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The Man
Former American stock broker
Investment advisor
Non-executive chairman of the NASDAQ stock market
Admitted operator of the largest Ponzi scheme in history.
Founder and Chairman of the Wall Street firm Bernard L. MadoffInvestment Securities LLC in 1960.
Arrested on December 11, 2008.
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His Firm
Secured a loan of $50,000 from his father-in-law used to set up Bernard L. Madoff
Investment Securities LLC.
The firm made markets (quoted bid and ask prices) via the National QuotationBureau's Pink Sheets.
To beat competition, innovative computer information technology used to disseminate
its quotes
The technology the firm helped develop became the NASDAQ.
Functioned as a third-market provider, by directly executing orders over the
counter from retail brokers.
At one point, Madoff Securities was the largest market maker at the NASDAQ and in
2008, it was the sixth largest market maker on Wall Street.
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& The Scandal
Minority ownership in the
Cincinnati Stock Exchange and
appointments to the board ofdirectors of Jewish institutions
used to procure new investments.
Company divided into two:
Lucrative market-making unit Shadowy investment advisory
unit.
Typical Ponzi scheme
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& The Scandal
Madoff lied about results, claiming
12-13% return of investor capital.
Suspicions of annual results
produced.
SEC coerced into opening up an
investigation.
Rumors of market-making arm
indulging in illegally front-run
trades.
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The Panic
Prominent figures and institutions
affected
BNP Paribas
Royal Bank of Scotland
Swiss banks &HNIs
Investors requested $7 billion dollars
in withdrawals
Madoff came clean about the absence
of funds to high-ranking officials in
the company
Sons reported Madoff to the FBI
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March 10, 2009: Criminal complaint filed stating thatover the past 20 years, Madoff had defrauded his clients
of almost $65 billion
Madoff pleaded guilty to 11 federal offenses Securities Fraud
Mail Fraud
Wire Fraud
Money Laundering False Statements
Thefts
Insisted sole responsibility for the fraud Wife, sons, friends, employees never informed
The Sentence
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Aug 2009: Frank DiPascali pleaded guilty
Nov 2009: David Friehling, Madoff's
accounting front man pleaded guilty Securities fraud
Investment adviser fraud
Making false filings to the SEC
And obstructing the IRS
Plea allocution stated commence of Ponzischeme in 1991.
No legitimate investments made with clients'money deposited in personal business
account
The Sentence
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Committed to satisfying his clients' expectations ofhigh returns, despite an economic recession.
Admitted to false trading activities masked byforeign transfers and false SEC filings.
Proved "difficult, and ultimately impossible" toreconcile his client accounts.
June 2009, Court announced verdict Maximum sentence of 150 years in federal prison.
Recovery of $17 Billion
Taking control of all personal assets worth about$800 Million
The Sentence
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Ethical & Moral Issues
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InvestorInvestor
GreedGreed
AccountingAccounting
EthicsEthicsLegal EthicsLegal Ethics
ReligiousReligious
EthicsEthics
SocietalSocietal
EthicsEthics
FamilyFamily
MoralsMorals
Investors: Big companies, banks, MNCs and the superrich and sophisticated HNIs
No due diligence
Returns to investors always higher than average
market return
Lack of conducting business with completetransparency
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InvestorInvestor
GreedGreed
AccountingAccounting
EthicsEthicsLegal EthicsLegal Ethics
ReligiousReligious
EthicsEthics
SocietalSocietal
EthicsEthics
FamilyFamily
MoralsMorals
Violating basic ethical practices which all accountingfirms are supposed to follow
Manipulating the statements and tax returns of clients
Creating false balance sheets
Bogus firm to answer queries of investors regarding taxand the nature of returns
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InvestorInvestor
GreedGreed
AccountingAccounting
EthicsEthicsLegal EthicsLegal Ethics
ReligiousReligious
EthicsEthics
SocietalSocietal
EthicsEthics
FamilyFamily
MoralsMorals
Madoff confessed filing false and misleading certified
audit reports with the SEC
Sent the same to his clients
Concealed facts like his auditors were a firm he himself
owned
Cheated the entire market and Wall Street
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InvestorInvestor
GreedGreed
AccountingAccounting
EthicsEthicsLegal EthicsLegal Ethics
ReligiousReligious
EthicsEthics
SocietalSocietal
EthicsEthics
FamilyFamily
MoralsMorals
Cheated people of his country and religion
Roman Catholic priests and institutions linked to the Redemptorist society
Jewish charities, Carl and Ruth Shapiro Family Foundation, YeshivaUniversity in Manhattan and the Jewish Foundation of Los Angeles
Lost money used to fund scholarships for inner city children, care forelderly priests and other charitable causes
Depleted savings and endowments of the St. Mary and St. Patrick schools
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InvestorInvestor
GreedGreed
AccountingAccounting
EthicsEthicsLegal EthicsLegal Ethics
ReligiousReligious
EthicsEthics
SocietalSocietal
EthicsEthics
FamilyFamily
MoralsMorals
Madoff used his position as member of the board of
directors of Jewish religious institutions to get investors.
For attracting the American business clients, his agents
used his position as a former chairman at NASDAQ to create
an atmosphere of trust.
Exploited friendship networks and country club connections
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InvestorInvestor
GreedGreed
AccountingAccounting
EthicsEthicsLegal EthicsLegal Ethics
ReligiousReligious
EthicsEthics
SocietalSocietal
EthicsEthics
FamilyFamily
MoralsMorals
Presented himself as a conservative investor and
involved Jewish philanthropist living a respectable
family life.
Act of selfish ambition and abuse of good faith
Lacks any sense of good relationships with friends and
fellow Jews.
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InvestorInvestor
GreedGreed
AccountingAccounting
EthicsEthicsLegal EthicsLegal Ethics
ReligiousReligious
EthicsEthics
SocietalSocietal
EthicsEthics
FamilyFamily
MoralsMorals
Hid entire business wrong doings from friends, employees,sons and wife
Completely immoral act
Morality of family was completely shaken and consequenceswere disastrous
While authorities were investigating the role of his sons tofind clues and indict them, the elder son committed suicide
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Consequences Reasons
How it could beavoided Learning
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Consequences Bernard Madoff issued a prisonsentence till death.
Jewish communities in the UShelping needy children and
aged people with charities fromfellow Jewish businessmenbeing looked with caution
People have lost trust
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Greed of investors who investedwithout any due diligence at
any stageReasons
Callousness of regulators in notcross-checking audit reports
Lack of ethics and morality of
one individual who cheatedpeople
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Build ethical practices andimpart education on how to actmorally and ethically, under all
circumstances.
Strong punishments
to be put in place
How it could beavoided
Using such cases as example to
understand need for fairpractices
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Do all activities morally andethically, setting an example
for others
Always perform due diligenceof all business entities and
partners
Reward employees for acts likewhistle blowing Learning
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Akshat Vaid 91004
Ankur Sharma 91008Harshita Periwal 91024
Karan Khanna 91026
Nikhil Soni 91038
Sandeep Agarwal 91048