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the bernie madoff scandal
Transcript of the bernie madoff scandal
SCANDAL A $50 Billion Ponzi Scheme What is a ponzi scheme? A fraudulent investment operation that pays quick returns to initial contributors using money from subsequent contributors rather than profit Who is Bernard L. Madoff? He was an entrepreneur
Started the investment company, called Bernard L. Madoff Investment Securities
His clients would invest through the company for "secure" investments in the stock market, as well
This massive investment company was located on Wall Street, New York, New York. Background information Key Players Who was Involved? Fallout from the Scandal Has it lost profits? Company currently being liquidated to help pay off debt
huge loss, company has billions to pay in debt Is there a court case going on? Main court case, Madoff pleaded guilty to 11 felony charges
investment adviser fraud, mail fraud, wire fraud
3 counts of money laundering
false filings with United States Securities and Exchange Commission ("SEC")
theft from an employee benefit plan Nature of the Scandal; When did it happen? In the early 1990's Bernard L. Madoff had started his ponzi scheme.
In an interview later, after he was caught, he said that he, "had dug himself down too deep, and by the time I [he] realized it was wrong, it was far too late."
When it got to the point that the company didn't have money to give the customers their money, they got the cash out of another clients account
This added to the list of money being "borrowed" Has it lost consumer confidence? After scandal was revealed, company hit rock bottom
Lost all consumer confidence, company in serious debt
now known as one of the greatest scandal in the investment business Shraddha Kamat Is it operating successfully? The company isn't operating successfully, still has lots of debt
Hasn't operated after the scandal Which were ignored? Principle of Conservatism Revenue Recognition Convention Full Disclosure Principle GAAPs In relation to ENRON... Both violated these GAAPs. ENRON and Bernard L. Madoff Investment Securities Both Companies Thanks for listening! :D When was the scandal uncovered? Madoff's scheme was uncovered on December 10th, 2008
His sons, Mark and Andrew reported him to the authorities after a serious conversation with him
In the end, Bernard L. Madoff owed $170 Billion in restitution as part of his sentence.
He was sentenced to 150 years in a federal prison for his crimes How Was This Allowed to Happen?
The SEC(Securities and Exchange Commission) Who was affected? They Ignored Harry Markopolos who within hours concluded that Madoff was a fraud. Later The SEC Started a investagtion in 2006 But even though Madoof lied during the investagation (which is punishable with up to five years in jail which he was not punished for) The SEC concluded there are no signs of fraud. AfterMath Everybody who had money in an account at Bernard L. Madoff Investment Securities
Peple related to Madoff Major fallouts from the scandal... Madoff's eldest son, Mark, committed suicide two years after the scanal came out to the public
Many other people also committed suicide because all of their lives savings were lost Auditors of funds typically confirm with custodians that assets exist as stated. To get around this Mr Madoff insisted clients make Madoff Securities custodian for assets, according to several people familiar with his terms.Auditors say they are entitled to take on trust the word of custodians of assets, which in this case was madoof securities, was correct. How the Accounting firm played a part. Frank DiPascali jr
When he pleaded guilty last August to 10 charges, including conspiracy,
Frank DiPascali Jr., Madoff’s right-hand man/chief financial officer,
said he’d “ended up being loyal to a terrible, terrible fault.”
He began working for Madoff after graduating high school,
and had participated in the scheme for some 20 years. David Friehling
Madoff's longtime outside accountant and the firm's supposed auditor,
David Friehling, pleaded guilty to several charges, including securities fraud,
last November. But he also said, “At no time was I aware that Mr. Madoff was
engaged in a Ponzi scheme.” He is awaiting sentencing, and could face as
much as 114 years. Danial Bonventre
Madoff’s director of operations. According to the SEC complaint, Bonventre, who worked for Madoff for at least three decades, “enabled and helped perpetuate the now infamous fraud” by falsifying accounting records for years. The company violated this GAAP, because the accounting for the business wasn't fair or reasonable. Books and reports were changed to make the business look like its making money. The business didn't include all the information, that would affect the income statements, because the books were changed, the company didn't accurately show that they weren't earning much. This GAAP was violated, as again revenue wasn't recorded when it was earned. Bernard Madoff Frank DiPascali Jr. David Friehling Daniel Bonventre