Good Samaritan Medical Center or Good Samaritan Hospital is a 333-bed acute care hospital located in West Palm Beach, Florida .
77-505: Jeffry M. Picower (May 5, 1942 – October 25, 2009) was an American investor involved in the Madoff investment scandal . He was the largest beneficiary of Madoff's Ponzi scheme , and his widow agreed to have his estate settle the claims against it by Madoff trustee Irving Picard for $ 7.2 billion, the largest single forfeiture in American judicial history. Picower was born into a Jewish family in
154-417: A penny stock trader with $ 5,000 ($ 51,496 in 2023), earned from working as a lifeguard and sprinkler installer, and $ 50,000 that he had borrowed from his in-laws ($ 514,961 in 2023). His fledgling business, which he founded with his high school sweetheart Ruth Alpern, began to grow with the assistance of his father-in-law, accountant Saul Alpern, who referred a circle of friends and their families. Initially,
231-525: A whistleblower whose repeated warnings about Madoff were ignored, estimated that at least $ 35 billion of the money Madoff claimed to have stolen never really existed, but was simply fictional profits he reported to his clients. Investigators determined that others were involved in the scheme. The U.S. Securities and Exchange Commission (SEC) was criticized for not investigating Madoff more thoroughly; questions about his firm had been raised as early as 1999. The legitimate trading arm of Madoff's business that
308-490: A 'hedge fund of funds ' privately labeling their own hedge funds which Bernie Madoff secretly runs for them using a split-strike conversion strategy getting paid only trading commissions which are not disclosed. If this is not a regulatory dodge, I do not know what is." Markopolos declared that Madoff's "unsophisticated portfolio management " was either a Ponzi scheme or front running (buying stock for his own account based on knowledge of his clients' orders), and concluded it
385-443: A Financial Legend, says that "the 5% payout rule", a federal law requiring private foundations to pay out 5% of their funds each year, allowed Madoff's Ponzi scheme to go undetected for a long period since he managed money mainly for charities. Zuckoff notes, "For every $ 1 billion in foundation investment, Madoff was effectively on the hook for about $ 50 million in withdrawals a year. If he was not making real investments, at that rate
462-462: A June 28, 2009, MSNBC article, that would make Picower and his wife the biggest beneficiaries of Madoff's scam, exceeding even Madoff himself. The Picowers' lawyer, William D. Zabel of Schulte Roth & Zabel, responded that, "They were totally shocked by his fraud and were in no way complicit in it." Madoff has suggested that Picower was allowed to remain as a client because he was "the Ponzi equivalent of
539-402: A bank too big to fail: an investor too big to fire." It would have been impossible for Madoff to find enough cash to completely redeem his multi-billion-dollar account. On November 1, 2009, an additional court filing by Irving Picard documented an apparently fraudulent gain benefiting Picower. "According to the new filing, Mr. Picower opened an account with Mr. Madoff on April 18, 2006, by wiring
616-408: A check for $ 125 million, more than a quarter of the entire sum he invested with Mr. Madoff over time. Within two weeks, the $ 125 million deposit had purportedly grown to $ 164 million because of a dramatic ‘gain’ on the securities held in the account—all of which supposedly had been purchased three months earlier ... Five months later, Mr. Picower withdrew his original $ 125 million, leaving $ 81 million in
693-474: A close Madoff family friend. Friehling was also an investor in Madoff's fund, which was seen as a blatant conflict of interest . In 2007, hedge fund consultant Aksia advised its clients not to invest with Madoff, saying it was inconceivable that a tiny firm could adequately service such a massive operation. Typically, hedge funds hold their portfolio at a securities firm (a major bank or brokerage), which acts as
770-461: A company involved in a merger. In 1991, Picower and Anthony Cerami established a charity, the Picower Institute for Medical Research, with an initial endowment of $ 10 million. Researchers there, led by Kevin J. Tracey , made a potentially valuable discovery, with possible applications in the treatment of rheumatoid arthritis , Crohn's disease , and multiple sclerosis . It was spun off into
847-486: A few days. That's why we were all so stunned." The Swiss bank Union Bancaire Privée explained that because of Madoff's huge volume as a broker-dealer , the bank believed he had a perceived edge on the market because his trades were timed well, suggesting they believed he was front running . The Madoff family gained unusual access to Washington's lawmakers and regulators through the industry's top trade group. The Madoff family maintained long-standing, high-level ties to
