The Bernard Madoff investment fraud scandal took an interesting turn yesterday, as federal prosecutors sought to have Madoff’s $10 million bail revoked. Prosecutors sought the revocation after they learned that Madoff had mailed “some very valuable jewelry” to his sons and brother after his assets were frozen in a civil lawsuit.
Madoff has been under house arrest since his December 11 arrest for securities fraud. The 70-year-old Madoff – once a chairman of the Nasdaq stock exchange – is the founder and primary owner of Bernard L. Madoff Investment Securities LLC. The firm is primarily known for its business in market-making, or serving as the middleman between buyers and sellers of shares. However, Madoff also oversaw an investment-advisory business that managed money for high-net-worth individuals, hedge funds and other institutions.
According to the FBI complaint against Madoff, that business was largely a Ponzi scheme. The FBI said Madoff “deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars.” Madoff reportedly told employees that his fraud could cost investors as much as $50 billion.
According to Bloomberg.com, Madoff’s lawyer said his sons reported to prosecutors that their father had sent them jewelry and other items in violation of a court order freezing his assets. Some items were also sent to his brother. Madoff’s lawyer insisted the items were merely “heirlooms” sent innocently to his sons and brother, Bloomberg said.
But prosecutors clearly disagree. According to Bloomberg.com, U.S. Attorney Marc Litt said in court yesterday that “transfer of valuables is a “changed circumstance” that warranted the revocation of bail.” He put the value of the items mailed by Madoff at around $1 million.
If Madoff’s bail is revoked, he would have to leave his posh Manhattan apartment for jail.
Meanwhile, the House Financial Services Committee held a hearing yesterday to address the Securities and Exchange Commission’s (SEC) apparent failure to detect Madoff’s decades-spanning fraud. The Wall Street Journal reported yesterday that the SEC failed to spot the fraud, despite receiving numerous tips, and investigating Madoff eight times in the last 16 years. Shortly after Madoff’s arrest, the SEC launched its own internal investigation into how his alleged Ponzi scheme was able to continue unchecked for so long.
According to CNN.com, H. David Kotz, the SEC’s inspector general, told Congress Monday that the investigation was ongoing. He added that his office planned to look at, among other things, complaints about Madoff’s activity and any other conflicts of interest between SEC officials, its staff and members of Madoff’s family.
In addition to hearing from SEC officials, the Committee took testimony from one of Madoff’s alleged victims. What he had to say was often poignant. Allan Goldstein, a 76-year-old former textile salesman from upstate New York, told lawmaker his entire life savings, which was worth as much as $4.2 million just months ago, has vanished. According to CNN, Goldstein said he feared he and his wife might now face foreclosure on his home because of their resulting financial woes.
“We are not trust funds, hedge funds or banks,” said Goldstein. “We are ordinary people who are victims of an incomprehensible crime and who have had their lives turned upside down.”
<You can leave a response, or trackback from your own site.
