January 10, 2009
Are these feeder funds like the Ariel Fund, aggrieved victims, conspirators or just professionally negligent and/or incompetent in losing their clients’ money in Madoff’s scheme? Many pocketed hefty fees to fund lifestyles. Bernard L. Madoff was arrested on December 11, 2008 and charged with federal securities laws violations. His highly sophisticated and massive fraud is considered to be the largest in history.
“The complicated relationships between Bernard L. Madoff Investment Securities, its feeder funds, and those funds’ investors are already creating a complicated tangle of lawsuits, with investors suing both Madoff and the feeder funds, while the feeder funds themselves [. . .] consider their own legal options (FINalternatives 2009-01-08).”
Madoff Feeder Funds: FIM Kingate funds, London, UK; Fairfield Greenwich Group, Conneticut/NY; Ariel Fund,
tags: feeder funds, hedge funds, Madoff, Kingate, Ariel, New York University, white collar crime, regulation, complex financial instruments,
Webliography and Bibliography
Berenson, Alex; Konigsberg, Eric. 2008-12-21. “Firm Built on Madoff Ties Faces Tough Questions.” New York Times.
December 23, 2008
It reads more like fiction than mainstream news.
“But, at about the time of High ‘Change, Pressure began to wane, and appalling whispers to circulate, east, west, north, and south. At first they were faint, and went no further than a doubt whether Mr Merdle’s wealth would be found to be as vast as had been supposed; whether there might not be a temporary difficulty in ‘realising’ it; whether there might not even be a temporary suspension (say a month or so), on the part of the wonderful Bank. As the whispers became louder, which they did from that time every minute, they became more threatening. He had sprung from nothing, by no natural growth or process that any one could account for; he had been, after all, a low, ignorant fellow; he had been a down-looking man, and no one had ever been able to catch his eye; he had been taken up by all sorts of people in quite an unaccountable manner; he had never had any money of his own, his ventures had been utterly reckless, and his expenditure had been most enormous. In steady progression, as the day declined, the talk rose in sound and purpose. He had left a letter at the Baths addressed to his physician, and his physician had got the letter, and the letter would be produced at the Inquest on the morrow, and it would fall like a thunderbolt upon the multitude he had deluded. Numbers of men in every profession and trade would be blighted by his insolvency; old people who had been in easy
circumstances all their lives would have no place of repentance for their trust in him but the workhouse; legions of women and children would have their whole future desolated by the hand of this mighty scoundrel. Every partaker of his magnificent feasts would be seen to have been a sharer in the plunder of innumerable homes; every servile worshipper of riches who had helped to set him on his pedestal, would have done better to worship the Devil point-blank. So, the talk, lashed louder and higher by confirmation on confirmation, and by edition after edition of the evening papers, swelled into such a roar when night came, as might have brought one to believe that a solitary watcher on the gallery above the Dome of St Paul’s would have perceived the night air
to be laden with a heavy muttering of the name of Merdle, coupled with every form of execration (Dickens 1857).
Using Google Maps we can actually follow in space and time, the story of this giant Ponzi scheme. This post is a draft and a work in progress . . .
Items on this Google Map have not been fully edited.
Items in the bibliography have not been properly edited yet . . .
to be continued . . .
I want to watch Midsomer Murders now . . .
Circumlocution Office is Dickens’ (1857) term to ridicule governmental offices that delayed business by passing through the hands of different officials. “That brilliant invention the Circumlocution Office was made up at a time when examinations were introduced for the Civil Service. Dickens felt that bureaucratic indolence and incompetence were responsible for the sufferings of British soldiers in the Crimean war. “This glorious establishment had been early in the field, when the one sublime principle involving the difficult art of governing a country, was first distinctly revealed to statesmen … Whatever was required to be done, the Circumlocution Office was beforehand with all the public departments in the art of perceiving – HOW NOT TO DO IT.” (Meaning, in Dickens’s time, how to avoid doing anything.) ( Byatt 2008-11-1.”
The Circumlocution Office is inhabited by a family of Tite Barnacles and relations.