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#1732905431909924-478: A for-profit company, Cytokine Networks, which was later merged with privately held PharmaSciences to form Cytokine PharmaSciences. However, it was revealed that Picower owned 76% of PharmaSciences stock and actually controlled 86.2%, putting him in a conflict of interest in the merger negotiations. After Physician Computer Network, Inc., went bankrupt, Picower, the chairman of the board and 45% shareholder, had to give $ 21 million to other shareholders in 2000 after it
1001-519: A fraud from the start. Madoff's operation differed from a typical Ponzi scheme. While most Ponzi schemes are based on nonexistent businesses, Madoff's brokerage operation arm was very real. At the time of its shuttering, it handled large trades for institutional investors. Madoff was a "master marketer" who, throughout the 1970s and 1980s, built a reputation as a wealth manager for a highly exclusive clientele. Investors who gained access, typically on word-of-mouth referral, believed that they had entered
1078-464: A half a billion dollars in investor money, totally outside the system that we can monitor and regulate. That's pretty frightening," said Richard Walker, who at the time was the SEC's New York regional administrator. Avellino and Bienes deposited $ 454 million of investors' money with Madoff, and until 2007, Bienes continued to invest several million dollars of his own money with Madoff. In a 2009 interview after
1155-459: A key factor in perpetuating the fraud. Ponzi schemes typically pay returns of 20% or higher and collapse quickly. One Madoff fund, which described its "strategy" as focusing on shares in the Standard & Poor's 100-stock index, reported a 10.5% annual return during the previous 17 years. Even at the end of November 2008, amid a general market collapse, the same fund reported that it was up 5.6%, while
1232-838: A mutual fund manager at Fidelity Investments , had been intrigued by anecdotes of Madoff's steady gains. But after a 2000 meeting with Markopolos he became convinced "nothing in Madoff's ostensible strategy made sense." In 2001, financial journalist Erin Arvedlund wrote an article for Barron's entitled "Don't Ask, Don't Tell", questioning Madoff's secrecy and wondering how he obtained such consistent returns. She reported that "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 ." The Barron's article and one in MARHedge by Michael Ocrant suggested Madoff
1309-488: A new foundation called the JPB Foundation with assets that remained from Jeffry Picower's estate following the legal settlement. Forbes reported that the foundation was established with a $ 1.2 billion endowment. As of 2018, the JPB Foundation had over $ 3.7 billion in total assets. According to Foundation Center's list of the largest grant-making foundations, the JPB Foundation was the 24th-largest foundation by asset size in
1386-485: A particular religious or ethnic community is a type of affinity fraud , and a Newsweek article identified Madoff's scheme as "an affinity Ponzi". The New York Post reported that Madoff "worked the so-called ' Jewish circuit' of well-heeled Jews he met at country clubs on Long Island and in Palm Beach ." The scandal so affected Palm Beach that, according to The Globe and Mail , residents "stopped talking about
1463-562: A penny a share to execute their customers' orders, profiting from the spread between bid and asked prices that most stocks trade for. Several family members worked for him. His younger brother, Peter, was senior managing director and chief compliance officer, and Peter's daughter, Shana Madoff , was the compliance attorney. Madoff's sons, Mark and Andrew, worked in the trading section, along with Charles Weiner, Madoff's nephew. Andrew Madoff invested his own money in his father's fund, but Mark stopped in about 2001. Federal investigators believe
1540-440: A product that could replicate Madoff's returns. However, Markopolos concluded that Madoff's numbers didn't add up. After four hours of trying and failing to replicate Madoff's returns, Markopolos concluded Madoff was a fraud. He told the SEC that based on his analysis of Madoff's returns, it was mathematically impossible for Madoff to deliver them using the strategies he claimed to use. In his view, there were only two ways to explain
1617-486: A settlement of $ 7.2 billion had been reached between Irving Picard and Barbara Picower, Picower's widow, the executor of the Picower estate, to resolve the Madoff trustee suit, and repay losses in the Madoff fraud. It was the largest single forfeiture in American judicial history. "Barbara Picower has done the right thing," US Attorney Preet Bharara said. In 2011, Barbara Picower resumed her philanthropic activities, setting up
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#17329054319091694-419: A split-strike conversion or a collar . "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
1771-487: A staff of fewer than 24. Madoff also ran a branch office in London that employed 28 people, separate from Madoff Securities. The company handled investments for his family of approximately £ 80 million. Two remote cameras installed in the London office permitted Madoff to monitor events from New York. After 41 years as a sole proprietorship , Madoff converted his firm into a limited liability company in 2001, with himself as
