Madoff Leaves Many Bad Off

[Chomsky]

Re: Madoff Leaves Many Bad Off

I find this story quite delicious. Fred Wilpon, the owner of the New York Mets, is an old pal of Madoff's, and had hundreds of millions of his own money and his firm's (Sterling Equities) invested with Madoff. Now there are questions about Wilpon's viability as a baseball franchise owner. Considering the amount of public money given to Wilpon to build a new ATM, er, baseball stadium out in Queens that passed without a public vote, this could be his just desserts.

http://www.nytimes.com/2008/12/14/sp...=wilpon&st=cse

Now if only the Steinbrenners were in with Madoff...

[due_indigence]

Re: Madoff Leaves Many Bad Off

The gripping narrative of him calling his sons to his apartment to explain the Ponzi scheme is an attempt to take the hit and exonerate the kids. Hmm. I think the 'smart' money with him assumed he was padding the returns with money from his market-making business, you know, screwing the retail NASD investor and enriching the already-rich, standard stuff. It was a legal way to get ill-gotten gains. Isn't that the Wall Street credo anyway? It turns out the ringleader was stealing from his own den of thieves. Where's that honor among thieves? Unconscionable! Almost hilariously pathological.

[politicalfootballfan]

Re: Madoff Leaves Many Bad Off

----nm----

[FRED]

Re: Madoff Leaves Many Bad Off

For anybody with a functioning brain cell, the SEC didn't have any legitimacy before this.

The headline making scandals always come in the very final stages of the mania, just before it heads down into the triple waterfall for good, thus snuffing any remaining false hopes of a quick recovery to "normal".

Remember the TMT economy in the late 1990's? Remember when the news broke about Enron? And WorldCom? And Tyco? The TMT bubble was already bursting by the time Jeff Skilling "retired"...the event that started the really intense scrutiny of what was going on. History rhymes...

Revelations of fraud, standard fair in the collapse of any financial bubble.

[FRED]

Re: Madoff Leaves Many Bad Off

I couldn't figure out what set you off about this article until I just went back and re-read it. I didn't remember when I went back to grab the quote that the end of the article went off on some zionist rant. I only read the Rubin lawsuit part, which was the relevant issue that I was trying to bring to your attention.
You are correct, that was an inappropriate article to post here because of that stuff towards the end.
I originally thought you were just offended at the source of the article, not the content. I stand corrected.

The criticisms you've received over the Rense posting could have been more polite. Congratulations on the great recovery despite that.

Wikipedia says:

Jeff Rense is an American conspiracy theorist and radio talk-show host of the Jeff Rense Program, broadcast on US satellite radio via Genesis Communications Network (GCN) and Internet radio.[1]

Rense's radio program and website, Rense.com,[2] cover subjects such as 9/11 conspiracy theories,[3] UFO reporting, paranormal phenomena, Zionism, tracking of new diseases and possible resultant pandemics, environmental concerns (see chemtrails), animal rights, possible evidence of advanced ancient technology, geopolitical developments and emergent energy technologies, complementary and alternative medicine among other subjects.

Renses's show has been noted as being among "conspiracy-oriented Internet radio shows that often feature anti-Semites and extremists" by the Anti-Defamation League, a non-profit organisation that opposes anti-semitism.[4]

Not our cup of tea. :eek:

[politicalfootballfan]

Re: Madoff Leaves Many Bad Off

----nm----

[FRED]

Re: Madoff Leaves Many Bad Off

The reader should note that this comment is coming from someone who struts an avatar of a young Aldous Huxley, who said in a 1962 speech at Berkeley the following (transcript):

"It seems to me that the nature of the ultimate revolution with which we are
now faced is precisely this: That we are in process of developing a whole
series of techniques which will enable the controlling oligarchy who have
always existed and presumably will always exist to get people to love their
servitude."

That certainly sounds like quite a conspiracy theory to me, was Huxley a conspiracy theorist?

Further, I did not realize that there is an authorized list of references one can utilize at the iTulip forums. Perhaps you can assemble a list of unathorized or authorized sources for posters here. I was under the impression that the intellectual ability of participants at this forum was at such a level that each reader could independently discern the relevance and credibility of various postings.

There is no strict list but if member post a link from Larouche or Rense or any of the other conspiracy nuts out there, they can expect to catch some flack.

