Madoff Accomplices Involved In The Greatest Ponzi Scheme

In December 2008, one of the largest Ponzi scheme surfaced when Mark and Andrew Madoff reported the works of their father, Bernard Madoff to the federal authorities. A Ponzi scheme is an investing scam that promises high rates of return with little risk to investors. The operator generates returns for older investors by gaining new investors. Bernard was arrested on December 11, 2008 and charged with securities fraud. He pled guilty to 11 counts and was sentenced to 150 years in federal prison-the maximum possible prison sentence. A reported $17.3 billion was invested into the scam by Bernie’s clients and only about $2.48 billion have been returned to these victims as of September 2012.

Many times in a Ponzi scheme the offender targets people they do not know personally but not Madoff. He had family, friends, employees and even charities and non-profit organizations as investors. “He tapped local money pulled in from country clubs and charity dinners, where investors sought him out to casually plead with him to manage their savings so they could start reaping the steady, solid returns their envied friends were getting” (Colesanti, 2012). “Levy invested $100,000” for Dell’Orefice, who felt honored to be a part of the “exclusive fund” (Lewis, 2010). Sheryl Weinstein, who was a friend of Madoffs for nearly 24 years, lost her entire savings to Madoff’s Ponzi scheme. “The charitable foundation of philanthropist Carl Shapiro had invested about 45 percent of its assets ($345 million) in Madoff's fund” (Auerbach, 2009). It is “estimated that Madoff's scam cost Jewish philanthropies at least $600 million, and

Convictions of the Bernie Madoff conspirators prove the Ponzi scheme could not have been the work of one person. Furthermore, the conspirators each played a critical role in facilitating the Ponzi scheme and concealing it from regulators, and auditors. For instance, Annette Bongiorno, was employed for Madoff for approximately 40 years as his secretary (Lappin, 2014). Consequently, Bongiorno was charged with manufacturing the false statements sent to clients that indicated they were worth a lot more than they actually were. Moreover, Bongiorno transferred $50 million of client’s funds into her own private account (Lappin, 2014).

Madoff was able to align himself with wealthy individuals, leaders involved in foundations, business entities, and government. This gave him unlimited access to different groups of investors. Among Madoff’s Ponzi scheme victims, it is easy to find wealthy individuals, charitable organizations, and its stakeholders, such as employees, communities, vendors, and even the government.

There is very little in the way except conjecture as to the motivation to why Madoff committed theses frauds for so long, and it appears that he is not telling either except that in 2009 where he said that in 2008 when admitting to his sons that his whole business was “just one big lie” to which the next day Madoffs sons reported him to authorities that led to his subsequent arrest. It seems as though it was not an attack of Madoffs conscious that led him to the confession, but it was because of the nature of how ponzi schemes work where the bulk of investors comprising the lower segment of investors pay for the few higher investors profits, which eventually there is no money left to pay back the vast majority of lower tier investors any profits since really the only money involved is the deposits from these investors themselves and not interest earned or investments (Henriques, 2009).

The case of the Madoff was a very complicated case. From an ethical perspective, this would be considered as a white collar crime. Bernard Madoff sacrificed the public interest to pursuit his own financial goals in life. He and his family lived a lavish life style, which caused them to become deeper and deeper in the scheme to maintain this life style. There main focus was to scheme as many people out of money to persuade as many new investors as they could. Madoff family gained access to Washington lawmakers because of Madoff’s broker’s dealings. The family used the investor’s monies for personal gain without regard to their personal financial losses. First of all, Madoff manipulated the stream of cash flow to make it look like his

This paper introduces Bernard L. Madoff a fraudster who orchestrated a multi-billion dollar Ponzi scheme. The paper discusses elements that make up a Ponzi scheme and explains what a Ponzi scheme is. The paper goes on to introduce some of the victim’s and examines some reasons why someone might fall victim to a Ponzi scheme. The paper describes the three elements making up the fraud triangle and how they relate to the fraud and the fraudster. This paper covers Bernard Madoff’s background and history and how he committed the fraud analyzing the fraud triangle. The paper describes ways to correct the issue, accounting principles violated, and recommendations for a fix. Finally, the paper looks at internal and external controls violated and ends with a conclusion.

