Results tagged “sec”

In what's become an SEC tradition, the government agency decided to reveal details of its botched Bernard Madoff investigations late Friday afternoon. The SEC offered up a jailhouse interview with Madoff; the NY Times reports he "said that the young investigators who pestered him over incidentals like e-mail messages should have just checked basics like his account with Wall Street’s central clearinghouse and his dealings with the firms that were supposedly handling his trades," adding, "If you’re looking at a Ponzi scheme, it’s the first thing you do."

Hindsight is 20/20: The NY Times reports the country's "largest independent securities regulator found that its staff members had missed numerous red flags that would have uncovered frauds run by Bernard L. Madoff and the Texas billionaire R. Allen Stanford." Apparently the Financial Industry Regulatory Authority’s "predecessor, NASD, did not act from 2003 to 2005 on 'credible information from at least five different sources claiming that the Stanford C.D.’s were a potential fraud.'" While no whistleblowers specifically contacted Finra about Madoff (the SEC was warned), Finra did find " several facts worthy of inquiry...that, with the benefit of hindsight, should have been pursued."

For your listening pleasure: The Massachusetts Secretary of State's office released audio (after the jump) of Bernard Madoff telling hedge fund Fairfield Greenwich chief risk officer Amit Vijayvergiya in 2005 how to deal with the SEC when they might come snooping around, "You know, you don't have to be too brilliant with these guys, because you don't have to be." First rule of Bernie's Ponzi Club: You do not know about the Ponzi Club. Madoff said Fairfield Greenwich shouldn't worry about how he operated, "You don't want to have that information because ... the commission, when they ask questions, they try and draw out information. The less that you know how we execute ... the better you are." He recommended saying that since he's been around for 45 years, he's essentially totally trustworthy! Madoff added, "They ask you a zillion different questions and we look at them sometimes and we laugh, and we say, 'Are you guys writing a book?'" And he says of needing to deal with another phone call, "I'm sorry. If I get any more solicitations for charity, I'm going to kill myself."

After offering a summary of how it bungled six warnings about Bernard Madoff's amazing investment firm, the Securities and Exchange Commission released the full 477 opus on its failings (PDF) last night. The Wall Street Journal reports on one glaring misstep, when in May 2003, an unnamed hedge-fund manager basically told an SEC examiner "that Mr. Madoff's self-described trading strategy didn't add up. The manager said the strategy wasn't duplicated by anyone else in the market, Mr. Madoff's accounts were in cash at month end, and there was 'always replacement capital,'" even saying, "These could be 'indicia of a Ponzi scheme" When the SEC investigated months later, it only focused on front-running and not on things like why there wasn't enough market volume for Madoff's trading strategy—and it didn't verify Madoff's trades through a third party either. Also, another hedge fund, Renaissance, was skeptical of Madoff's finances, but didn't tell the SEC because it assumed the SEC was keeping tabs on Bernie! A Renaissance portfolio manager wrote in 2003 internal e-mail, "Throw in that his brother-in-law is his auditor and his son is also high up in the organization and you have the risk of some nasty allegations."

The Inspector General for the Securities and Exchange Commission said the agency failed to conduct "competent and thorough" investigations about Ponzi schemer Bernard Madoff, even after at least six warnings. IG David Kotz wrote in his report, "Despite numerous credible and detailed complaints, the SEC never properly examined or investigated Madoff’s trading and never took the necessary, but basic, steps to determine if Madoff was operating a Ponzi scheme," adding that even Madoff himself was "shocked" that the SEC didn't check his trading records, which would have revealed the $65 billion fraud.

Merrill Lynch's decision to hand out extravagant bonuses last year— as it was about to lose $15 billion in the final quarter—continues to cause problems for Bank of America, which acquired Merrill. Even though the Securities and Exchange Commission (you know, the agency that was supposed to keep tabs on Madoff) settled a lawsuit against BoA for the bonuses, to the tune of BoA paying $33 million, a federal judge has refused to approve the settlement! The SEC complaint said that BoA lied about letting Merrill pay as much as $5.8 billion in bonuses (Merill paid out $3.6 billIon), leading Rakoff to point out that if BoA did in fact break the law, then there's "something strangely askew in a fine of $33 million." He added that both companies "effectively lied to their shareholders... Do Wall Street people expect to be paid large bonuses in years when their company lost $27 billion?"—$27 billion is the amount that Merrill lost. And when a BoA lawyer pointed out that much of the bonus money was shared by people making an average of $91,000/year, Rakoff said, "I’m glad you think that $91,000 is not a lot of money. I wish the average American was making $91,000."