[jk]

Re: Madoff Leaves Many Bad Off

What is interesting is several "hedge" funds that were essentially fully invested with Madoff. Now why would anyone pay a hedge fund 2 & 20 so they can stick the money with someone else who's also taking a fee?

there are some rational explanations, assuming one accepts 2+20 as ever rational at all: e.g.
1. see "fund of funds"
2. so they can get into closed funds

[GRG55]

Re: Madoff Leaves Many Bad Off

there are some rational explanations, assuming one accepts 2+20 as ever rational at all: e.g.
1. see "fund of funds"
2. so they can get into closed funds

Fair enough if that was actually the case [and for a portion of the fund in your item 2].

But the situation I was pointing out was that it appears there were hedge funds [not fund of funds] that were essentially 100% invested with Madoff. I interpreted that to mean that investor JSI [Joe Sophisticated Investor] placed money with hedge fund manager RC85 [Romanee-Conti 1985] at the agreed 2 & 20, or whatever ridiculous fee was agreed, and expecting active management of a particular hedged strategy. RC85 in turn sent essentially all the funds to Madoff, made no further decisions and collected fees on a regular basis, for doing nothing much more than making one decision [a rather bad one, as it turns out]. I wonder if JSI had any knowledge of that?

Here's another example [it appears] from today's Bloomberg...Tremont Rye Investment Management...

Tremont Group Funds Invested $3.3 Billion With Madoff

Dec. 15 (Bloomberg) -- Tremont Group Holdings Inc., a hedge- fund firm owned by OppenheimerFunds Inc., had $3.3 billion invested with Bernard Madoff, according to a person familiar with the matter.

Tremont’s Rye Investment Management unit had $3.1 billion, virtually all of its assets, invested with Madoff, said the person, who declined to be identified because the information is private. Tremont had another $200 million invested through its fund of funds group, Tremont Capital Management.

“We believe Tremont exercised appropriate due diligence in connection with the Madoff investments,” the company said in a statement...

Nice work. If you can get it. :p

[while it lasted]

[metalman]

Re: Madoff Leaves Many Bad Off

Fair enough if that was actually the case [and for a portion of the fund in your item 2].

But the situation I was pointing out was that it appears there were hedge funds [not fund of funds] that were essentially 100% invested with Madoff. I interpreted that to mean that investor JSI [Joe Sophisticated Investor] placed money with hedge fund manager RC85 [Romanee-Conti 1985] at the agreed 2 & 20, or whatever ridiculous fee was agreed, and expecting active management of a particular hedged strategy. RC85 in turn sent essentially all the funds to Madoff, made no further decisions and collected fees on a regular basis, for doing nothing much more than making one decision [a rather bad one, as it turns out]. I wonder if JSI had any knowledge of that?

Here's another example [it appears] from today's Bloomberg...Tremont Rye Investment Management...

Tremont Group Funds Invested $3.3 Billion With Madoff

Dec. 15 (Bloomberg) -- Tremont Group Holdings Inc., a hedge- fund firm owned by OppenheimerFunds Inc., had $3.3 billion invested with Bernard Madoff, according to a person familiar with the matter.

Tremont’s Rye Investment Management unit had $3.1 billion, virtually all of its assets, invested with Madoff, said the person, who declined to be identified because the information is private. Tremont had another $200 million invested through its fund of funds group, Tremont Capital Management.

“We believe Tremont exercised appropriate due diligence in connection with the Madoff investments,” the company said in a statement...

Nice work. If you can get it. :p

[while it lasted]

unfucking believable.

'We believe Tremont exercised appropriate due diligence in connection with the Madoff investments'.

does a 3 nights at strip clubs with the firm's management in two years count as 'appropriate due diligence'? :eek:

[kingcopper]

Re: Madoff Leaves Many Bad Off

unfucking believable.

'We believe Tremont exercised appropriate due diligence in connection with the Madoff investments'.

does a 3 nights at strip clubs with the firm's management in two years count as 'appropriate due diligence'? :eek:

I started envisioning a group of professional hedge fund women combing through Madoff's hair while they inspect his paperwork, not his ****. I guess the inspectors were in fact men and Madoff had some of his own professional women combing cocks of hedge fund inspectors' while Madoff burned paperwork!

[D-Mack]

Re: Madoff Leaves Many Bad Off

Global trail of victims of the man on 17th floor

RBS and HSBC among major banks to admit losses from $50bn Wall Street fraud
Andrew Clark in New York
The Guardian, Tuesday 16 December 2008


From Hollywood to Tokyo, London and Jerusalem, furious victims are demanding answers. How could a 70-year-old man on the 17th floor of a Manhattan tower block fiddle the global financial community out of $50bn?

