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Bernard Madoff arrested over alleged $50 billion fraud

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March 27th 2009 : British investigators said Friday that Ruth Madoff got a $2 million payment from the London division of her husband’s securities firm just weeks before he was arrested for securities fraud. That’s on top of the $15 million that she withdrew from a Massachusetts brokerage account beginning in late November - with $10 million removed on the eve of Bernard Madoff’s arrest. This latest report that Ruth Madoff was withdrawing additional sums before her husband’s arrest raises further questions about her knowledge of her husband’s scheme, if not her possible involvement. Perhaps Ruth will join the likes of five such women: Imelda Marcos, Elena Ceauçescu, Chairman Mao’s fourth wife and Grace Mugabe & maybe Patti Blagojevich. The Chicago Tribune compared Patti to Shakespeare’s brutally ambitious Scots noblewoman who goaded her husband to regicide, alleging that Mrs. Blagojevich “plotted against her husband's perceived enemies.” citing transcripts of phone conversations in which she told “her husband, in the coarsest terms, what to do." Well the others named did just that??

March 13th 2009 : Bernie Madoff pleaded guilty to eleven counts of theft, perjury, money laundering, and fraud, Judge Denny Chin remanded Madoff to jail to await his sentencing on June 16. Up until now he's been allowed to stay in his Manhattan apartment, but Chin explained : "He has incentive to flee, he has the means to flee, and thus he presents the risk of flight," he said. "Bail is revoked." The US government is pressing for the maximum possible punishment of a 150-year jail term.

Now they want the assets:Bernard L. Madoff mailed Cartier and Tiffany watches, an emerald ring and a diamond necklace worth a total of at least $1 million to relatives and friends in violation of a court order

• A Manhattan condominium valued at $7 million on East 64th Street, where Madoff was under house arrest for three months before his guilty plea.

• Homes in Montauk, New York; Palm Beach, Florida; and Cap d'Antibes, France, as well as "all insured and readily salable personal property" contained in the homes.

• A yacht named Bull, docked in France; three other boats and four automobiles: two Mercedes, one BMW and one Volkswagen.

• A Steinway piano valued at $39,000 and a silverware set valued at $65,000.

• $17 million deposited at Wachovia Bank, $45 million in securities held at COHMAD Securities and Madoff's interest in COHMAD Securities.

The wife of accused swindler Bernard Madoff is arguing that their $7 million Manhattan penthouse and an additional $62 million in assets belong to her. In court papers filed Monday in U.S. District Court in Manhattan, Ruth Madoff and her lawyer claim that the Upper East Side apartment, $45 million in municipal bonds and $17 million more in a separate account, all belong to her, rather than to her husband, who was charged with a $50 billion scheme to defraud investors.

Pursuing efforts to jail Bernard Madoff, federal prosecutors disclosed Thursday that investigators had found about 100 signed checks to friends and relatives, totaling more than $173 million, on the day of his arrest.They said the discovery of the checks in his office desk is more evidence that the trader was trying to keep his assets out of the hands of his investors.

NEW YORK (Reuters) – Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion "Ponzi scheme" in what may rank among the biggest fraud cases ever. The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses. Madoff told senior employees of his firm on Wednesday that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme," with estimated investor losses of about $50 billion, according to the U.S. Attorney's criminal complaint against him.

A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors. On Thursday, two agents for the U.S. Federal Bureau of Investigation entered Madoff's New York apartment. "There is no innocent explanation," Madoff said, according to the criminal complaint. He told the agents that it was all his fault, and that he "paid investors with money that wasn't there," according to the complaint. The $50 billion allegedly lost would make the hedge fund one of the biggest frauds in history. When former energy trading giant Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets.

U.S. prosecutors charged Madoff, 70, with a single count of securities fraud. They said he faces up to 20 years in prison and a fine of up to $5 million. The Securities and Exchange Commission filed separate civil charges against Madoff.

"Our complaint alleges a stunning fraud -- both in terms of scope and duration," said Scott Friestad, the SEC's deputy enforcer. "We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors." Dan Horwitz, Madoff's lawyer, told reporters outside a downtown Manhattan courtroom where he was charged, "Bernard Madoff is a longstanding leader in the financial services industry. We will fight to get through this unfortunate set of events." A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment.

Authorities, citing a document filed by Madoff with the U.S. Securities and Exchange Commission on January 7, 2008, said Madoff's investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management. Those clients may have included other funds that in turn had many investors. The SEC said it appeared that virtually all of the assets of his hedge fund business were missing.

CONSISTENT RETURNS

An investor in the hedge fund said it generated consistent returns, which was part of the attraction. Since 2004, annual returns averaged around 8 percent and ranged from 7.3 percent to 9 percent, but last decade returns were typically in the low-double digits, the investor said. The fund told investors it followed a "split strike conversion" strategy, which entailed owning stock and buying and selling options to limit downside risk, said the investor, who requested anonymity. Jon Najarian, an acquaintance of Madoff who has traded options for decades, said "Many of us questioned how that strategy could generate those kinds of returns so consistently." Najarian, co-founder of optionmonster.com, once tried to buy what was then the Cincinnati Stock Exchange when Madoff was a major seatholder on the exchange. Najarian met with Madoff, who rejected his bid.

