SEC

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.

Madoff Records Are "Utterly Unreliable"

Arthur Levitt, Banking Crisis, Bernie Madoff, Carlyle Group, Christopher Cox, Ponzi Scheme, Wall Street Fraud
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Dec. 17 (Bloomberg) — Bernard Madoff’s ability to avoid scrutiny from U.S. regulators for years shows that the monitoring system is “broken and has to be fixed,” former Securities and Exchange Commission Chairman Arthur Levitt said.

Levitt, a senior adviser to Carlyle Group, said today in a Bloomberg Radio interview that the SEC must respond to allegations that it failed to act on tips of wrongdoing by Madoff that it had received since the 1990s.

“The system is obviously flawed and it’s got to be rethought in terms of how investors can be protected,” Levitt said. SEC Chairman Christopher Cox “is doing the right thing” by calling for a probe of the agency’s role, Levitt said.

Madoff was arrested Dec. 11 after telling his two sons and federal investigators that he’d been using money from new investors to pay off old ones in a Ponzi scheme. He said clients of his New York-based investment-advisory firm lost $50 billion.

Levitt said Madoff may have run a conventional business for a while and “shifted gears,” when the market turned against him. Madoff “clearly lied” to avoid registering with the SEC, which has shrunk as the financial industry has grown, Levitt said.

In 2004, the agency had 477 people in its inspection office, overseeing about 8,000 investment advisers, Levitt said. Today, 430 people regulate 11,300 advisers, along with about 16,000 mutual funds, he said.

Cox said yesterday the SEC failed to act for almost a decade on “credible and specific allegations” against Madoff. He announced an internal probe to review the “deeply troubling” revelations.

Levitt is a board member of Bloomberg LP, the parent company of Bloomberg News.

SEC Under Scrutiny in Madoff Case

Bernie Madoff, Fraud, Grassley, Madoff Securities, Palm Beach, SEC, Wall Street, Wiesel. Spielberg, Zuckerman

Senator: The SEC “Letting Down the American People”

mad-money

ABC NEWS

By BRIAN ROSS and RICHARD ESPOSITO

Dec. 15, 2008—

As the list of victims continues to grow and investigators examine how Bernard Madoff allegedly ran his massive scam, some are questioning how Madoff avoided detection for so long. As a registered investment advisor since 2006, he was subject to scrutiny by the Securities and Exchange Commission, yet he managed to maintain a clean record even after complaints from whistleblowers started nine years ago.

“The Securities and Exchange Commission is letting down the American people,” Sen. Charles Grassley (R-Iowa) said of the SEC. “They failed. This person was registered as a broker dealer, they should have known what he was doing all the time, and particularly if you have whistleblowers.”

The head of enforcement at the SEC attempted to duck questions about the failure of the agency to detect what may be the biggest investment fraud in history.

“It is hard to directly respond given the fact that so much of what we have done historically is non-public and needs to remain non-public until someone decides otherwise,” said Linda Thomsen.

Meanwhile, the list of Madoff’s victims keeps growing. European banks have lost billions, as have charities run by Elie Wiesel, director Steven Spielberg, and New York billionaire Mort Zuckerman, whose charitable trust lost $30 million.

Authorities say Madoff didn’t hesitate to scam even close friends and fellow members of the Palm Beach Country Club.

“They’re going to have to sell their 20, 30 million dollar mansions,” said Larry Leamer, author of “Madness Under the Royal Palms”. “It’s all over. Some of these people crazily put all their money with him so they’re finished.”

Some Were Sent a Warning Sign on Madoff

While many trusted Madoff with their life savings, others were sending out a warning signal. The research firm Aksia, which also provides advice to pensions, endowments, foundations and insurance companies, says it has long been steering clients away from Madoff’s hedge fund based on a “host of red flags.”

According to a letter to its clients, Aksia “published extensive reports on several of the ‘feeder funds’ which allocated their capital to Madoff Securities … Our judgment was swift, given the extensive list of red flags.”

