Case Analysis

Madoff was known as an experienced investor. He was able to lure clients to invest in his
scheme using his charisma, wits and reputation. Madoff manipulated the stream of cash
flow to make it look like his company is more valuable than it actually was. Second, his
companys financial reports were never made public during the time of the scheme.The
fraudulent investment scheme occurred because of the lack of regulation and inadequate
oversight of certain financial intermediaries and opportunistic behavior

Madoff started off small. He gathered money from local establishments like country clubs
and charity events. Investors would be present at these gatherings and they would
question Madoff for advice, as he was already a well-known investor who was able to
make seemingly magic returns. From there, these investors would entrust him with his
savings, which only fueled the principal that Madoff needed to make his Ponzi scheme
continue to work.
By 1992, the Untied States Securities and Exchange Commission caught up with one of
the companies Madoff was using to feed his massive Ponzi empire, Avellino & Bienes.
Since 1962, the firm, which had formerly been known as Alpern, Avellino and Bienes,
funneled funds to Madoff by recommending that clients invest in a highly success but
anonymous man who was able to generate high returns.
The interesting part comes at the point when the allegations of SEC shut down the firm.
Instead of liquidating all the assets related to Avellino & Bienes, they were transferred to
Bernard L. Madoff Securities LLC, a company owned by Madoff. The chief reason that
this happened was because Madoff claimed he had no knowledge that the firm was
operating illegally and that Madoff had a reportedly legitimate investment returns portfolio
for the prior 10 years.
Between 1999 and 2006, the SEC investigated Madoff's company several times.
In the first two investigations performed by the SEC in 1999 and 2000, there were
reportedly no fraudulent practices in Madoff's business.
In 2004, articles began to appear in popular business journals alleging that Madoff's
business was a fraud. One article went so far as to say that Madoff's hedge fund was the
biggest fraud in the world. Unfortunately for the investors involved, this was dead on.
In 2005, the SEC investigated Madoff's business again. This time, they found that he was
in violation of doing business as an asset manager while he was registered as an
investment adviser. While no serious fines were brought up against Madoff, he was forced
to register as an asset manager. The rest of the SEC's findings were kept secret.
In 2005, Madoff's company was investigated as being an alleged Ponzi scheme. The SEC
ruled that they found no evidence and no legal action was taken.
It seemed like Madoff had everything set in his favor until 2006 rolled around. The amount
of principal that was being introduced to Madoff's Ponzi scheme wasn't enough to cover
the returns previous investors were promised. This, along with the fact that investors were
moving to begin withdrawing their funds from Madoff's care, caused parts of Madoff's
scheme to collapse.
It wasn't until 2007 when the Financial Industry Regulatory Authority reported that parts
of Madoff's business didn't add up. The problem was that parts of Madoff's firm had no
customers, which is what finally caused the SEC to arrest Madoff.
Originally, Madoff stated that his company had liabilities that topped out at US$50 billion.
Prosecutors of his case, however, stated that the size of his scheme's fraud was around
$64.8 billion and that it affected over 4,800 of Madoff's clients. This makes the Bernie
Madoff scandal the largest case of international fraud yet.
Madoff Key Officials

