WORLD> America
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WORLD> America
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List of potential victims grows in NY fraud case
(Agencies)
Updated: 2008-12-14 12:22 Perhaps more startling than the loss was that it apparently caught regulators and investigators off guard, only coming to light last week when Madoff's own family turned him in. The core of the scheme, taking investments from one client to pay returns to another, "has been around since the beginning of time," said Marc Powers, a former Securities and Exchange Commission enforcement chief and head of the securities practice at Baker Hostetler. The firm somehow pulled off the fraud despite being subject to examination by the SEC, Powers added. "You wonder how these things escaped the normally careful review of these regulatory organizations." The latest dose of bad news in the world of finance has left Madoff's clients "panicked," said Stephen A. Weiss, a lawyer for several dozen investors. "These people are sorrowful. These people are angry. And many are now destitute." The wave of ill will, fuel for inevitable lawsuits, was aimed at a man who had cultivated an image as a straight-shooter with a personal touch. The day after his arrest, his company's website still boasted that "in an era of faceless organizations ... Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner's name is on the door." It went on to say "Bernard Madoff 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." Madoff's resume was the stuff of Wall Street legend: He founded his company in 1960 with $5,000 he earned in part working as a lifeguard on Long Island beaches while putting himself through Hofstra University Law School. It eventually became one of five broker-dealers that spearheaded the formation of the Nasdaq Stock Market, where he served as a member of the board of governors in the 1980s and as chairman of the board of directors in the early '90s. By 2001, Madoff's firm was one of the three top market makers in Nasdaq stocks and the third-largest firm matching buyers and sellers of securities on the New York Stock Exchange, according to Baron's. Investigators say Madoff's crime originated in a separate and secretive investment-advising business. Madoff apparently kept the loss a secret even from his two sons and other family members who work at the firm until he and two of them retreated to his apartment occupying the entire 12th floor of an Upper East Side building on Dec. 9, according the complaint drawn up by an arresting FBI agent. "It's all just one big lie," he told his family. He confided he had blown the money in what was "basically, a giant Ponzi scheme," the complaint added. Several attorneys representing investors, however, have questioned how he could have acted alone, given the size of the alleged fraud and vast holdings of his firm. According to the court complaint, Madoff told his family he expected to end up behind bars, but wanted to execute his own version of a bailout package by doling out $200 to $300 million he had left to family, friends and employees. After the meeting, a lawyer for the family contacted regulators, who alerted the federal prosecutors and the FBI. Madoff was in a bathrobe when two FBI agents arrived at his door unannounced at 8:30 a.m. on Dec. 11. He invited them in, then confessed after being asked "if there's an innocent explanation," the complaint said. Responded Madoff: "There is no innocent explanation."
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