1848-804: The New York Public Library . In 2002, it granted $ 50 million to the Massachusetts Institute of Technology neuroscience research center, which was subsequently renamed the Picower Institute for Learning and Memory . However, the Picower Foundation was forced to close in 2009 due to losses arising from the uncovering of Madoff's Ponzi scheme . It was reported that between December 1995 and December 2008, Picower and his family withdrew "from their various Madoff accounts $ 5.1 billion more than they invested." In June 2009, Irving Picard ,
1925-547: The SEC Commissioners for legal action. In 2007, the Financial Industry Regulatory Authority (FINRA), the industry-run watchdog for brokerage firms, reported without explanation that parts of Madoff's firm had no customers. "At this point in time we are uncertain of the basis for FINRA's conclusion in this regard," SEC staff wrote shortly after Madoff was arrested. As a result, the chairman of
2002-694: The Securities Industry and Financial Markets Association (SIFMA), the primary securities industry organization. Bernard Madoff sat on the board of directors of the Securities Industry Association , which merged with the Bond Market Association in 2006 to form SIFMA. Madoff's brother Peter subsequently spent two terms on SIFMA's board. From 2000 to 2008, the brothers donated $ 56,000 to SIFMA, and also spent tens of thousands to sponsor SIFMA industry meetings. Peter resigned from
2079-418: The principal would last 20 years. By targeting charities, Madoff could avoid the threat of sudden or unexpected withdrawals. In his guilty plea, Madoff admitted that he had not actually traded since the early 1990s, and all of his returns since then had been fabricated. However, David Sheehan, principal investigator for trustee Irving Picard , believes the wealth management arm of Madoff's business had been
2156-429: The 'calls'. The 'puts', funded in large part by the sales of the 'calls', limit the portfolio's downside." In his 1992 "Avellino and Bienes" interview with The Wall Street Journal , Madoff discussed his supposed methods: In the 1970s, he had placed invested funds in "convertible arbitrage positions in large-cap stocks, with promised investment returns of 18% to 20%", and in 1982, he began using futures contracts on
2233-584: The Bronx , New York. He was a certified public accountant and lawyer, but made most of his fortune by investing with Madoff. As an accountant at Laventhol & Horwath in the 1980s, Picower set up questionable tax shelters . When the IRS challenged their validity, one of Picower's clients sued him and the firm. The case was settled out of court. In 1983, Picower was rebuked by the U.S. Securities and Exchange Commission for late disclosure of his greater than 5% position in
2310-598: The Palm Beach Police Department, "An autopsy of the body of Jeffry M. Picower was performed this morning. The Palm Beach County Medical Examiner's Office determined that Mr. Picower suffered a massive heart attack while in the swimming pool resulting in accidental drowning." He was buried on October 27, 2009, in Mount Ararat Cemetery in Farmingdale, New York . On December 17, 2010, it was announced that
2387-518: The S&;P 500 during the 1980s. The Journal concluded Madoff's use of futures and options helped cushion the returns against the market's ups and downs. Madoff said he made up for the cost of the hedges , which could have caused him to trail the stock market's returns, with stock-picking and market timing . Madoff's sales pitch was an investment strategy consisting of purchasing blue-chip stocks and taking options contracts on them, sometimes called
Jeffry Picower - Misplaced Pages Continue
2464-459: The SEC's New York office, Avellino & Bienes agreed to return the money to investors, shut down their firm, undergo an audit, and pay a fine of $ 350,000. Avellino complained to the presiding federal judge, John E. Sprizzo , that Price Waterhouse fees were excessive, but the judge ordered him to pay the bill of $ 428,679 in full. Madoff said that he did not realize the feeder fund was operating illegally, and that his own investment returns tracked
2541-524: The SEC's Office of Compliance Inspections and Examinations Eric Swanson , whom she had met in April 2003 while he was investigating her uncle Bernie Madoff and his firm. The two had periodic contact thereafter in connection with Swanson speaking at industry events organized by a SIFMA committee on which Shana Madoff sat. During 2003, Swanson sent Shana's father Peter Madoff two regulatory requests. In March 2004, SEC lawyer Genevievette Walker-Lightfoot , who
2618-512: The SEC, Christopher Cox , stated that an investigation would delve into "all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm". A former SEC compliance officer, Eric Swanson, had married Madoff's niece Shana, the Madoff firm compliance attorney. Outside analysts raised concerns about Madoff's firm for years. Mathematician Edward O. Thorp noted irregularities in 1991. Among other problems, Thorp found evidence Madoff
