Bernie Madoff: “Made off”, Research Paper Example

Abstract

Bernie Madoff attempted to pull off the greatest Ponzi scheme in United States’ history — roughly $50 billion dollars. In fact, Madoff attempted to pull off the largest financial fraud in U.S. history. Details of many circumstances that came out of the workings of Bernard Lawrence Madoff, how the scandal was discovered, why the legislation to-come is needed, and any interesting facts that make this story fascinating are the core of this assignment. Key facts, such as reasons why the outcome fits the crime or circumstances, and reasons why all appropriate reasoning has been made evident to show why the punishment fits the crime are herein demonstrated.

Plus, a listing of legislation that has since been formed, to prevent such a crime from happening again, will be presented. The lasting implications are what have created this legislative pursuit to be discussed. Any of the red flags that might have preceded the unethical behavior and how they can never be revealed until the aftermath of the crime, once the dust settles, will be a concern within this literature also. Many investors were tainted, much mistrust took place (i.e., Bernie Madoff the Philanthropist), and several steps have been taken and are still being infiltrated to this day in order to prevent one person from ever becoming able to consume and destroy the financial vigor while exploiting the good will of so many others.

The Lehman Brothers fallout and the Enron have far too many subjective and debatable (inconclusive) elements to try to summarize within three pages. Bernie Madoff, however, pioneered a Ponzi scheme and possesses more elements that seem black-or-white. Accordingly, this essay will be based around Bernie Madoff and how he “made-off” with a large amount of other people’s money. Enron and EronOnline, that took off in November 1999, was like Madoff in that it was another Ponzi Scheme, but too many details are available of too many executives (Jeffrey Skilling, Kenneth Lay, Ken Rice, Arthur Andersen, alongside roughly thirty other corporate names that may or may not have been in on the scheme — even George W. Bush and the “mysterious disappearance” of Kenneth Lay in 2006) [1][2][3]. Therefore, this will concern Bernie Madoff and his uproar since the evidence seems more concrete and unpersuadable.

Soon thereafter, Harvard Business Review (HBR Blog Network) began to investigate the Bernie Madoff ordeal in an effort to prevent anything similar from happening again. In 2009, when Madoff was tried and sentenced, regulations immediately came centered around Higher fiduciary standards for financial professionals, Expanded SEC powers, Court-based arbitration, Larger bounties for whistleblowers [11] in a legislative effort to tighten that preventive lens.

Former American businessman, stockbroker, investment advisor, financier, and former non-executive chairman (advisor and chair of the main board of a company, or overall “Head Honcho”) of the NASDAQ stock market, Bernie Madoff, will be the key player here. As “the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S. history” [5], Madoff took money from other investors to pay a partial amount of the money to come (which Madoff never truly planned to pay later)[6]. This empty promise gave reason for others to invest, and then revenue only grew from there.

This unethical behavior was not detected, though, until “decades later” when his own sons, Andrew and Mark: “Early one morning in 2008, the FBI showed up to arrest Bernie Madoff. He’d been turned in by his own sons, and their mother only later learned who had made the call” [12]. To this day, legislation is still working through a trial-and-error strategy to learn which method will be the best way to prevent aspects the Ponzi scheme in the future. Of course, the development of criminology, the scientific study of crime and criminals, can only be formulated after a new method has been formulated and successfully infiltrated, so crime can only be prevented until the next successful criminal figures out a new successful method.

“A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going. The system is destined to collapse because the earnings, if any, are less than the payments to investors” [6].

This scheme was named after Charles Ponzi and the crime that he was arrested for in 1920. Though he was not the first to commit a crime of this sort, he was he first to do so on a scale as grand as he did [6]. “Madoff founded the Wall Street firm, Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest on December 11, 2008” [7]. Since he has been “the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S. history” [5], Madoff evidently topped the crime of Charles Ponzi.

“Since 1991, Madoff and his wife [had] contributed about $240,000 to federal candidates, parties and committees, including $25,000 a year from 2005 through 2008 to the Democratic Senatorial Campaign Committee. The Committee has returned $100,000 of the Madoffs’ contributions to Irving Picard, the bankruptcy trustee who oversees all claims. Senator Charles E. Schumer returned almost $30,000 received from Madoff and his relatives to the trustee, and Senator Christopher J. Dodd donated $1,500 to the Elie Wiesel Foundation for Humanity, a Madoff victim” [4].

Madoff tried to persuade through a monetary means, meaning that he attempted to persuade active officials and administrators by making them feel gratefully obligated to “turn a blind eye” and blindly condone by ignoring. Madoff was also known as a philanthropist, or a person attempting to promote the welfare of others, but only due to his own manipulative methods to gain a false appearance of trust [10]. This measure really adds into his reason for that 150 year prison sentence; he was inhumane and calculative enough to realize where to falsely portray compassion as a way to dissuade the objective focus of others. These two accounts are extremely similar to the bribery that led to the Enron scandal; this detail lead to inspections by higher authorities, leading to the discovery of the much larger picture. The only thing that will seem shady here will be the date his misanthropic events occurred; though most sources used reckon that his inhumane spite began through the 1970s (some say the beginning of that decade, while others say toward the end), all that can be truly accounted are from his 11 confessed crimes.

Anyhow, on “On June 29, 2009, Madoff was sentenced to 150 years in prison, the maximum allowed. Bernard Madoff gets 150 years behind bars for fraud scheme” [9]. Though Madoff pleaded guilty, at the surface that maximum sentence does seem extreme. However, since he plead guilty to eleven separate crimes, and each of those crimes were malignant and inhumane, he deserved that sentence since he never perceived other people as worthy and has no compassion for humanity.

Sources

“Enron’s Kenneth Lay Defended at His Memorial Service” (July 12, 2006). Bloomberg. Web. 8 April 2012.

Pellegrini, Frank. “Bush’s Enron Problem.” (Thursday, Jan. 10, 2002) Time Magazine. Web. 8 April 2012.

“Ken Lay: Dead or Alive?” 2001 – 2011 Democratic Underground, LLC. Web. 8 April 2012.

Becker, Bernie (March 26, 2009). “Money From Madoff is Rerouted.” The New York Times. Web. 8 April 2012.

“Madoff Says He Is Happier in Prison Than Free.” (27 October 27 2011). The New York Times. Reuters. Web. 8 April 2012.

“Ponzi Schemes”. US Social Security Administration. Web. 8 April 2012.

“The Madoff Case: A Timeline.” (March 6, 2009). The Wall Street Journal. Web. 8 April 2012.

Henriques, Diana. “New Description of Timing on Madoff’s Confession” (January 13, 2009). The New York Times. Web. 8 April 2012.

“Bernard Madoff gets 150 years behind bars for fraud scheme.” (June 29, 2009). CBC News. Web. 8 April 2012.

Appelbaum, Binyamin; David S. Hilzenrath and Amit R. Paley (December 13, 2008). “‘All Just One Big Lie'”. The Washington Post: p. D01. Web. 8 April 2012.

Pozen, Robert C. The Bernie Madoff Law: A Closer Look 12:17 PM Friday October 9, 2009. Web. 8 April 2012.

AICPA sets ethical standards for outsourcing. (2005). Journal of Accountancy, 199(1), 8-8. Retrieved from http://www.journalofaccountancy.com/