Aksia said in its letter that when the firm checked the auditor of Madoff’s fund they found the operation was quite small, given the amount of money being handled.

The accounting firm, says Aksia, had just three employees, “of which one was 78 years old and living in Florida, one was a secretary, and one was an active 47-year-old accountant (and the office in Rockland County, N.Y., was only 13 ft x 18 ft large).”

More Republicans For Obama's Cabinet

Barack Obama, Ken Salazar, Mary Schapiro, Repuublicans, Robert Gates, SEC, Vilsack

CHICAGO, Illinois (CNN)

artmaryschapirosecgiPresident-elect Barack Obama has picked GOP Rep. Ray LaHood of Illinois to be his nominee for transportation secretary, two sources told CNN on Wednesday.

Two Democratic sources also said Obama will tap Mary Schapiro to head the Securities and Exchange Commission.

Schapiro is CEO of the Financial Industry Regulatory Authority, the largest nongovernment regulator for all securities firms doing business with the U.S. public. She is a former SEC commissioner and served as chairman of the Commodity Futures Trading Commission in 1994 during the Clinton Administration.

Obama will formally announce his choice of LaHood, a seven-term congressman from Peoria, at a press conference in Chicago on Thursday morning, the sources said.

LaHood is well-respected by Democrats and Republicans on Capitol Hill.

One of LaHood’s closest friends in Congress, fellow Illinois Republican Tim Johnson, said LaHood “has the ability to work both sides of the aisle well” and called him “an extraordinarily talented legislator.”

Obama has so far chosen one other Republican for his Cabinet. Defense Secretary Robert Gates will stay on in the Obama administration.

Earlier on Wednesday, Obama announced former Iowa Gov. Tom Vilsack as his choice for agriculture secretary and Colorado Sen. Ken Salazar as his choice for secretary of the interior.

“Together they will serve as guardians of the American landscape on which the health of our economy and the well-being of our families so heavily depend,” Obama said at a news conference in Chicago.

Vilsack was a high-profile supporter of Sen. Hillary Clinton during the presidential primaries after he briefly sought the Democratic presidential nomination.

Vilsack has championed the development of ethanol, an alternative energy, in Iowa — something that coincides with Obama’s vision for an energy-independent future, and something he can promote from the Department of Agriculture.

Vilsack, who dropped out of the presidential race in February 2007, is the fourth former presidential rival to join Obama’s team.

Vice president-elect Joe Biden; Hillary Clinton, Obama’s pick for secretary of state; and Bill Richardson, Obama’s pick for secretary of commerce, also sought the Democratic presidential nomination.

“With the appointments I announced earlier in the week, and with those I am announcing today, I am confident that we have the team we need to make the rural agenda America’s agenda, to create millions of new green jobs, to free our nation from its dependence on oil and to help preserve this planet for our children,” Obama said. VideoWatch Obama name Salazar and Vilsack to his team »

Salazar, Obama’s choice for secretary of the interior, has focused on public land and energy resource issues as a first-term senator from Colorado. He is the second Latino to be named to Obama’s Cabinet.

Obama said Wednesday he was confident that under Salazar, the Interior Department would become more proactive instead of “sitting back, waiting for whoever has most access in Washington to extract what they want.”

Salazar is a member of the Senate Committee on Energy and Natural Resources and has developed a reputation as a strong advocate of reducing the country’s dependence on foreign oil.

A fifth-generation Coloradan, Salazar was elected to the Senate in 2004 and quickly made a name for himself in immigration reform.

He was a key member of a bipartisan Senate group that put together the Comprehensive Immigration Reform Act of 2007, which would have beefed up border security and increased the number of Border Patrol agents, but also would have created a guest worker program.

That program would have allowed migrants to work temporarily in the Untied States. The most controversial aspect of the bill was the creation of a pathway to legalization and eventual citizenship for the estimated 12 million illegal immigrants already in the country, an idea that critics dismissed as “amnesty.” The bill failed to make it through Congress.

