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Billions in Drug and Organized Crime 'Dirty Money' Funneled Into Bernie Madoff's Operation

Barack Obama, Wall Street
WASHINGTON, Feb. 4, 2009

(CBS) By CBS News chief investigative correspondent Armen Keteyian and Investigative Producer Laura Stricker.

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On Capitol Hill Wednesday, the financial analyst who first blew the whistle on Bernie Madoff back in 2000 went public for the first time, stunning lawmakers with the full scope of the $50 billion fraud. CBS News correspondent Armen Keteyian reports.

In two hours of riveting, no-holds barred testimony, Harry Markopolos revealed the depth – and danger – of his nine-year fight to expose the Madoff scandal.

Markopolos said at one point he feared for his life.

“He would have known my name and, he knew he had a team tracking him. I didn’t think I was long for this world,” he said.

One reason: Bernie Madoff was among the “most powerful men” on Wall Street.

Another: In 2002 Markopolos said he discovered billions of dollars in “dirty money” was being funneled into Madoff Securities through a series of off-shore accounts.

“When you’re that big and that secretive, you’re going to attract a lot of organized crime money, and which we … now know came from the Russian mob and the Latin-American drug cartel,” Markopolos said.

A 162-page document filed with the U.S. Bankruptcy Court in Manhattan late Wednesday lists several thousand of the people and entities that handed money over to Madoff to “invest”. Among the victims are some very well-known personalities – and Madoff’s own defense lawyer. Click here to read more.

Markopolos said he began his crusade back in late 1999, when he was asked by his employer to see if he could match an investment strategy that produced unusually steady returns – like Madoff’s.

“It took me about five minutes to figure out that he was a fraud,” Markopolos said.

Despite “gift wrapping” evidence of the largest Ponzi scheme in history, Markopolos ran into a stone wall at the SEC. It was an agency, he charged, was unwilling and incapable of following his leads.

“I gave them a road map and a flashlight to find the fraud, and they didn’t go where I told them to go,” Markopolos said.

And he wasn’t the only one warning the feds.

This anonymous letter sent in April 2006 to the head of the SEC was obtained exclusively by CBS News.

In it, SEC Chairman Christopher Cox is told that Madoff keeps two “sets of records. The most interesting of which is on his computer which is always on his person.”

The letter was sent to Cox once on Dec. 6, 2006, and then again on April 26, 2006. The second letter has a note at the top saying, “Dear Sir, this is sent in the event you did not receive the original.”

The letter is also stamped, “Received: 2006 March 31, Chairman’s Correspondence Unit.” The anonymous writer says Madoff is perpetrating a “scandal of major proportion …”

But again, nothing happened.

Hardly surprising to former SEC Commissioner Paul Atkins, who told CBS News “higher ups” pushed investigators into cases that made headlines and careers.

“They were actively discouraged from going after Ponzi schemes, pump-and-dump schemes, and things that were considered small cases,” Paul Atkins, former SEC commissioner, said. “Actively discouraged by their superiors.”

As to the question of whether Bernie Madoff pulled off $50 billion worth of fraud all by himself?

Markopolos had a very simple answer: “No.”

© MMIX, CBS Interactive Inc. All Rights Reserved.

Not Just Super Rich Getting Destroyed By "The Madoff"

Banking, Berrie Madoff, Charities, Investment Firms, Money Manager, NASDAQ, The Madoff, Wall Street

ASSOCIATED PRESS

Dec 14, 6:16 PM (ET)

By JOE BEL BRUNOWall Street Arrest

NEW YORK (AP) – From a Jewish youth charity in Boston to major banks as far afield as Zurich, the list of investors who say they were duped in one of Wall Street’s biggest Ponzi schemes are streaming forward.

Around the world, investors who sunk cash into veteran Wall Street money manager Bernard Madoff’s investment pool spent the weekend calculating how much exposure they might have. The 70-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors.

One thing was clear in the fallout from his arrest: The alleged victims span from the super rich, to pensioners and powerful financial institutions, to local charities. Some investors claim they’ve been wiped out, while others are still likely to come forward.

“There were a lot of very sophisticated people who were duped, and that happens a great deal when you’ve had somebody decide to be unscrupulous,” said Harvey Pitt, a former chairman of the Securities and Exchange Commission, a regulator in charge of monitoring investment funds like the one Madoff operated.

(AP) The apartment building where Bernard L. Madoff’s lives on New York’s Upper East Side is seen…
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“It isn’t just the big investors,” he said. “There’s a lot of charitable and foundation money involved in this, which is the real tragedy.”

Charities across the country are expected to be directly affected by the collapse of Madoff’s investment fund. The assets of Bernard L. Madoff Investment Securities LLC were frozen Friday in a deal with federal regulators and a receiver was appointed to manage the firm’s financial affairs.

One of the largest financial scams to hit Wall Street has investors wondering if they’ll ever get their money back.

In Boston, the Robert I. Lappin Charitable Foundation, a charity that financed trips for Jewish youth to Israel, said on its Web site Sunday that the money for its operations was invested with Madoff.

“The money needed to fund the programs of the Lappin Foundation is gone,” it said. “The foundation staff has been terminated today.”

(AP) The Manhattan apartment building where Bernard L. Madoff lives on New York City’s Upper East Side…
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New Jersey Sen. Frank Lautenberg, one of the wealthiest members of the Senate, entrusted his family’s charitable foundation to Madoff. Lautenberg’s attorney, Michael Griffinger, said they weren’t yet sure the extent of the foundation’s losses, but that the bulk of its investments had been handled by Madoff.

Lautenberg’s foundation handed out more than $765,000 to at least 100 recipients in 2006, according to the most recent listing on Guidestar, which tracks charitable organization filings.

The foundation helps support a variety of religious, educational, civic and arts organizations in New Jersey and elsewhere, and its contributions range from a gift of than $300,000 to the United Jewish Communities of MetroWest New Jersey to a $2,000 donation to a children’s program at the Hackensack Medical Center.

Reports from Florida to Minnesota included profiles of ordinary investors who gave Madoff their money. Some had been friends with him for decades, others were able to invest because they were a friend of a friend. They told stories of losing everything from $40,000 to an entire nest egg worth well over $1 million.

They join a list of more powerful investors that have come forward, all worried about the extent of their losses. The roster of names include Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services, among others.

Beyond U.S. hedge funds, more corporate names disclosed exposure to Madoff. Late Sunday, some of Europe’s biggest banks acknowledged they, too, were exposed to Madoff’s investment fund.

Switzerland’s Reichmuth & Co. said the private bank has $327 million at risk. It told investors that they “sincerely regret” being affected.

Other banks such as Spain’s Grupo Santander SA, Europe’s second-largest banking consortium, and France’s BNP Paribas are also left with billions of dollars in exposure, according to media reports. Both banks could not immediately be reached for comment.

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Associated Press Writer Samantha Henry in Trenton, N.J. contributed to this report.