The strict banking secrecy policies and bank-client confidentiality agreements at UBS have frequently been used to avoid, evade or otherwise escape foreign direct taxation. Can you email it to me at: Boy, 6, swept away by floodwaters; dies. At the moment i am considering moving to Penang for work.
Highlights—April 2, 2016
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No Comments Mar 23, No Comments Feb 20, However, the SEC did not look any more deeply into the matter, and never publicly referred to Madoff. Avellino complained to the presiding Federal Judge, John E. The size of the pools mushroomed by word-of-mouth, and investors grew to 3, in nine accounts with Madoff. Regulators feared it all might be just a huge scam. They took in nearly a half a billion dollars in investor money, totally outside the system that we can monitor and regulate.
In a interview after the scam had been exposed, he said, "Doubt Bernie Madoff? You can doubt God, but you don't doubt Bernie.
He had that aura about him. The SEC investigated Madoff in and about concerns that the firm was hiding its customers' orders from other traders, for which Madoff then took corrective measures. In , after published articles appeared accusing the firm of front running, the SEC's Washington office cleared Madoff.
Madoff was registered as a broker-dealer , but doing business as an asset manager. In September Madoff agreed to register his business, but the SEC kept its findings confidential.
In , SEC enforcement completed an investigation they had begun on January 6, into a Ponzi scheme allegation. This investigation resulted in neither a finding of fraud, nor a referral to the SEC Commissioners for legal action.
As a result, the chairman of the SEC, Christopher Cox , stated that an investigation will delve into "all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm".
Outside analysts raised concerns about Madoff's firm for years. A year earlier, Rampart had found out that Access International Advisors , one of its trading partners, had significant investments with Madoff. Markopolos' bosses at Rampart asked him to design a product that could replicate Madoff's returns. After four hours of trying and failing to replicate Madoff's returns, Markopolos concluded Madoff was a fraud.
He told the SEC that based on his analysis of Madoff's returns, it was mathematically impossible for Madoff to deliver them using the strategies he claimed to use. In his view, there were only two ways to explain the figures—either Madoff was front running his order flow, or his wealth management business was a massive Ponzi scheme. This submission, along with three others, passed with no substantive action from the SEC.
The culmination of Markopolos' analysis was his third submission, a detailed page memo entitled The World's Largest Hedge Fund is a Fraud.
The biggest red flag was that Madoff reported only seven losing months during this time, and those losses were statistically insignificant. This produced a return stream that rose steadily upward at a nearly-perfect degree angle.
Markopolos argued that the markets were far too volatile even under the best of conditions for this to be possible, a fact that would have been clear to anyone who understood the underlying math.
In part, the memo concluded: He's organized this business as a 'hedge fund of funds ' privately labeling their own hedge funds which Bernie Madoff secretly runs for them using a split-strike conversion strategy getting paid only trading commissions which are not disclosed.
If this is not a regulatory dodge, I do not know what is. In , financial journalist Erin Arvedlund wrote an article for Barron's entitled "Don't Ask, Don't Tell",  questioning Madoff's secrecy and wondering how he obtained such consistent returns. She reported that "Madoff's investors rave about his performance — even though they don't understand how he does it. When high-volume investors who were considering participation wanted to review Madoff's records for purposes of due diligence , he refused, convincing them of his desire that proprietary strategies remain confidential.
By selling its holdings for cash at the end of each period, Madoff avoided filing disclosures of its holdings with the SEC, an unusual tactic. Madoff rejected any call for an outside audit "for reasons of secrecy", claiming that was the exclusive responsibility of his brother, Peter, the company's chief compliance officer ". Friehling , a close Madoff family friend. Friehling was also an investor in Madoff's fund, which was seen as a blatant conflict of interest.
Typically, hedge funds hold their portfolio at a securities firm a major bank or brokerage , which acts as the fund's prime broker. This arrangement allows outside investigators to verify the holdings. Madoff's firm was its own broker-dealer and allegedly processed all of its trades. Ironically, Madoff, a pioneer in electronic trading , refused to provide his clients online access to their accounts. Madoff operated as a broker-dealer who also ran an asset management division.
In , Joe Aaron, a hedge-fund professional, also found the structure suspicious and warned a colleague to avoid investing in the fund, "Why would a good businessman work his magic for pennies on the dollar? And only if Madoff was assumed to be responsible for all the options traded in the most liquid strike price. Gradante , co-founder of hedge-fund research firm Hennessee Group, observed that Madoff "only had five down months since ",  and commented on Madoff's investment performance: In , Michael Ocrant, editor-in-chief of MARHedge wrote a story in which he interviewed traders who were incredulous that Madoff had 72 consecutive gaining months, an unlikely possibility.
Clients such as Fairfield Greenwich Group and Union Bancaire Privée claimed that they had been given an "unusual degree of access" to evaluate and analyze Madoff's funds and found nothing unusual with his investment portfolio. The Central Bank of Ireland failed to spot Madoff's gigantic fraud when he started using Irish funds and had to supply large amounts of information that should have been enough to enable the Irish regulator to uncover the fraud much earlier than late when he was finally arrested in New York.
The scheme began to unravel in the fall of , when the general market downturn accelerated. Madoff had previously come close to collapse in the second half of after Bayou Group , a group of hedge funds, was exposed as a Ponzi scheme that used a bogus accounting firm to misrepresent its performance.
Madoff only survived by moving money from his broker-dealer's account into his Ponzi scheme account. By then, at least two major banks were no longer willing to lend money to their customers to invest it with Madoff. In June , Markopolos' team uncovered evidence that Madoff was accepting leveraged money.