Salazar’s appointment would not jeopardize the balance of power in the Senate. Colorado Gov. Bill Ritter, a fellow Democrat, would name his replacement. iReport.com: Chatting with Salazar

Also on Wednesday, White House spokeswoman Dana Perino announced that Obama will meet for a second time with President Bush. The meeting also will include the three living former presidents.

President Bush will be host at a lunch with Obama and former Presidents Jimmy Carter, George H. W. Bush and Bill Clinton on January 7, Perino said.

Obama proposed the meeting with the former presidents to Bush when the two met in the Oval Office on November 10, two sources said.

The high-powered meeting is another sign of how closely the Obama and Bush teams have been working to try to make sure the first post-9/11 transfer of power goes smoothly.

“It’s been unbelievably cooperative,” said one Democratic official, who was not authorized to speak publicly about the conversations between Bush and Obama.

Bernie Madoff's Son Mark Worked For New SEC Head

Andrew Madoff, Bernie Madoff, Madoff, Mark Madoff, Obama, Peter Madoff, Schapiro, SEC

New SEC chief gave Bernard Madoff’s son a job

Rosie Lavan
TIMES ONLINE
mad-money

Mary Schapiro, Barack Obama’s choice to lead the Securities and Exchange Commission (SEC), previously appointed one of Bernard Madoff’s sons to a regulatory body that oversees American securities firms.

It has emerged that in 2001, Ms Schapiro, currently chief executive of the Financial Industry Regulatory Authority (Finra), employed Mark Madoff to serve on the board of the National Adjudicatory Council — the division that reviews disciplinary decisions made by Finra.

Mr Madoff is under house arrest in his $7 million Manhattan apartment and will be electronically tagged after he failed to secure further signatories to guarantee his $10 million bail.

Both sons have emphatically denied any involvement in what could be the biggest fraud perpetrated by an individual.

However, the link with Mark Madoff may prove controversial for Ms Schapiro and the President-elect, who has moved fast to replace Christopher Cox, the current head of the SEC. The watchdog has came under fire for failing to detect Mr Madoff’s activities.

Earlier this week, Mr Cox admitted the regulator had repeatedly failed to follow up on tip-offs about Mr Madoff’s business dealings.

At the time of Mark Madoff’s appointment, Ms Schapiro was serving as president of the National Association of Securities Dealers (NASD), according to the Wall Street Journal, which was consolidated with the New York Stock Exchange Member Regulation in 2007 to form Finra.

She has served as a commissioner of the SEC under three administrations since the 1980s: President Reagan appointed her in 1988, she returned for the first President Bush in 1989, and she was named acting chairman by President Clinton in 1993.

Ms Schapiro chaired the Commodities Future Trading Commission in the mid-1990s, during the downfall of Barings Bank, and first joined NASD in 1996 as president of regulation.

Mr Madoff was himself closely involved in NASD, the self-regulatory organisation for brokers and dealer firms, in the 1970s.

The NASD went on to found Nasdaq, the screen-based equity exchange, in 1971, and Mr Madoff became its chairman in 1990.

Mark Madoff began working at his father’s firm, Bernard L. Madoff Securities, in 1986. He was the third member of Mr Madoff’s family to join the business, following his uncle, Peter Madoff, and his cousin, Charles Wiener, son of Bernard’s sister, Sandra. Andrew Madoff, his younger brother, followed in 1988, and Roger and Shana, children of Peter Madoff, joined in the 1990s.

It emerged yesterday that Shana Madoff’s relationship with her husband, Eric Swanson, is at the centre of an SEC probe. Mr Swanson is a former SEC attorney.

In a profile of the Madoff family, published in 2000, Mark Madoff said: “What makes it fun for all of us is to walk into the office in the morning and see the rest of your family sitting there. That’s a good feeling to have. To Bernie and Peter, that’s what it’s all about.”

Last week, Mark Madoff, with his brother, Andrew, were understood to have approached the authorities after their father apparently confessed to orchestrating a $50 billion securities fraud.