2695-418: The U.S., trading about 15% of transaction volume. Academics have questioned the ethics of these payments. Madoff has argued that these payments did not alter the price that the customer received. He viewed payments for order flow as a normal business practice: "If your girlfriend goes to buy stockings at a supermarket, the racks that display those stockings are usually paid for by the company that manufactured
2772-443: The account. There is no legitimate explanation for these events nor any possibility that they escaped Picower’s notice." On October 25, 2009, Jeffry Picower died at his Palm Beach home. Picower's wife Barbara told dispatchers she found him "at the bottom of their swimming pool" at their oceanfront estate shortly after noon. He was taken to Good Samaritan Medical Center , where he was pronounced dead about 80 minutes later. According to
2849-649: The bane of the New York Stock Exchange. He has built a highly profitable securities firm, Bernard L. Madoff Investment Securities, which siphons a huge volume of stock trades away from the Big Board. The $ 740 million [$ 1.61 billion in 2023] average daily volume of trades executed electronically by the Madoff firm off the exchange equals 9% of the New York exchange's. Mr. Madoff's firm can execute trades so quickly and cheaply that it actually pays other brokerage firms
2926-436: The best possible price for customer orders; and operating as an unregistered investment adviser . Madoff was registered as a broker-dealer , but doing business as an asset manager . "The staff found no evidence of fraud". In September 2005 Madoff agreed to register his business, but the SEC kept its findings confidential. During the 2005 investigation, Meaghan Cheung, a branch head of the SEC's New York's Enforcement Division,
3003-627: The board in December 2008 as the Madoff scandal began to come to light and scrutiny of the brothers' relationship with SIFMA and regulators increased. In addition, Bernard Madoff's niece Shana Madoff who was the compliance officer and attorney at Bernard L. Madoff Investment Securities from 1995 until 2008, was active on the Executive Committee of SIFMA's Compliance & Legal Division, but resigned her SIFMA position shortly after her uncle's arrest. She in 2007 married former assistant director of
3080-477: The end of 1974, the firm became Avellino and Bienes and continued to invest solely with Madoff. Avellino & Bienes, represented by Ira Sorkin , Madoff's former attorney, were accused of selling unregistered securities. In a report to the SEC they mentioned the fund's "curiously steady" yearly returns to investors of 13.5% to 20%. However, the SEC did not look any more deeply into the matter, and never publicly referred to Madoff. Through Sorkin, who once oversaw
3157-507: The end of each period, Madoff avoided filing disclosures of its holdings with the SEC, an unusual tactic. Madoff rejected any call for an outside audit "for reasons of secrecy", claiming that was the exclusive responsibility of his brother, Peter, the company's chief compliance officer . Concerns were also raised that Madoff's auditor of record was Friehling & Horowitz, a two-person accounting firm based in suburban Rockland County that had only one active accountant, David G. Friehling ,
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3234-405: The figures—either Madoff was front running his order flow, or his wealth management business was a massive Ponzi scheme. This submission, along with three others, passed with no substantive action from the SEC. At the time of Markopolos' initial submission, Madoff managed assets from between $ 3 billion and $ 6 billion, which would have made his wealth management business the largest hedge fund in
3311-559: The firm made markets ( quoted bid and ask prices) via the National Quotation Bureau 's Pink Sheets . To compete with firms that were members of the New York Stock Exchange (NYSE) trading on the stock exchange's floor, his firm began using innovative computer information technology to disseminate quotes. After a trial run, the technology that the firm helped develop became Nasdaq . At one point, Madoff Securities
3388-617: The fraud in the investment management division and advisory division may have begun in the 1970s. However, Madoff himself stated his fraudulent activities began in the 1990s. Madoff's fraudulent activities are believed to have accelerated after the 2001 change from fractional share trades to decimals on the NYSE, which cut significantly into his legitimate profits as a market-maker. With fractional trades Madoff profited up to 12.5 cents per share with each trade handled by his firm, but following decimalization this bid ask spread between sellers and buyers