Yesterday the sheer scale of the deceit perpetrated by Bernie Madoff was only gradually becoming clear. The genial, white-haired Wall Street figure has emerged as one of the biggest alleged financial fraudsters in history, with victims ranging from some of the world's biggest banks to individual investors who have seen their life savings wiped out.

HSBC yesterday said it had exposure of about $1bn, while Royal Bank of Scotland is staring at a possible loss of £400m.

A children's charity run by the film director Steven Spielberg invested as much as 60% of its money with Madoff. Hundreds of prominent members of Jewish communities in New York and Florida entrusted Madoff with their savings. Even the high-flying City fund manager Nicola Horlick, once dubbed "superwoman", has been caught out in the £33.5bn scam.

"This has made law enforcement and regulatory agencies in the US look absolutely ridiculous," said Bradley Simon, a New York defence lawyer specialising in white-collar crime. "How they failed to spot this is beyond me. It's incomprehensible that they couldn't somehow have got wind of it."


....

http://www.guardian.co.uk/business/2...scams-hsbc-rbs

[Slimprofits]

Re: Madoff Leaves Many Bad Off

SEC Didn't Act on Madoff Tips - WaPo - 12/15/08

Aksia, a New York-based consulting firm that advises institutional investors about hedge funds, found that Madoff's auditor worked out of a 13-foot-by-18-foot office in Rockland County, N.Y., with only three employees. The employees of the firm, which had only Madoff as a client, included a 78-year-old living in Florida and a secretary, Aksia said it discovered. The auditor, Friehling and Horowitz, did not respond to a request for comment.

"If it's true that the SEC had begun receiving warnings in 1999, then even if they did nothing before then, surely when he registered with them in 2006, he should have gone to the top of their list," said Barbara Roper of the Consumer Federation of America.

Madoff avoided scrutiny despite the dogged bell-ringing of a Boston accountant, employed by another investment firm, who repeatedly accused Madoff of breaking the law in a series of letters to the SEC that began in 1999. The accountant, Harry Markopolos, said he sent his most recent letter in April.

A former SEC enforcement official said the letters should have raised red flags for regulators.

"It is not common to get complaints about somebody who's running a large amount of money that it's a Ponzi scheme," said the former official, speaking on condition of anonymity.

He said that investigating a Ponzi scheme is not difficult: The agency can simply demand proof that the investment adviser holds the amount of money he claims to hold. And he added that regulators also should have noticed that Madoff was audited by a tiny company with no reputation. He said there are only a few accounting firms with the sophistication to audit an investment adviser that, at the time of registration with the SEC, reported $17 billion on assets.
Regulators should have noticed instantly, he said, that Madoff's auditor was not on the list.

[Jim Nickerson]

Re: Madoff Leaves Many Bad Off

Here's a piece from Barron's that is self -explanatory regarding the early warning (Erin Arvedlund wrote it seven years ago), at least as a few may have seen it, of Madoff's investment scheme, which seemed to have been beyond explanation of some others on Wall Street or thereabouts.

http://online.barrons.com/article/SB...cle-outset-box


What We Wrote About Madoff

Our 2001 story, excerpted here, questioned Bernie Madoff's too-good-to-be-true track record well before his Ponzi scheme was exposed.

Seven years ago, well before Bernie Madoff had been accused of fleecing investors of $50 billion in a massive Ponzi scheme, Barron's questioned his remarkable investment performance. One of our staff writers, Erin E. Arvedlund, talked with experts who were highly skeptical about Madoff's claimed results. One financial adviser that she quoted had pulled his clients' funds out of Madoff's shop for exactly that reason. Here's the story, excerpted in almost its entirety. (Erin was recently interviewed on National Public Radio about her story. Here is a link to the interview.)

TWO YEARS AGO, AT A HEDGE-FUND CONFERENCE in New York, attendees were asked to name some of their favorite and most-respected hedge-fund managers. Neither George Soros nor Julian Robertson merited a single mention. But one manager received lavish praise: Bernard Madoff. Folks on Wall Street know Bernie Madoff well. His brokerage firm, Madoff Securities, helped kick-start the Nasdaq Stock Market in the early 1970s and is now one of the top three market-makers in Nasdaq stocks. Madoff Securities is also the third-largest firm matching buyers and sellers of New York Stock Exchange-listed securities.