Bernie Madoff began his career as an investment broker in 1960, where he legally bought and sold over-the-counter stocks not listed on the New York Stock Exchange (NYSE). From the 1960’s through the 1990’s, Madoff’s success and business grew substantially, mainly from a closed circle of known investors and friends through word of mouth. In the 1990’s Bernard L. Madoff Investment Securities traded up to 10 percent of the NASDAQ on any given day. With the success of the securities business, Madoff started an illegal money-management business, promising his investors consistent returns from 10-12 percent, unheard of returns at the time, which should have tipped off most investors that something was amiss.

Ponzi schemes are fraudulent investments in which false returns from a new investor are given to existing investors. The facilitator of a Ponzi scheme lures new victims in by promising high return and little to no risk investments. Most schemes are driven by the con artist creating a façade. Con artists create these facades by bringing in new investors and promising payments, to build up the same facade so they can continue to create the appearance of a lucrative, genuine business to invest in (Ponzi Schemes, 2013). Ponzi scheme is derived from a man named Charles Ponzi.

A breakdown took place while many large firms investigated/audited Madoff and found his business creditable. How could Madoff mislead auditors for some of the largest accounting firms? It was clear that the accounting firms did not do proper due diligence. More layers of creditability should be added in the audit process for larger banks and investing houses. It was unclear if auditors did not do a good job, or they were paid off by Madoff to look the other way (Gandel, 2008).

Using John Stuart Mill’s and John Rawls’ theories, one can analyze the ethical and moral decisions made in the Ponzi scheme of Bernard Madoff. Mills’ theory supports ethical decisions on the happiness and utility principles which both would have failed under Madoff’s scheme. Madoff was concerned with generating a high amount of cash flow for himself and business, and only funded the returns based on the constant flow of new investments and fees. Under the happiness principle, the scheme did not provide happiness for all involved individuals in the end. During the successful years of the scheme, it may be argued that it could be viewed as ethical based on the Greatest Happiness Principle. However, in order to remain an ethically and morally right

A well-venerate financier, Madoff convict thousands of investors to skill over their savings, falsely promising harmonious advancement in remit. He was caught in December 2008 and entrust with 11 counts of fraud, currency laundering, perjury, and theft. Madoff used a so-warn Ponzi plot, which entice investors in by undertake unusually tall returns. The name begins with Charles Ponzi, who plight 50% render on investments in only 90 days.

What is right or wrong? People base their values of right and wrong on what they have learned from their experiences (Ferrell, Fraedrich, & Ferrell, 2018). What one person sees as wrong, may be a normal for another. Most people are taught to work hard, save money, and invest for a future retirement. However, when it comes to money, some people lose all principles and standards of behavior. There were several ethical issues in the Madoff case. They include: stealing, cheating, lying, misrepresentation, and deliberate deception. Madoff used the Ponzi scheme or the money pyramid to make his money. In the Ponzi scheme, money was taken from new investors and given to existing customers as earning without being invested. Was this right or wrong? Throughout this case study ethical concerns can be seen on both sides, the investors and Madoff’s.

“Sixty-five of the one hundred thirteen victim's' statements were examined. These sixty-five statements were from victims who invested directly with Bernard L. Madoff Investment Securities. We analyzed the data using the victim's 'language as presented in their statements. Though thirty-four victims (52%) indicated that they had lost "everything they had" or their life savings, we cannot determine whether losses for the remaining victims (who indicated an amount) represented all or a portion of their entire wealth.” (David Glodstein)

We chose Bernard Madoff’s case because we thought that we could relate his case to many unethical behaviors. The analysis can be made on decision making and lack of ethical training which we think is an important topic to focus on this course.