3465-648: The fund's prime broker . This arrangement allows outside investigators to verify the holdings. Madoff's firm was its own broker-dealer, and purported to process all of its trades. Ironically, Madoff, a pioneer in electronic trading , refused to provide his clients online access to their accounts. He sent out account statements by mail, unlike most hedge funds, which email statements. Good Samaritan Medical Center (West Palm Beach, Florida) The hospital opened in May 1920, replacing "Emergency Hospital" (which dated from about 1914), with 35 beds located on 12th street near
3542-466: The inner circle of a money-making genius, and some were wary of removing their money from his fund, in case they could not get back in. In later years, even as Madoff's operation accepted money from various countries through feeder funds, he continued to package it as an exclusive opportunity. People who met him in person were impressed with his apparent humility despite his reported financial success and personal wealth. A scheme that targets members of
3619-455: The lakefront (now Palm Beach Lakes Boulevard) and Dixie Highway. Dr. William Ernest Van Landingham (1879-1973), a recent arrival and then secretary of the one-year-old Palm Beach County Medical Society, was a co-founder and the first administrator. The Victor W. Farris Building was completed in 1988. Another building is called Flagler Waterway. A brick building next to Burger King has been abandoned. In 2001, Tenet Healthcare acquired
3696-416: The last several years, but did not find any violations or major issues of concern. In 2004, after published articles appeared accusing the firm of front running, the SEC's Washington office cleared Madoff. The SEC detailed that inspectors had examined Madoff's brokerage operation in 2005, checking for three kinds of violations: the strategy he used for customer accounts; the requirement of brokers to obtain
3773-631: The local destruction the Madoff storm caused only when Hurricane Trump came along" in 2016. The New York Times reported that Madoff courted many prominent Jewish executives and organizations and, according to the Associated Press , they "trusted [Madoff] because he is Jewish." One of the most prominent promoters was J. Ezra Merkin , whose fund Ascot Partners steered $ 1.8 billion towards Madoff's firm. Most Ponzi schemes appeal to greed, but Madoff appealed to investors' fear of volatility. His "unusually consistent" annual returns of around 10% were
3850-490: The magazine acknowledged that he was "likely worth billions more." The Jeffry M. and Barbara Picower Foundation was created in 1989 by Picower and his wife Barbara. Barbara Picower was listed as Executive Director and trustee, with both Picowers being members of the board of directors . Longtime friend Bernard Madoff managed foundation assets listed at over $ 1 billion. It distributed over $ 268 million in grants to various American organizations, including Human Rights First and
3927-420: The markets were far too volatile even under the best of conditions for this to be possible. Later, Markopolos testified before Congress that this would be like a baseball player batting .966 for the season , compared to .300 to .400 for elite players, "and no one suspecting a cheat". In part, the memo concluded: "Bernie Madoff is running the world's largest unregistered hedge fund. He's organized this business as
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#17329054319094004-514: The nation. Barbara Picower currently serves as the President and Director of the JPB Foundation. Madoff investment scandal The Madoff investment scandal was a major case of stock and securities fraud discovered in late 2008. In December of that year, Bernie Madoff , the former Nasdaq chairman and founder of the Wall Street firm Bernard L. Madoff Investment Securities LLC, admitted that
4081-407: The original federal charges, Madoff said that his firm had "liabilities of approximately US$ 50 billion." Prosecutors estimated the size of the fraud to be $ 64.8 billion, based on the amounts in the accounts of Madoff's 4,800 clients as of November 30, 2008. Ignoring opportunity costs and taxes paid on fictitious profits, about half of Madoff's direct investors lost no money. Harry Markopolos ,
4158-458: The previous 10 years of the S&P 500. The SEC investigation came right in the middle of Madoff's three terms as the chairman of the Nasdaq stock market board. The size of the pools mushroomed by word-of-mouth, and investors grew to 3,200 in nine accounts with Madoff. Regulators feared it all might be just a huge scam. "We went into this thinking it could be a major catastrophe. They took in nearly
4235-500: The principals being Frank Avellino, Michael Bienes, and his wife Dianne Bienes. Bienes began his career working as an accountant for Madoff's father-in-law, Saul Alpern. Then, he became a partner in the accounting firm Alpern, Avellino and Bienes. In 1962, the firm began advising its clients about investing all of their money with a mystery man, a highly successful and controversial figure on Wall Street —but until this episode, not known as an ace money manager—Madoff. When Alpern retired at
