Bernie_Madoff

BERNARD LAWRENCE “BERNIE” MADOFF KIM JONES PROFESSOR RYAN KOPF BUSINESS LAW I AUGUST 20, 2010 1. Describe three types of illegal business behavior alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business. Mr. Madoff engaged in fraud, theft and deceptive practice while operating a ponzi scheme for over 20 years. Fraud was committed because he intentionally took money from people knowing that he could not give the returns he promised knowing the only person/people to gain from these investments was Mr. Madoff and his family. Mr. Madoff committed theft when he used people investments monies to repay other clients/investor returns when they asked to redeem shares. This practice was a clear case of dishonesty because he used their money without their consent to pay off his debts. Deceptive practices was the entire business, Mr. Madoff continually marketed that his firm could produce positive returns on all monies invested. He created phony statements each month to send to clients/investor stating that their investment was making money this was misleading and false information. 2. Name three types of parties who were impacted by the actions of Mr. Madoff and describe how they were impacted. David Friehling was Mr. Madoff, “accounting front man pleads guilty to securities fraud, investment adviser fraud, making false filings to the Securities and Exchange Commission, and obstructing the IRS”, (Bernie Madoff. (n.d.). Wikipedia). Cohmad Securities Corporation was brought up on charges by the Securities Exchange Commission for “actively marketing investment opportunities with Madoff while knowingly or recklessly disregarding facts indicating that Madoff was operating a fraud.” (U.S. Securities Exchange Commission, Litigation Release No. 21095 / June 22, 2009). Finally thousands of everyday people have lost their life savings due to investing with Mr. Madoff. 3. Describe three business safeguards (risk management) that may have prevented the harm caused by Mr. Madoff. The biggest safeguard should have been the Securities Exchange Commission should have acted on all the tips it was given by other brokers like Harry Markopolos, who on three occasions wrote and called the SEC in reference to Mr. Madoff. The SEC should have thoroughly gone through records and demanded that Mr. Madoff turnover records of all his trading and clients. They never reviewed any documents that could verify the transactions of his firm. The ultimate safeguard would have been Mr. Madoff running a business that was transparent. He never discloses to his clients/investors how he made them money. 4. Describe three ways private investors might have better protected themselves from risk. One way in which private investors can protect themselves would be by not invest all of their money with one person/firm. Ask questions and demand answers. In the Madoff case a lot of investors stated they never received a straight answer from Mr. Madoff when they approached him with questions. Private investor should always be skeptical if a firm cannot produce documentation to verify profits made. A statement is not proof of how the money was made. 5. Describe three legal actions that possibly may be brought against Mr. Madoff under criminal or civil law. Mr. Madoff was charged with numerous criminal counts under federal law. He was charged with money laundering because he took money illegal from investors and move it into accounts for him and his family members. He was charged with false filings with the United States Securities and Exchange Commission because he gave false records and information when enforcement officers were sent to his firm for compliance checks. Under civil law the government has filed to have Mr. Madoff asset frozen and asses to repay the billions of dollars lost to investors of his firms. REFERENCES BERNARD MADOFF. Wikipedia, the free encyclopedia. Retrieved (2010, August 22) from http://en.wikipedia.org/wiki/Bernard_Madoff U.S Securities and Exchange Commission. (2009). Ligitation Release NO 21095/June 2009, Retrieved from http://www.sec,gov/litigation/litrelease/2009/lr21095 Bernard l madoff. (2010, May 25). The New York Times, Retrieved from http://topics.nytimes.com/top/reference/timetopics/people/m/bernard