General Motors (GMAC) The U.S. Federal Reserve on Wednesday approved GMAC Financial Services’ application to become a bank-holding company, a status that would give the auto-financing arm of General Motors Corp. access to government bailout dollars and the Fed’s discount window. The move complements a $17.4 billion emergency loan package the government extended to GM and (Wall Street Journal 2008-12-24)… “Merkin, who is chairman of GMAC LLC, is named in the lawsuit brought by NYU, along with his Gabriel Capital LP fund and Ariel Fund Ltd. GMAC is the finance business owned by General Motors Corp and private equity firm Cerberus Capital Management LP. The Funds ‘feeding’ money to Madoff, including Ariel, made a conscious effort to conceal Madoff’s involvement from their own investors,” the NYU lawsuit said. “This concealment was a requirement dictated by Madoff, which was agreed to by Merkin and other ‘feeder’ funds (McCool Reuters 2008-12-24).”
Electronic Communications Networks (ECNs) trading model
National Market System (NMS) Bernie Madoff presented his arguments at SEC hearings (2004-04-21 SEC) on the redesigning of “the existing national market system (“NMS”) rules to maximize profits and efficiency.
U.S. Securities and Exchange Commission (SEC) Washington, DC.
1823 Charles Dickens’ father, John Dickens, was imprisoned in the infamous debtors’ prison in Borough High Street, the Marshalsea. At twelve-years of age the future novelist was sent sent to work in a boot-blacking factory. John Dickens was the model for both Mr. Dorrit in Little Dorrit and Mr. Micawber in David Copperfield. Charles Dickens is in effect, Little Dorrit. In a prescient move, the BBC broadcast its adaptation of Dickens’ (1857) Little Dorrit, a month before Bernie Madoff’s arrest in his luxury Upper East Manhattan apartment. The similarities between the two stories are uncanny. See Byatt, A. S. 2008-11-15. “Little Dorrit: Within the walls of the Marshalsea.” The Guardian.
1857 In Charles Dickens’ introduction of his 1857 novel Little Dorrit he apologized for any similarity between factual events in Britain and Ireland and the context and character of his fictional banker, Mr. Merdle, who embarked on a fraudulent scheme now being compared to Madoff’s.
“If I might offer any apology for so exaggerated a fiction as the Barnacles and the Circumlocution Office, I would seek it in the common experience of an Englishman, without presuming to mention the unimportant fact of my having done that violence to good manners, in the days of a Russian war, and of a Court of Inquiry at Chelsea. If I might make so bold as to defend that extravagant conception, Mr Merdle, I would hint that it originated after the Railroad-share epoch, in the times of a certain Irish bank, and of one or two other equally laudable enterprises. If I were to plead anything in mitigation of the preposterous fancy that a bad design will sometimes claim to be a good and an expressly religious design, it would be the curious coincidence that it has been brought to its climax in these pages, in the days of the public examination of late Directors of a Royal British Bank. But, I submit myself to suffer judgment to go by default on all these counts, if need be, and to accept the assurance (on good authority) that nothing like them was ever known in this land (Dickens 1857).”
Thanks to these sources for making the Madoff-Merdle link: Paul Krugman, The New York Times Op-Ed columnist, in his 2008-12-19 blog post entitled “Madoff/Merdle“; McCann, Vincent. 2008-12-20. “Separating fact from fiction in financial fraud case.” Scotsman.com News.
1920s Financial frauds of the 1920s. See Galbraith, John Kenneth. 1954. The Great Crash: 1929. Boston: Houghton Mifflin.
1960 Bernie Madoff started his firm Bernard L. Madoff Investment Securities with $5,000. Bernard L. Madoff Investment Securities LLC.
1938 Bernard L. Madoff was born?
1970s The creation of the consolidated system for disseminating market information generated enormous benefits for investors (SEC 2004-02-27).”
1980s The incorporation of The Nasdaq Stock Market, Inc. (“Nasdaq”) securities into the NMS generated enormous benefits for investors (SEC 2004-02-27).”
1990s The adoption of the Order Handling Rules in the 1990s generated enormous benefits for investors (SEC 2004-02-27).”
2004-02-27 SEC published Regulation NMS for public comment. “In addition to redesignating the existing national market system (“NMS”) rules adopted under Section 11A of the Securities Exchange Act of 1934 (“Exchange Act”), Regulation NMS would incorporate four substantive proposals that are designed to enhance and modernize the regulatory structure of the U.S. equity markets (SEC 2004-02-27).”