4312-602: The same year-to-date total return on the S&P 500-stock index had been negative 38%. Diana Henriques of the Times said that Madoff's victims could have made much more money in other investments But they were willing to give up those greater returns in exchange for the consistency of Madoff's returns. He made them feel safe. They all thought they were taking a conservative step. An unnamed investor remarked, "The returns were just amazing, and we trusted this guy for decades — if you wanted to take money out, you always got your check in
4389-557: The scam had been exposed, he said, "Doubt Bernie Madoff? Doubt Bernie? No. You doubt God. You can doubt God, but you don't doubt Bernie. He had that aura about him." The SEC investigated Madoff in 1999 and 2000 about concerns that the firm was hiding its customers' orders from other traders , for which Madoff then took corrective measures. In 2001, an SEC official met with Harry Markopolos at their Boston regional office and reviewed his allegations of Madoff's fraudulent practices. The SEC said it conducted two other inquiries into Madoff in
4466-511: The sole shareholder. In 1992, Bernard Madoff explained his purported strategy to The Wall Street Journal . He said his returns were really nothing special, given that the Standard & Poors 500 - stock index generated an average annual return of 16.3% between November 1982 and November 1992. "I would be surprised if anybody thought that matching the S&P over 10 years was anything outstanding." The majority of money managers actually trailed
4543-513: The stock index, and then placed put options on futures during the 1987 stock market crash . A few analysts performing due diligence had been unable to replicate the Madoff fund's past returns using historic price data for U.S. stocks and options on the indexes. Barron's raised the possibility that Madoff's returns were most likely due to front running his firm's brokerage clients. Mitchell Zuckoff, professor of journalism at Boston University and author of Ponzi's Scheme: The True Story of
4620-533: The stockings. Order flow is an issue that attracted a lot of attention but is grossly overrated." By 2000, Madoff Securities, one of the top traders of US securities, held approximately $ 300 million in assets ($ 531 million in 2023). The business occupied three floors of the Lipstick Building in Manhattan, with the investment management division on the 17th floor, referred to as the " hedge fund ", employing
4697-516: The trustee liquidating Madoff's assets, filed a lawsuit against Picower in the U.S. Bankruptcy Court for the Southern District of New York (Manhattan), seeking the return of $ 7.2 billion in profits, alleging that Picower and his wife Barbara knew or should have known that their rates of return were "implausibly high", with some accounts showing annual returns ranging from 120% to more than 550% from 1996 through 1998, and 950% in 1999. According to
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#17329054319094774-446: The two married. A spokesman for Swanson said he "did not participate in any inquiry of Bernard Madoff Securities or its affiliates while involved in a relationship" with Shana Madoff. Madoff Securities LLC was investigated at least eight times over a 16-year period by the U.S. Securities and Exchange Commission (SEC) and other regulatory authorities. In 1992, the SEC investigated one of Madoff's feeder funds , Avellino & Bienes,
4851-431: The wealth management arm of his business was an elaborate multi-billion-dollar Ponzi scheme . Madoff founded Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest. The firm employed Madoff's brother Peter as senior managing director and chief compliance officer, Peter's daughter Shana Madoff as rules and compliance officer and attorney, and Madoff's sons Mark and Andrew . Peter
4928-418: The world even then. The culmination of Markopolos' analysis was his third submission, a detailed 17-page memo entitled The World's Largest Hedge Fund is a Fraud. He had also approached The Wall Street Journal about the existence of the Ponzi scheme in 2005, but its editors decided not to pursue the story. The memo specified 30 "red flags" based on a little over 14 years of Madoff trades. The biggest red flag
5005-461: Was discovered that company executives had falsified financial statements. Alaris Medical Systems, 65% owned by Picower, was taken over by Cardinal Health in 2004 for $ 1.6 billion. Picower was listed by Forbes magazine as one of the 400 richest people in the United States for 2009, his only time on the list. Forbes , which listed Picower at no. 371, placed his net worth at $ 1 billion, though
5082-546: Was doing." Suspecting fraud, RBC declined to invest with Madoff and also cut off professional contact with Tremont. The next major concern about Madoff's operation was raised in May 2000, when Harry Markopolos , a financial analyst and portfolio manager at Boston options trader Rampart Investment Management, alerted the SEC about his suspicions. A year earlier, Rampart had learned that Access International Advisors , one of its trading partners, had significant investments with Madoff. Markopolos' bosses at Rampart asked him to design