To Markopolos' mind, Madoff was running out of cash and needed to increase his promised returns to keep the scheme going. The trickle became a flood with when Lehman Brothers was forced into bankruptcy in September, as well as the near-collapse of American International Group at the same time.
Unknown to them, however, Madoff had simply deposited his clients' money into his business account at Chase Manhattan Bank , and paid customers out of that account when they requested withdrawals. To pay off those investors, Madoff needed new money from other investors. However, in November, the balance in the account dropped to dangerously low levels. He had just barely enough in the account to meet his redemption payroll on November Even with a rush of new investors who believed Madoff was one of the few funds that was still doing well, it still wasn't enough to keep up with the avalanche of withdrawals.
In the weeks prior to his arrest, Madoff struggled to keep the scheme afloat. MSIL had neither customers nor clients, and there is no evidence that it conducted any trades on behalf of third parties. Shapiro , a year-old Boston philanthropist and entrepreneur who was one of Madoff's oldest friends and biggest financial backers. Judge Lifland ruled that Rosenman was "indistinguishable" from any other Madoff client, so there was no basis for giving him special treatment to recover funds.
Madoff asked others for money in the final weeks before his arrest, including Wall Street financier Kenneth Langone , whose office was sent a page pitch book, allegedly created by the staff at the Fairfield Greenwich Group. However, it was far too little and far too late. By the week after Thanksgiving, Madoff knew he was at the end of his tether. With banks having all but stopped lending to anyone, he knew he could not even begin to borrow enough money to meet the outstanding redemption requests.
On December 4, he told Frank DiPascali , who oversaw the Ponzi scheme's operation, that he was finished. He directed DiPascali to use the remaining balance in the Chase account to cash out the accounts of relatives and favored investors.
On December 9, he told Peter that he was on the brink of collapse. At that point, Madoff asked his sons to follow him to his apartment, where he admitted that he was "finished", and that the asset management arm of the firm was in fact a Ponzi scheme — as he put it, "one big lie".
Mark and Andrew then reported him to the authorities. Madoff intended to take a week to wind up the firm's operations before his sons alerted authorities. Instead, Mark and Andrew immediately called lawyers. When the sons revealed their father's plan to use the remaining money to pay relatives and favored investors, their lawyers put them in touch with federal prosecutors and the SEC.
Madoff was arrested the following morning. Investigators were looking for others involved in the scheme, despite Madoff's assertion that he alone was responsible for the large-scale operation. He would have had to nurture the Ponzi scheme daily. What happened when he was gone? Who handled it when somebody called in while he was on vacation and said, 'I need access to my money'? You would need office and support personnel, people who actually knew what the market prices were for the securities that were being traded.
You would need accountants so that the internal documents reconcile with the documents being sent to customers at least on a superficial basis," said Tom Dewey, a securities lawyer. David Kotz , who was conducting an investigation into how regulators failed to detect the fraud despite numerous red flags.
Williams of the U. Postal Service was brought in to conduct an independent outside review. A violation of the ethics rule took place if the friendship was concurrent with Kotz's investigation of Madoff. Madoff's firm reported to its customers for decades. It is unclear exactly how much investors deposited into the firm. The year-old financier paused, then said: Apart from 'Bernard L. Madoff' and 'Bernard L. Previously, Madoff was thought to be cooperating with prosecutors.
On March 10, , the U. Attorney for the Southern District of New York filed an count criminal information, or complaint,  charging Madoff  with 11 federal crimes: Madoff pleaded guilty to three counts of money laundering. Madoff gave the appearance that he was trading in Europe for his clients. On March 12, , Madoff appeared in court in a plea proceeding, and pleaded guilty to all charges. The charges carried a maximum sentence of years in prison, as well as mandatory restitution and fines up to twice the gross gain or loss derived from the offenses.
He accepted a lifetime ban from the securities industry, and also agreed to pay an undisclosed fine. In his pleading allocution , Madoff admitted to running a Ponzi scheme and expressed regret for his "criminal acts".
He wished to satisfy his clients' expectations of high returns he had promised, even though it was during an economic recession. He admitted that he hadn't invested any of his clients' money since the inception of his scheme. Instead, he merely deposited the money into his business account at Chase Manhattan Bank. He admitted to false trading activities masked by foreign transfers and false SEC returns. When clients requested account withdrawals, he paid them from the Chase account, claiming the profits were the result of his own unique "split-strike conversion strategy".
He said he had every intention of terminating the scheme, but it proved "difficult, and ultimately impossible" to extricate himself. He eventually reconciled himself to being exposed as a fraud. Only two of at least 25 victims who had requested to be heard at the hearing spoke in open court against accepting Madoff's plea of guilt.
Judge Denny Chin accepted his guilty plea and remanded him to incarceration at the Manhattan Metropolitan Correctional Center until sentencing. Chin said that Madoff was now a substantial flight risk given his age, wealth and the possibility of spending the rest of his life in prison.
Madoff's attorney, Ira Sorkin filed an appeal , to return him back to his "penthouse arrest", await sentencing, and to reinstate his bail conditions, declaring he would be more amenable to cooperate with the government's investigation,  and prosecutors filed a notice in opposition. Madoff's funds in the future. Prosecutors recommended a prison sentence of years, the maximum possible under federal sentencing guidelines. They informed Chin that Irving Picard , the trustee overseeing bankruptcy proceedings for the Madoff organization, had indicated that "Mr.
Madoff has not provided meaningful cooperation or assistance. The judge granted Madoff permission to wear his personal clothing at sentencing. On June 29, Judge Chin sentenced Madoff to years in prison, as recommended by the prosecution.