“The central objective of this review is to determine how the regulations governing the U.S. equity markets should be modernized. Our markets are continually evolving because of such factors as innovative trading technologies, new market entrants, and changing investment patterns. We believe that one of our most important responsibilities is to monitor these changes and to ensure that the U.S. regulatory structure remains up to date. In this way, we can help our markets retain their position as the deepest and most efficient in the world – markets that offer a fair deal to all types of investors, large and small.”
2004 Bernie Madoff presented his arguments at hearings on the redesigning of “the existing national market system (“NMS”) rules adopted under Section 11A of the Securities Exchange Act of 1934 (“Exchange Act”), Regulation NMS would incorporate four substantive proposals that are designed to enhance and modernize the regulatory structure of the U.S. equity markets.
Discussion: “Is access to markets through the members of an SRO and through the customers or subscribers of ECNs or market makers sufficient to assure fair and efficient access to their displayed quotes? Are there barriers to access that must be removed for this indirect access to be feasible?”
Participants: Ivan K. Freeman (Morgan Stanley), John C. Giesea (Security Traders Association), Robert Greifeld (Nasdaq Stock Market), Larry Leibowitz (Schwab Capital Markets), Bernard L. Madoff (Madoff Investment Securities) and Thomas Peterffy (Interactive Brokers Group)
2008-01 Bernard L. Madoff Investment Securities claimed their investment advisory business managed $17.1 billion for 11 to 25 clients and boasted of an “unblemished record of value, fair-dealing and high ethical standards (Zambito and Smith 2008).”
2008-11-15 In a prescient move, the BBC broadcast its adaptation of Dickens’ (1857) Little Dorrit, a month before Madoff’s arrest in his luxury Upper East Manhattan apartment. The similarities between the two stories are uncanny. See Byatt, A. S. 2008-11-15. “Little Dorrit: Within the walls of the Marshalsea.” The Guardian.
2008-12-10 Andrew Madoff and Mark Madoff, Bernie’s sons and his employees claimed to be innocent victims of a fraud that they knew nothing about. They called the Securities and Exchange Commission, which told the FBI (Zambito and Smith 2008).”
2008-12-10 Special FBI Agent Theodore Cacioppi and a colleague questioned Madoff at his $9M East Manhattan luxury apartment on Thursday morning to investigate the possibility of any “innocent explanation.” “There is no innocent explanation,” Madoff replied. Within hours, investors who had trusted the 70-year-old Madoff for years – including the owner of the New York Mets – were reeling at charges that one of the most trusted names on Wall Street was a full-time fraud (Zambito and Smith 2008).”
2008-12-12 “[A]ngry investors crowded a Manhattan federal courtroom hoping to find out if the SEC would come to their rescue. Manhattan Federal Judge Louis Stanton issued an order freezing Madoff’s assets, as well as those of his firm, and named lawyer Lee Richard to oversee the business. The hearing was canceled, leaving investors bewildered (Zambito and Smith 2008).”
2008-12-23 “[H]edge fund executive Thierry Magon de la Villehuchet, 65, was found dead in his office in an apparent suicide, reportedly distraught over being duped by Madoff. New York City Police Commissioner Raymond Kelly said Villehuchet had cuts on his wrists from a box cutter and pills nearby. The Frenchman’s Access International had an exposure of $1.5 billion, officials said (McCool 2008-12-24).”
2008-12-24 Washington: “The U.S. Federal Reserve on Wednesday approved GMAC Financial Services’ application to become a bank-holding company, a status that would give the auto-financing arm of General Motors Corp. access to government bailout dollars and the Fed’s discount window. The move complements a $17.4 billion emergency loan package the government extended to GM and …” Wall Street Journal McCool, Grant. 2008-12-24. “(McCool 2008-12-24) New York University sued fund executive over Madoff
2008-12-24. “Fed Grants GMAC’s Request to Become Bank-Holding Company.” Wall Street Journal.
Webliography and Bibliography
- Byatt, A. S. 2008-11-15. “Little Dorrit: Within the walls of the Marshalsea.” The Guardian.