5159-593: Was front-running to achieve his gains. In 2001 Ocrant, editor-in-chief of MARHedge , wrote he interviewed traders who were incredulous that Madoff had 72 consecutive gaining months, an unlikely possibility. Hedge funds investing with him were not permitted to name him as money manager in their marketing prospectus . When high-volume investors who were considering participation wanted to review Madoff's records for purposes of due diligence , he refused, convincing them of his desire to keep his proprietary strategies confidential. By purportedly selling its holdings for cash at
5236-404: Was investigating a complaint that Bernard Madoff might be running "the biggest Ponzi scheme ever." In April 2006, Swanson began to date Shana Madoff. Swanson reported the relationship to his supervisor who wrote in an email "I guess we won't be investigating Madoff anytime soon." On 15 September 2006, Swanson left the SEC. On December 8, 2006, Swanson and Shana Madoff became engaged. In 2007,
5313-687: Was lying about or exaggerating his activities. While Madoff claimed to have purchased 123 call options for Procter & Gamble stock on April 16, 1991, Thorp later stated "only 20 P&G options in total had changed hands that day." Rob Picard of the Royal Bank of Canada (RBC), seeking low-volatility investments, was referred to Madoff in 1997 by employees of Tremont Group who were one of Madoff's key "feeder funds". When pressed for details of his investing strategy, Madoff "stuttered" and became evasive. Picard later stated: "right away I realized he either didn't understand it or he wasn't doing what he said he
5390-500: Was most likely a Ponzi scheme. Markopolos later testified to Congress that to deliver 12% annual returns to the investor, Madoff needed to earn an extraordinary 16% gross on a regular basis, so as to distribute a 4% fee to the feeder fund managers, whom Madoff needed to secure new victims, which encouraged the feeder funds to be "willfully blind, and not get too intrusive". Though Markopolos's findings were neglected by regulators he did persuade some professional investors. Joel Tillinghast,
5467-483: Was reduced to as low as one cent. In the 1980s, Madoff's market-maker division traded up to 5% of the total volume made on the NYSE. Madoff was "the first prominent practitioner" of payment for order flow , paying brokers to execute their clients' orders through his brokerage, a practice some have called a "legal kickback ". This practice gave Madoff the distinction of being the largest dealer in NYSE-listed stocks in
5544-412: Was reviewing Madoff's firm, raised questions to Swanson (Walker-Lightfoot's boss's supervisor) about unusual trading at a Bernie Madoff fund; Walker-Lightfoot was told to instead concentrate on an unrelated matter. Swanson and Walker-Lightfoot's boss asked for her research, but did not act upon it. In February 2006, Swanson was emailed by Assistant Director John Nee that the SEC's New York Regional Office
5621-677: Was run by his two sons was one of the top market makers on Wall Street, and in 2008 was the sixth-largest. Madoff's personal and business asset freeze created a chain reaction throughout the world's business and philanthropic community, forcing many organizations to at least temporarily close, including the Robert I. Lappin Charitable Foundation , the Picower Foundation , and the JEHT Foundation. Madoff started his firm in 1960 as
5698-480: Was sentenced to 10 years in prison, and Mark died by suicide exactly two years after his father's arrest. Alerted by his sons, federal authorities arrested Madoff on December 11, 2008. On March 12, 2009, Madoff pleaded guilty to 11 federal crimes and admitted to operating the largest Ponzi scheme in history. On June 29, 2009, he was sentenced to 150 years in prison, the maximum sentence allowed, with restitution of $ 170 billion. He died in prison in 2021. According to
5775-409: Was that Madoff reported only seven losing months during this time, and those losses were statistically insignificant. This result produced a return stream that rose steadily upward with almost no downticks, represented graphically by a nearly-perfect 45-degree angle. Markopolos argued that anyone who knows the math of the markets would know that such a distribution "simply doesn't exist in finance," since
5852-531: Was the largest buying-and-selling " market maker " at the Nasdaq. He was active in the National Association of Securities Dealers (NASD), a self-regulatory securities industry organization, serving as the chairman of the board of directors and on the board of governors . In 1992, Randall Smith of The Wall Street Journal described him as: ... one of the masters of the off-exchange "third market" and
5929-403: Was the person responsible for the oversight and blunder, according to Markopolos, who testified on February 4, 2009, at a hearing held by a House Financial Services Subcommittee on Capital Markets . In 2007, SEC enforcement completed an investigation they had begun on January 6, 2006, into a Ponzi scheme allegation. This investigation resulted in neither a finding of fraud, nor a referral to
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