1. Peter B. Madoff - Chief Compliance Officer, worked with his brother Bernie for
more than 40 years, and ran the daily operations for the past 20 years. Peter
Madoff admitted to improperly avoiding taxes by having the firm pay many of his
expenses, which he didnt report as income. He also said he filed false reports
with regulators that helped conceal the fraud. After learning of the Ponzi scheme,
Peter Madoff said he helped his brother parcel out $300 million remaining in the
firm to select friends and family members. A forfeiture order requires Peter to
surrender all of his assets to the government, including cash, homes, cars and
a Rolex watch. A settlement reached with his family requires the forfeiture of
assets held by his wife, Marion, his daughter, Shana Madoff Swanson, and other
family members.On December 20, 2012, he was sentenced to 10 years in prison
for his involvement in the Ponzi scheme.
2. Frank DiPascali - director of options trading and as well as chief financial officer
at Madoff Securities. pleaded guilty on August 11, 2009, to 10
counts:[83]conspiracy, securities fraud, investment advisor fraud, mail fraud, wire
fraud, perjury, income tax evasion, international money laundering, falsifying
books and records of a broker-dealer and an investment advisor. On May 7,
2015, while still awaiting sentencing, DiPascali died of lung cancer.
3. David G. Friehling Madoffs listed accountant. Friehling was charged on March
18, 2009, with securities fraud, aiding and abetting investment adviser fraud, and
four counts of filing false audit reports with the Securities and Exchange
Commission. In May 2015, U.S. District Judge Laura Taylor Swain sentenced
Friehling to one year of home detention and one year of supervised release.
Friehling avoided prison because he cooperated extensively with federal
prosecutors and because he had been unaware of the extent of Madoff's crimes.
Addressing the court at the hearing, Friehling apologized to Madoff's victims.
Referring to Madoff's reported statement that he was a "dumb auditor," Friehling
said: "I would rather be regarded as dumb than crooked. I did not question what I
 should have questioned. Swain accepted the plea terms, but suggested that
Friehling be forced to pay part of the overall $130 million forfeiture arising from
the fraud.
4. Daniel Bonventre - worked as company director of operations and as an
accountant for Madoff since the 1960s. He was arrested in 2010 and charged
with allegedly having created false and fraudulent books and records,
conspiracy, securities fraud, and tax-related charges. He is also being sued by
the SEC for falsifying records. On those initial charges he may be sentenced to a
maximum of 77 years in prison if convicted. In Dec 2012 Bonventre's request for
access to his seized funds for legal defence purposes was turned down by U.S.
District Court. In March 2013 a three-judge appeals court granted a hearing in a
lower court on his seized funds access request.[95] His trial is to open on October
7, 2013 .On December 8, 2014, Bonventre was sentenced to 10 years in prison
after being convicted on securities fraud and tax-evasion charges for his
involvement in Madoff's $17.5 billion fraud.
5. Annette Bongiorno is a long time personal secretary and aide to Madoff. She is
accused of directing two assistants, Semone Anderson and Winnie Jackson, to
generate fictitious trading tickets for customer accounts. During the 1980s,
Bongiorno recruited small investors from Howard Beach, Queens, where she
grew up next door to Frank DiPascali. Their money was held in accounts called
"RuAnn" (named after Annette and her husband Rudy). Madoff paid for her
honeymoon airfare. She owns homes inManhasset, New York and Boca Raton,
Florida, with a combined assessment of $3.85 million. Bongiorno was arrested in
November 2010 and charged with conspiracy, securities fraud and tax evasion.
She then faced up to 75 years in jail After a brief incarceration in late 2010 and
after $7.6 million were seized from Bongiornos' accounts (out of an estimated
$14 million personal take), Bongiorno was released to house arrest with ankle
monitor at her Manhasset, Long Island residence on a $3.6 million personal
recognizance bond secured by eight co-signers Her trial is to open on October 7,
2013 In December 2014, Bongiorno was sentenced to a 6-year prison term for
her involvement in the Madoff ponzi scheme.
6. Joann Crupi is a former investment advisor to Madoff. Her trial was to open on
Oct 7, 2013. Bongiorno allegedly withdrew $14million from investment accounts
 between 1975 and 2008, despite only investing $920,000 during that time
period.Crupi received payments of over $2.7million from Madoff directly out of
the company's investor funds account, prosecutors said. A jury found her guilty,
and on December 15, 2014 Crupi was sentenced to 6 years in prison for her role
in the scam.
7. George Perez and Jerome O'Hara - is a former computer programmer of
Madoff. A jury found them guilty, and on December 10, 2014 Perez was
sentenced to 2 1/2 years in prison for their role in the scam His trial was to open
on Oct 7, 2013.On December 9, 2014, he was sentenced to 2 1/2 years in prison
for his role in the scam.

Largest Financial Losers Feeder Funds Non-Profit Organizations Individuals

Feeder Funds
Fairfi eld Greenwich
Advisors: $7.5 billion
Tremont Group Holdings:
$3.3 billion
Banco Santander: $2.9
billion
Bank Medici: $2.1 billion
Ascot Partners: $1.8 billion
Non-Profit Organizations Individuals
Hadassah: $90 million Carl Shapiro: $500 million
New York University: $24 Phyllis Molchatsky: $17
million million
Jewish Community Richard Spring: $11 million
Foundation of Los
Angeles: $18 million
Elie Wiesel Foundation: Zsa Zsa Gabor: $10 million
$15.2 million
Yeshiva University: $14.5 Ira Roth: $1 million
million

Conclusion :

In conclusion, the case of Bernard Madoff is another example of a white collar crime
which is orchestrated by an educated, experienced and respectable mastermind who
takes advantage of the trust and desire of people to gain more profit. The incident could
have been prevented if only there was enough internal controls and compliance
standards that detected this misconduct. The errors and ignorance at the SEC is still the
only variable proven to enable the Madoff fraud to continue over a decade. There were
probably more factors that mattered like corruption and loopholes therein. However, the
most immediate actions to prevent similar events from occurring must take place
internally in the commission. Effective audits, more transparency and better
understanding of the true nature of operations of the Madoff business was where
everyone fell short on.

Sources :
http://thedebtweowe.com/the-bernie-madoff-scandal-a-short-overview-of-the-worlds-
largest-ponzi-scheme#sthash.tvj4zLsd.dpuf

http://dcollins.faculty.edgewood.edu/pdfdocuments/Madoff%20Case.pdf

https://prezi.com/aq5qipdfy9gc/bernie-madoff-case-study/

https://en.wikipedia.org/wiki/Participants_in_the_Madoff_investment_scandal