"He always seemed to be a straight shooter. I was shocked by this news," Najarian said.

'LOCK AND KEY'

Madoff had long kept the financial statements for his hedge fund business under "lock and key," according to prosecutors, and was "cryptic" about the firm. The hedge fund business was located on a separate floor from the market-making business. Madoff has been conducting a Ponzi scheme since at least 2005, the U.S. said. Around the first week of December, Madoff told a senior employee that hedge fund clients had requested about $7 billion of their money back, and that he was struggling to pay them.

Investors have been pulling money out of hedge funds, even those performing well, in an effort to reduce risk in their portfolios as the global economy weakens. The fraud alleged here could further encourage investors to pull money from hedge funds. "This is a major blow to confidence that is already shattered -- anyone on the fence will probably try to take their money out," said Doug Kass, president of hedge fund Seabreeze Partners Management. Kass noted that investors that put in requests to withdraw their money can subsequently decide to leave it in the fund if they wish. Bernard L. Madoff Investment Securities has more than $700 million in capital, according to its website.

Madoff remains a member of Nasdaq OMX Group Inc's nominating committee, and his firm is a market maker for about 350 Nasdaq stocks, including Apple, EBay and Dell, according to the website. The website also states that Madoff himself has "a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."

HITS THE RICH AND BANKS: BBC news

Meanwhile, some of the biggest private losers seem to have been members of the Palm Beach country club, where many of Mr Madoff's wealthy clients were recruited. The list of prominent victims include a New Jersey Senator, the owners of the New York Mets and the charities run by film director Stephen Spielberg and Nobel Prize winning writer Elie Wiesel.Among the potential losers is Spain's largest bank, Santander, which owns the UK High Street banks Abbey, Alliance & Leicester and Bradford & Bingley.The bank had a direct exposure of 17m euros ($23m; £15m), but clients of its Optimal fund management unit have another 2.3bn euros invested in the firm run by Bernard Madoff Britain's HSBC said it had investments of about $1bn, which could be affected.

Royal Bank of Scotland said it could potentially lose about £400m ($601m) if all its investments had to be written off. The French bank, Natixis, a subsidiary of Caisse d'Epargne and Banque Populaire, said it could potentially lose up to 450m euros (£402m; $605m). One of the world's biggest investment groups, Man, said it had invested about $360m through its RMF institutional fund of funds business, representing 0.5% of its total funds. Banking shares fell around the world, with Royal Bank of Scotland dropping 3.7%, HSBC losing 1.2% and banks making up the top four losers on New York's Dow Jones Industrial Average

FROM RICHES TO RAGS

Mr Madoff is alleged to have used money from new investors to pay off existing investors in the fund. A federal judge has appointed a receiver to oversee Mr Madoff firm's assets and customer accounts, while the 70-year-old banker has been released on $10m bail. Mr Madoff founded Bernard L Madoff Investment Securities in 1960, but also ran a separate hedge fund business. According to the US Attorney's criminal complaint filed in court, Mr Madoff told at least three employees on Wednesday that the hedge fund business - which served up to 25 clients and had $17.1bn under management - was a fraud and had been insolvent for years. He said he was "finished", that he had "absolutely nothing" and "it's all just one big lie", and that it was "basically, a giant Ponzi scheme", the complaint said. US prosecutors say he could face up to 20 years in prison and a fine of up to $5m.

With homes in New York and Florida, Mr Madoff enjoyed the trappings of a wealthy New York financier. A member of the elite Palm Beach Country Club, private dining societies, Mr Madoff played golf and drank cocktails with the exclusive tranche of old American money for 50 years. His offices were adorned with Roy Lichten-stein prints and the glass lobby was flanked with a colonnade of red granite pillars. In the past few years – it is not clear exactly when – Mr Madoff began to diversify. He set up a separate arm of his business designed to invest the funds of rich individuals, enticing them with his long-established name, his own wealth, and promising potential investors returns of up to 12 per cent. He was able to lure new clients through recommendations from his institutional clients, such as the banks on whose behalf he had traded for decades. According to a regulatory filing in January, Mr Madoff’s advisory business had $17.1 billion of assets under its control. Had it not been for the collapse of Lehman Brothers on September 15, Mr Madoff would probably be planning his Christmas golfing plans in the tropical warmth of Florida. He would not be on a $10 million bail bond and instructed not to stray far beyond the New York state boundaries.

Madoff’s own $19 million foundation also was wiped out, while a Long Island Jewish Health program lost $5 million, and a Texas-based foundation that gave to Jewish causes lost $6 million. “I laid off five people today,” said a shell-shocked Coltin, whose group dispensed about $1.5 million a year to Massachusetts Jewish groups. “Our foundation was the lifeblood of this community. It’s just very, very sad.” Washington Post .Fairfield, Connecticut, thought the 58,000- person town’s pension fund was holding up well amid the worst financial crisis since the Great Depression & are set to lose $42m in pension funds.

The company's website may be found here: http://www.madoff.com/