Suzanne Opton for Barron's

Erin E. Arvedlund

But what few on the Street know is that Bernie Madoff also manages more than $6 billion for wealthy individuals. That's enough to rank Madoff's operation among the world's five largest hedge funds. What's more, these private accounts have produced compound average annual returns of 15% for more than a decade. Remarkably, some of the larger, billion-dollar Madoff-run funds have never had a down year.

When Barron's asked Madoff how he accomplishes this, he says, "It's a proprietary strategy. I can't go into it in great detail." Nor were the firms that market Madoff's funds forthcoming. "It's a private fund. And so our inclination has been not to discuss its returns," says Jeffrey Tucker, partner and co-founder of Fairfield Greenwich, a New York City-based hedge-fund marketer. "Why Barron's would have any interest in this fund, I don't know." One of Fairfield Greenwich's most sought-after funds is Fairfield Sentry Limited. Managed by Bernie Madoff, Fairfield Sentry has assets of $3.3 billion.

One of Madoff's hedge-fund-offering memorandums describes his strategy this way: "Typically, a position will consist of the ownership of 30-35 S&P 100 stocks, most correlated to that index, the sale of out-of-the-money calls on the index and the purchase of out-of-the-money puts on the index. The sale of the calls is designed to increase the rate of return, while allowing upward movement of the stock portfolio to the strike price of the calls. The puts, funded in large part by the sale of the calls, limit the portfolio's downside."

Among options traders, that's known as the "split-strike conversion" strategy. In layman's terms, it means Madoff invests primarily in the largest stocks in the S&P 100 index -- names like General Electric , Intel and Coca-Cola . At the same time, he buys and sells options against those stocks. For example, Madoff might purchase shares of GE and sell a call option on a comparable number of shares -- that is, an option to buy the shares at a fixed price at a future date. At the same time, he would buy a put option on the stock, which gives him the right to sell shares at a fixed price at a future date. The strategy, in effect, creates a boundary on a stock, limiting its upside, while at the same time protecting against a sharp decline in the share price. When done correctly, this so-called market-neutral strategy produces positive returns no matter which way the market goes.


Using this split-strike conversion strategy, the Fairfield Sentry Limited fund has had only four down months since inception in 1989. In 1990, Fairfield Sentry was up 27%. In the ensuing decade, it returned no less than 11% in any year, and sometimes as much as 18%. Last year, Fairfield Sentry returned 11.55% and so far in 2001, the fund is up 3.52%.

Those returns have been so consistent that some on the Street have begun speculating that Madoff's market-making operation subsidizes and smooths his hedge-fund returns. Why would Madoff Securities do this? Because, in having access to such a huge capital base, it can make much larger bets -- with very little risk -- than it could otherwise. It works like this: Madoff Securities stands in the middle of a tremendous river of orders, which means that its traders have advance knowledge, if only by a few seconds, of what the big customers in the market are buying and selling. And by hopping on the bandwagon, the market-maker effectively locks in profits. As such, throwing a little cash back to the hedge funds would be no big deal. And the funds' consistent returns, in turn, attract more capital.

Our story, published on May 7, 2001.

When Barron's ran that scenario by Madoff, he dismissed it as "ridiculous."

Still, some on Wall Street remain skeptical about how Madoff achieves such stunning double-digit returns using options alone. Three option strategists for major investment banks told Barron's they couldn't understand how Madoff churns out such numbers using this strategy. Adds a former Madoff investor: "Anybody who's a seasoned hedge-fund investor knows the split-strike conversion is not the whole story. To take it at face value is a bit naïve." Madoff dismisses such skepticism. "Whoever tried to reverse-engineer, he didn't do a good job. If he did, these numbers would not be unusual."

Adding further mystery to Madoff's motives is the fact that he charges no fees for his money-management services. Indeed, while fund marketers like Fairfield Greenwich rake off a 1.5% from investors, none of that goes back to Madoff. Nor does he charge a fee on money he manages in private accounts. Why not? "We're perfectly happy to just earn commissions on the trades," he says.

Madoff's investors rave about his performance -- even though they don't understand how he does it. "Even knowledgeable people can't really tell you what he's doing," one very satisfied investor told Barron's. "People who have all the trade confirms and statements still can't define it very well. The only thing I know is that he's often in cash" when volatility levels get extreme. This investor declined to be quoted by name. Why? Because Madoff politely requests that his investors not reveal that he runs their money.

"What Madoff told us was, 'If you invest with me, you must never tell anyone that you're invested with me. It's no one's business what goes on here,' " says an investment manager who took over a pool of assets that included an investment in a Madoff fund. "When he couldn't explain how they were up or down in a particular month," he added, "I pulled the money out."