The court-appointed trustee for Bernard L. Madoff’s estate has sued three major global financial institutions for a combined $17.4 billion, alleging that the banks aided Madoff in his Ponzi scheme.
Madoff, former investment advisor and chairman of the Nasdaq Stock Exchange, in March 2009 pleaded guilty to a massive fraud involving his investment management business, bilking investors out of more than $50 billion dollars.
He is currently in prison serving a sentence of 150 years, after his Ponzi scheme involving Bernard L. Madoff Investment Securities LLC was publicized in December 2008.
The three banks been sued are HSBC, JPMorgan, and UBS. They are accused of aiding and abetting Madoff’s Ponzi scheme.
But analysts say that proving knowledge of fraud is difficult—there’s a difference of condoning fraudulent acts and actively finding it. Even the Securities and Exchange Commission failed to act on reining in Madoff, despite alerts of fraud from multiple sources.
Outraged neighbors ratted on a Wells Fargo & Co. employee who threw lavish parties at a foreclosed home in pricey Malibu, Calif. The bank said Monday that the employee had been fired.
The Los Angeles Times first reported earlier that 39 year old Cheronda Guyton, a Wells Fargo senior vice president responsible for foreclosed commercial properties and a seventeen year veteran of the bank, spent weekends at the house, hosting parties that caught the attention of neighbors.
Wells Fargo took possession last May of a 3,800 square foot beachfront mansion. The previous owner was reportedly wiped out by the Ponzi scheme run by Bernard Madoff. It was valued at $12 million when it was taken back by the bank in May.
Instead of putting the property up for sale or letting it stand empty while the foreclosure was completed, Cheronda Guyton, senior vice president in charge of commercial foreclosed properties for the bank, apparently used the place to entertain friends, including transporting guests from a yacht moored offshore.
After neighbors cried foul, Wells Fargo investigated and identified Guyton as the culprit. Monday, the company said in a statement, “We deeply regret the activities that have taken place as they do not reflect the conduct we expect of our team members.”
Malibu Mayor Andy Stern, who also happens to be a real estate agent, told Reuters that the house could lease for $150,000 a month.
Wells says the house was kept off the market under an agreement with the prior owners. “Our investigation concluded a single team member was responsible for violating our company policies,” Wells said in a statement. “As a result, employment of this individual has been terminated. We deeply regret the activities that have taken place as they do not reflect the conduct we expect of our team members.”
Malibu Colony is one of the city’s first and still most exclusive neighborhoods. It has been the playpen of celebrities going back to Bing Crosby’s days
Sept. 7 (Bloomberg) — Family members of a U.S. Securities and Exchange Commission enforcement official, whose unit got a tip in 2005 that Bernard Madoff may be running a Ponzi scheme, entrusted $2 million to the scam, the agency’s watchdog said.
The anonymous e-mailed tip to the Office of Internet Enforcement was among at least six “substantive complaints” the SEC didn’t fully investigate during 16 years, Inspector General H. David Kotz said Sept. 4 in a report released before he testifies before the Senate. Investments by two of the official’s relatives were disclosed as a footnote in the 457- page report, which doesn’t identify him or specify losses. He wasn’t part of any Madoff probe, Kotz noted.
Kotz’s eight-month inquiry offers the most exhaustive look yet at how the agency missed chances since 1992 to detect a $65 billion fraud that burned thousands of investors. The inspector faulted the agency for inadequately pursuing tips, assigning inexperienced staff to conduct reviews and failing to seek trading records that would have revealed the scam.
“It is a failure that we continue to regret, and one that has led us to reform in many ways how we regulate markets and protect investors,” SEC Chairman Mary Schapiro said in a statement. “In the coming weeks we will continue to closely review the full report and learn every lesson we can.”
How about this, a man in New York has been operating a $40 million Ponzi scheme for 31 years. This is a mini-Madoff except that Madoff only lasted 20 years, and Philip Barry, 52, ran the scam without detection for 31 years. He invested the money in real estate and a mail order porn business.
What’s interesting, in both Madoff and Barry’s downfall was the economy. Even more interesting if you can call it that, both were never caught by SEC, but turned themselves in. In both cases, the downfall of the economy led to the downfall of their Ponzi schemes. Money started to run out, so they turned themselves in. What, no money, they develop a conscience?
Prosecutors said that Mr. Barry started his scam in 1978. Bernard Madoff’s $65 billion scam ran for at least 20 years. He was jailed in June for 150 years.
Investigators said they learned of the scheme when Barry turned up at the U.S. Attorney’s office in Manhattan in August of 2008 and asked to speak to a prosecutor. They said Barry acknowledged that, for years, he had been paying off his guaranteed profits by taking money from some customers to cover withdrawals made by others.
Working from a small office in the Brooklyn neighborhood of Bay Ridge, far from the city’s financial center, Barry claimed to be investing in stock options and guaranteed his neighborhood clients solid returns.
But in reality, investigators said, Barry was using much of the money to speculate on real estate. He bought an office building in Brooklyn and big tracts of undeveloped land upstate.
Authorities said he hid the scheme by feeding his customers financial statements boasting of hefty profits that didn’t exist. Sounds familiar, Madoff used the same tactics.
Some of the cash was used to pay for Mr. Barry’s own expenses at restaurants and petrol stations and to maintain the approximately 60 properties he had bought, prosecutors said.
Other funds were diverted to a mail-order business called Barry Publications, which sold pornographic materials
“It’s all in real estate,” Barry said. “I’m going to keep on working to make sure everyone gets the profit they are entitled to.”
Investors have sued Mr. Barry for the return of their cash but are unlikely to receive the bulk of it back. The properties owned by Leverage Group are thought to be worth slightly over $1 million in total. At least 19 of the properties are in foreclosure.
How did this all happen? A promise of high returns on investment, promising 12% to 20% return on money invested. If it’s too good to be true, it’s not true. People’s greed gets them every time.