- McCool, Grant. 2008-12-24. “New York University sues fund executive over Madoff.” Reuters.
- Quinn, James. 2008-12-16. “An American Tragedy.” Financial Sense.
- Zambito, Thomas; Smith, Greg B. 2008-12-13. “Feds say Bernard Madoff’s $50 billion Ponzi scheme was worst ever.” New York Crime. Daily News.
- 2008-12-22. “Jewish leaders bracing for Madoff fallout.” The Boston Globe.
- Unlikely Player Pulled Into Madoff Swirl.”NYTimes.com
- A.G. takes himself out of Madoff probe | Deseret News (Salt Lake City) | Find Articles at BNET
- Fund Fraud Hits Big Names – WSJ.com
- 2008-12-14.Bodyblow to Wall Street at The Brian Sullivan Blog
- Business News – AOL Money Canada
- U.S. Congress to probe SEC role in Madoff affair
- edmontonsun.com – World – $50B fraud plot thickens
- Madoff Mess manoeuvres
- Judge orders Madoff to tally his assets
- Don’t Be Scammed by Madoff Investor Sob Stories – Seeking Alpha
- Madoff investors unlikely to regain money
- Madoff bad omen for fund of hedge funds industry – AOL Money Canada
- Run by investors, for investors – North American Markets end lower, Madoff scandal raises concerns over financials – North American Market Summary
- More banks reveal exposure to Madoff scandal – Yahoo! Canada News
- Bernard Madoff scandal draws publishers
- IOC has nearly $5 million tied to Madoff – AOL Sports Canada
- Some Madoff investors may have to give back gains – Dec. 19, 2008
- Madoff’s auditor Friehling and Horowitz doesn’t audit? – Dec. 17, 2008
- Did Bernard Madoff act alone? – Dec. 18, 2008
- Answers to 6 Madoff questions – Dec. 18, 2008
- A stock exchange caught in the Madoff mess – Dec. 18, 2008
- ‘A Giant Ponzi Scheme’
- reportonbusiness.com: Madoff debacle reveals stunning failure of due diligence
- Midas Letter – Health, Wealth and Prosperity
- Meet the real Ponzi behind the ‘scheme’ – Dec. 15, 2008
- TheStar.com | Business | Banks, funds among clients who lost billions
- Charities hit hard as Madoff fraud losses mount
- Madoff: ‘Bloodbath’ for Twin Cities investors
- Pigeon King owes $23 million | Farm andDairy – The Auction Guide and Rural Marketplace
- globeandmail.com: Farmers should have been warned about pigeon venture: critics
- The Canadian Press: Royal Bank says clients have $50M in exposure to alleged Madoff fraud
- Ponzi schemes strike in U.S., Russia and Colombia | Worldfocus
- Bloomberg.com: Worldwide
- The Madoff Fraud: How Culpable Were the Auditors? – TIME
- Madoff Victims Look for Ways to Recover Their Money – TIME
- Wall Street’s Latest Downfall: Madoff Charged with Fraud – TIME
- How I Got Screwed by Bernie Madoff – TIME
- Bernie Madoff’s man to see – The Boston Globe
- Bull Market
- Top Trader Is Accused of Defrauding Clients – NYTimes.com
- Bernard L. Madoff News – The New York Times
- The New York Times > Books > Sunday Book Review > His Last Name Is Scheme
- A Scheme With No Off Button – NYTimes.com
- Ponzi Schemes – News – The New York Times
- Even Winners May Lose With Madoff.” NYTimes.com
- Madoff Agrees to Security ‘to Prevent Harm or Flight’ -NYTimes.com
- “Talking Business – Avoiding a Financial Collapse, Indian-Style.” – NYTimes.com
- “Madoff Scheme Kept Rippling Outward, Across Borders.” NYTimes.com
- “Madoff Ponzi Scheme Lawsuit: Attorneys for Defrauded Investors.”
- Madoff Scheme Kept Rippling Outward, Across Borders.” NYTimes.com
- “Top Trader Is Accused of Defrauding Clients.” NYTimes.com
- Op-Ed Columnist – The Brightest Are Not Always the Best -NYTimes.com
- Wall Street fallout shakes economy