There was a notable small minority who responded negatively to Part One of this series: see, http://www.dailykos.com/...
Their basic thrust is that Bernie’s game didn’t net anywhere near the amount that federal investigators have alleged in the scheme. It's all gone, they insist. Their message: "Nothing to see folks. Move along."
What is their support for that assumption? I thought it would be interesting to trace it back. This is what I found - the New York bank where Bernie kept most of his operating funds, and its mouthpiece in minimizing investor law suits, a Bush appointee to the SEC who ignored persistent, credible efforts by a whistleblower and failed to investigate Madoff's game.
MORE . . .
The Madoff Deniers
There are two Bernie Madoffs. The first operated Bernard L. Madoff Securities (BLMS) and was arrested by the FBI on December 11. That's the one described in the government’s Forfeiture Demand seeking $177 billion as the total proceeds of 13 years operation that BLMS operated as an ongoing criminal enterprise http://www.dealbook.blogs.nytimes.co... ; that's the one which ripped off the 160-page list of Madoff’s 4800 victims http://www.businessinsider.com/... .
But, there’s a second Bernie emerging in the corporate media. Call him the made-up Madoff. He’s the one who oversaw a fund that never really existed. That’s the one that Bernie, himself, claims was "insolvent for years." There’s the Bernie that barely had enough money to cover expenses, the same one who didn’t actually make profits that nobody can find because they were all made up. That’s the revisionist Bernie Madoff that’s emerged in the minds of some who deny that money wasn’t diverted. He wasn’t exactly innocent, but he was acting alone, they insist. The bottom-line for this one:
Nothing lost, nothing to be gained by looking for it.
Which are you going to believe?
***
There is a recurring single source that some have cited for doubt that there could have been a significant diversion of funds. That is a low-ball estimate of $10 billion for the amount that Madoff actually took from investors. That figure was thrown out by a former Bush Administration official who appears to be acting as a spokesman for the large banks and accounting firms seeking to minimize their legal exposure from the Madoff rip-off.
The low-ball figure was report by Robert Smith, a legal correspondent for NPR’s All Things Considered, aired on March 12, 2009: http://www.npr.org/...
"Estimates of the amount of money Bernard Madoff bilked from investors vary from $50 billion to $64 billion. Investigators say, however, the actual losses are far less."
Based on a story by AP, Smith says the money "actually handed over" by investors may have been no more than $10-17 billion. What Smith did not reveal is that lower figure stems from a comment quoted from George W. Bush’s original appointee as head of the SEC, Harvey Pitt, who said Madoff: http://www.google.com/...
"probably inflated the amount of money he had under management." He predicted the actual loss would fall below $17 billion.
"But there's no question the amounts are probably north of $10 billion and that's a lot of money by anyone's reckoning," he said at a recent forum on the case."
Pitt has no direct involvement with the investigation. But, he has turned into a very visible talking head on the subject of Madoff. Interviewed by Fox News, Pitt said that JP Morgan Chase Bank, where Madoff kept his principal New York operating account, had "no legal issue" but merely "a moral one" to disclose that it had dumped its interest in Madoff’s fund months before the scandal became public. Madoff's victims surely disagree - many of them are suing that bank. JP Morgan Chase neglected to notify its own customers who held Madoff funds of its own concerns and actions. That interview: http://www.foxbusiness.com/...
Pitt has his own history of regulatory problems with gross criminal negligence and fraud still to account for as a result of actions he took as SEC Chairman, and faces accusations that he maintained serious conflicts of interest as a result of his former representation of Enron and the Arthur Anderson auditing firm. In 2002, as part of its "Worse Than Enron" series, PBS Frontline ran a portrait of Pitt and his predecessor, Arthur Levitt. In a special report, "A Tale of Two Chairman", that profile reflected about Pitt: http://www.pbs.org/...
The unkindest cut to this securities lawyer turned public servant (who began his career at the SEC and went on to represent the Big Five accounting firms) came from the Wall Street Journal, which ran a lead editorial in May entitled "Harvey Pitt's Credibility." "The SEC chief," pronounced the Journal's conservative editorial-page editors, "isn't restoring trust in American capitalism." Controversy had flared in January over Pitt's failure to recuse himself from the Enron and Andersen investigations. Now, the appearance of conflicts of interest in his meetings with former Big Five clients, according to the Journal, called his fitness for the top SEC job into question -- especially at a moment when investors' confidence in the integrity of America's markets has been shaken. In May, some critics began calling for his resignation.
SNIP
Pitt, who serves in the anti-regulation Republican administration of George W. Bush, has received his harshest criticism from consumer and investor-advocacy groups, liberal commentators in the press, and pro-reform Democrats in Congress.
SNIP
(Pitt is) still holding to the accounting-industry position on key issues like expensing stock options (bad idea, according to Pitt), revising the 1995 tort-reform law to restore some investor protections (not necesssary, Pitt says), and forcing accounting firms to separate their auditing and consulting practices to avoid conflicts of interest (it will hurt the quality of audits, explains the chairman).
An interview with Pitt in Forbes last December, revealed this in his thinking about Madoff: http:// www.forbes.com/2008/12/19/sec-madoff-pitt-biz-wall-cz_cc_1219pitt.html
Forbes: Why is it difficult for the SEC to detect frauds, such as the one allegedly orchestrated by Bernie Madoff?
Pitt: If someone is going to commit deliberate fraud, your chances as a regulator of finding it are very slim. You need a whistleblower. You can look at what information was there and ask, "well, why didn't they follow up on it?" The truth of the matter is even if you follow up on it, the question of whether you actually can find a truly intentional fraud is really debatable. At the end of the day people who plan to defraud others have a good chance of keeping their efforts hidden--at least for a while.
Pitt seemed to be unaware, or didn’t mention, the fact that like Enron and Arthur Anderson scandals, Madoff had a credible and persistent whistleblower. Harry Markopolos was repeatedly rebuffed by a GOP-controlled SEC and other federal authorities and was virtually ignored by the major corporate press for nearly a decade.
What Did Pitt, the Bush SEC, and the Media Talking Heads Ignore?
Harry Markopolos sums up has case against Madoff in, "The World's Largest Hedge Fund is a Fraud", November 7, 2005 Submission to the SEC. Outside of this forum and the Internet, where his accusations have been circulating for years, his accusations got little play since he first brought Madoff to the attention of the SEC office in Boston in 1999.
The evidence Markopolos presented way back then and repeatedly since has indeed stood the test of time, as investigations showed after December 11, when Madoff was arrested by the FBI. He showed that Madoff had reported losses only four percent of the time, which is an astronomical improbability in legitimate finance. He also pointed out 29 red-flags that Madoff’s operation was a fraud that was faking its securities purchase tickets. Yet, in all those years no one at SEC bothered to check to see if Madoff had ever actually been purchasing stocks for his customer accounts. See,
http://static.reuters.com/...
END PART 2__________________________________________
NEXT INSTALLMENT:
The True Scale of the Fraud and How Much Was Diverted?