Law Review: Vol. 48 : Iss. 4 , Article 8. Available at: http://ideaexchange.uakron.edu/akronlawreview/vol48/iss4/8 This Article is brought to you for free and open access by Akron Law Journals at IdeaExchange@UAkron, the institutional repository of The nivU ersity of Akron in Akron, Ohio, USA. It has been accepted for inclusion in Akron Law Review by an authorized administrator of IdeaExchange@UAkron. For more information, please contact [email protected], [email protected]. Isaacson: Securities Class Action THE ROBERTS COURT AND SECURITIES CLASS ACTIONS: REAFFIRMING BASIC PRINCIPLES Eric Alan Isaacson* I. Introduction ....................................................................... 924 II. The Roberts Court Record: Sometimes Quite Hospitable to Class Proceedings ........................................ 926 III. Background of the Roberts Court’s Securities Class- Action Decisions: The 1988 Rehnquist Court Basic v. Levinson Decision And the Presumption
    [Show full text]
  • Evolution Or Revolution? Distributed Ledger Technologies in Financial Services
    Evolution or revolution? Distributed ledger technologies in financial services Anil Savio Kavuri1 and Alistair Milne2 (There are two versions of this paper: a short summary report of 16 pages plus references; the full research report of 121 pages plus references.) 1 Loughborough University and Australian National University. [email protected] 2 Loughborough University. [email protected] Evolution or revolution? Distributed ledger technologies in financial services Contents of full report 1 Introduction to the full report ............................................................................................... 2 2 Distributed ledgers: basic concepts and supporting technologies. ...................................... 5 2.1 Definitions ....................................................................................................................... 5 2.2 The component technologies used in distributed ledgers ............................................. 7 2.3 How the technologies are combined: the database ‘stack’ ........................................... 8 3 Applications of distributed ledgers in financial services ..................................................... 11 3.1 Fourteen areas of application....................................................................................... 11 3.2 Seven case studies ........................................................................................................ 38 4 Distributed ledgers: the adoption decision ........................................................................
    [Show full text]
  • Did Repeal of Glass-Steagall for Citigroup Exacerbate the Crisis?
    ETHICS Curtis C. Verschoor, CMA, Editor Did Repeal of Glass-Steagall for Citigroup Exacerbate Freed from the restrictions of the Glass-Steagall Act, giant bank- the Crisis? holding companies appear to have been focused more on industry should be recognized as Citibank and Travelers Group. In meeting the expectations of Wall at least a quasi-public utility, exist- addition to the traditional bank- Street analysts than on protect- ing in large part for the benefit of ing services, this $140 billion ing depositors’ funds from risk. depositors who need to have con- umbrella encompassed brokerage, tinuing confidence that their investment banking, and several funds are safe. insurance companies, including mid the finger-pointing After the savings and loan disas- Travelers. Agoing on in regard to the cur- ter caused the previous banking More recently, urged on by for- rent banking crisis, it seems that debacle, the FDIC Improvement mer U.S. Treasury Secretary we may be forgetting who the real Act of 1991 mandated that insured Robert Rubin, Citigroup’s director culprits are. Should we blame the institutions employ adequate con- and chair of its Executive Com- bungling bureaucrats in Fannie trols to manage their risks in order mittee, Citi acquired heavy expo- Mae, Freddie Mac, the Federal to maintain the safety and sound- sure to Collateralized Debt Oblig- Reserve, the Securities & Exchange ations (CDOs) based on subprime Commission (SEC), and the Trea- mortgages. By 2006, Citi had sury Department? Or are the regu- It will take a major become the second largest under- lators (perhaps they should be overhaul of business writer of CDOs.
    [Show full text]
  • The Universal Effect of Fraud in the Accounting Field
    Long Island University Digital Commons @ LIU Undergraduate Honors College Theses 2016- LIU Post 2018 The niU versal Effect of Fraud in the Accounting Field Abby Snidemiller Long Island University, [email protected] Follow this and additional works at: https://digitalcommons.liu.edu/post_honors_theses Recommended Citation Snidemiller, Abby, "The nivU ersal Effect of Fraud in the Accounting Field" (2018). Undergraduate Honors College Theses 2016-. 46. https://digitalcommons.liu.edu/post_honors_theses/46 This Thesis is brought to you for free and open access by the LIU Post at Digital Commons @ LIU. It has been accepted for inclusion in Undergraduate Honors College Theses 2016- by an authorized administrator of Digital Commons @ LIU. For more information, please contact [email protected]. The Universal Effect of Fraud in the Accounting Field An Honors College Thesis by Abby Snidemiller Fall, 2018 School of Professional Accountancy Michael Abatemarco, Faculty Advisor Carol Boyer, Reader Date Abstract In this thesis, I will explain in detail the impact fraud can have on the accounting profession. I will first discuss the basics of financial statements, including what they accomplish and how they pertain to the purpose of auditing. Next, I will explain the Generally Accepted Accounting Principles and how they, too, tie into the auditing process. Since it will be necessary to provide a background on auditing, I will incorporate this as my third topic. The fourth main topic will be the Sarbanes-Oxley Act of 2002, where I will describe its implementation into the accounting field. This will lead to my discussion on the Public Company Accounting Oversight Board and the ways in which it works to prevent accounting fraud.