It's another report of how Bernard Madoff is doing behind bars! This time, instead of an inmate, we hear from a lawyer representing some of the victims in Madoff's $65 billion Ponzi scheme. Attorney Joseph Cotchett says he and an associate met with the scammer for four and a half hours at Butner Federal Correction Complex in North Carolina. And Madoff told them, "There were several times that I met with the SEC and thought 'they got me'" Of course, the SEC didn't!

David Friehling, the accountant who helped Bernard Madoff perpetuate his $65 billion Ponzi scheme by filing fake audit reports, has pleaded not guilty to fraud charges. However, he may be pleading guilty later down the road. Federal prosecutors and Friehling, who waived his right to a grand jury, are discussing a "possible disposition." Bloomberg News says Friehling's moves today are a "likely a prelude" to a guilty plea. A lawyer not associated with the case said, "There is nothing to be gained for Mr. Friehling to waive indictment except to placate prosecutors who are no doubt pressing him to plead guilty and cooperate with them in their investigation. It is the accountant who knows where the bodies are buried." Friehling, who is free on $2.5 million bail, and his family had accounts with Madoff (an SEC violation) and withdrew millions since 2000.

Well, well, well, look how the times have changed. Senator Charles Schumer, who famously championed Wall Street business to the point of protecting the industry, as the NY Times put it last winter, "from government oversight and tougher rules" (saving Wall Street ), now thinks the financial services industry, um, needs regulating. This morning at a Crain's Business event, Schumer explained that, per Crain's, "more aggressive regulation is needed in order to ensure New York maintains its standing as the world’s capital of finance... because jittery investors around the world are looking for places where they can trust that tough regulators will protect their interests." He also said that a regulatory reform bill will be sent to President Obama by April.

While Boston-based accountant Harry Markopolos was a notable outspoken skeptic of Bernard Madoff's supposed investing prowess, it turns out there were others who had questions about the Ponzi schemer's proposition. But, the Post reports, they did nothing. Documents filed with the SEC reveal that three senior executives from Citigroup, Goldman Sachs and Write Capital had their suspicions but never contacted their superiors or the SEC. The Post writes, "The silence by the executives is disturbing to some, who claim a second alarm bell could have forced the SEC's hand and brought Madoff's alleged scam to an end sooner." However, "A source close to Citi said [former employee Leon] Gross should not be singled out, as his views about Madoff were commonplace on Wall Street, adding that Gross did not spend much time analyzing Madoff's investment strategies." The director of the SEC's enforcement division, Linda Thomsen, announced her resignation last week.

Hilarious: After not doing anything about Bernard Madoff when warned about him years ago, the Securities and Exchange Commission has reportedly agreed to a civil case settlement with Ponzi schemester Madoff. The AP reports the agreement "could eventually force [Madoff] to pay a civil fine and return money raised from investors." Money raised from investors—wait, the money that no one can seem to find? (Fine, they found $950 million of an estimated tens of billions.) Don't worry, there's still that criminal case against Madoff. The AP adds, "The partial judgment must be approved by the judge overseeing the Madoff case in federal court in Manhattan."

Earlier this week, the scamming investor Bernard Madoff's housekeeper reported that a $10,000 statue was stolen from his Palm Beach estate. Yesterday, the Palm Beach police found it—near the Palm Beach Country Club, where Madoff reportedly wooed many investors to join his Ponzi scheme—and the statue had a note attached.

Republican presidential candidate John McCain was on 60 Minutes last night and showed bipartisan leanings, when it comes to someone who could head the Securities and Exchange Commission. McCain, who previously blasted SEC chair Christopher Cox, said, "This may sound a little unusual, but I’ve admired Andrew Cuomo. I think he is somebody who could restore some credibility, lend some bipartisanship to this effort.” The candidate said Cuomo "did a good job" as HUD secretary under Clinton, “And he has respect, and he has prestige.” In other NY state of mind McCain news, the state's Independence Party endorsed him, noting his independent thinking.