    [Show full text]
  • Ethics Resource Center (2013) a Scary Headline
    If I Were Trying to Get and Keep an Ethical Culture . Prof. Marianne Jennings Emeritus W.P.Carey School of Business Arizona State University Jennings Where we are SOME SCARY SLIDES 2 Ethical Lapses . Davis-Besse . Google (3 times) . Bear Stearns . Adelphia (FENOC) . GroupOn . Berkshire Hathaway . Deloitte Touche . ADM . Hallmark Westland . Biovail . Delphi . AIG (three times) . HealthSouth . BNY . Deutsche Bank . Allergan . Body Shop . Diamond Nuts . Helig-Myers . American Apparel . Boeing . Downey Savings & . Herbalife . American Express . BP (three times) Loan . HP . Apple (twice) . Bristol-Myers . Duke Energy Squibb . HSCB . Apollo Group . DuPont . Calpers . ImClone . Arthur Andersen . Edward Jones . Cardinal Health . IndyMac . AstraZeneca . Eli Lilly . Cendant . Ernst & Young . Johnson & Johnson . AT & T . Chase . Facebook . Autonomy . Kmart . Chesapeake Energy . Fannie Mae (twice) . Avon . KPMG (twice) . Chiquita . Fidelity Investments . Bally Total Fitness . Chrysler . Krispy Kreme . Galleon Hedge Fund . Bank of America . Cintas . Lehman Brothers . General Electric . Barclays . Citigroup . Lennar Corp. GlaxoSmithKline (2) . Bayer . Columbia HCA . Lucent . BCBS . Computer . Global Crossing Associates . Madoff Investment . BCCI . Global Research Securities . Countrywide . BDO Seidman Financial . GM . Marsh & McLennan . CSFB . Goldman Sachs (2X) . McNeil (Tylenol) . CVS Ethical Lapses . Medtronic . Qwest . Mellon Bank . Razorfish . Tyco International . Mercer . RBS . UBS . Merck . Reebok . UnitedHealth Group . Refco . Merrill Lynch . Universities and . MF Global . Royal Ahold sports . Royal Shell . Microstrategy . UPS . Milberg Weiss . SAC Capital . Wachovia . Moody’s . Saks Fifth Avenue . Morgan Stanley . Sallie Mae . WaMu . Navistar International . Samsung . Wells Fargo . New Century Financial . Satyam (India) . World Bank . Shaw Group . New Orleans Saints . WorldCom . Nortel . Siemens . Xerox . Novartis . Société General . Options scandals (200 . Standard & Poor’s . Zynga companies) . Stanford Investments . Oracle . Student loan lenders .
    [Show full text]
  • World's Largest Hedge Fund Is a Fraud
    Page 1 of 1 Suh, Simona From: Cheung, Meaghan S. Sent: Rnonday,November 07, 20051:49 Pf;4 To: Suh, Simona Subject: FW: Resubmitted Mado~f SEC Meeting.doc Attachments: Resubmitted Madoff SECMeeting.doc From: Harry MarkopolosPersonal Privacy Sent: Monday, November To: Cheung, plleaghan S. Cc:Personal Privacy Subject: Resubmitted Madoff SEC Meeting,doc Meaghan, 1. I spent some time over the weekend further improving my-analysis on why Madoff Investment Secun'tie's, LLC is likely a Ponzi Scheme (although there is a slight chance the returns are real but accrue from front-running customer order fiow). 2. 1 added an Attachment 4, pages 6 and 7, from an offering memorandum by Fairfield Sentry that was fared to my office on March 21, 2001. 3. The entire report ties in to Fairfield Sentry Ltd., a third party hedge fund, fund of funds, that has over $5 billion invested in Madoff Investment Securities, LLC. Hopefully all of my entries foot to the 4 attachments a lot better than the version I sent you on Friday. 4. 1 am out of the office all~day on Tuesday, November 8th, but available the rest of the week to teleconference if you would like me to answer any questions. 5. 1 also added some clarifying language in the event this case involves front-running under the SEC's Section 21A(e) of the 1934 Act bounty eblowers. My attomey and I spent significant time on another case where we negotiated with Personal Privacy now a deputy in the SEC's enforcement branch in Washington, regarding qualifying insider-trading cases under the Section 21A(e) bounty program.
    [Show full text]