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Sources: Madoff Indictments Imminent
One victim I talked to described a meeting with Bernie that later convinced her that the sons had knowledge of wrongdoing. "I was riding up in an elevator with him to his office so I could write a big check. I had decided that he was so good, it was the safest and most profitable place to put my money. I had heard he was sui generis, a brilliant financier who could make a lot of money for me in investments that were safe rather than risky. But I like to ask questions about where my money is going and the first question I asked was what would happen when he retired. He told me he wasn't going to retire, but when he died, he said his sons had agreed to take over. He also said that they ran the brokerage part of the business, and knew everything about the company and the way it handled investment.”
The victim continued: “I asked him how he himself made money because he did not take management fees. He said he charged four cents a share in a trade, which was the old-fashioned way of doing it. And then he volunteered that he ran the trades through his brokerage division. Then, after he was exposed as an impostor, I thought, with his sons running the brokerage business, they had to see the trades, or rather the lack of trades. There was no way, no way at all that they could not have known that the investment advisory business was a charade.”
Apparently absent from the office months out of the year, the sons were reportedly paid millions of dollars for jobs that required little work. A computer programmer high up in the brokerage division, the first company employee to break his silence, told the The Daily Beast that the third part of Bernard Madoff Securities Investment, the small market-making operation, was legitimate. But, he said, the large brokerage division was essentially a front for Bernie's illegal activities, a place that, unlike most New York brokerage houses, moved at a snail's pace. He said that the older employees were relatively idle, surfing the Internet, talking to friends on the phone. Yet, they were extravagantly paid, as were the rest of the employees of the firm. The employee described it as a kind of hush money, making staffers disinclined to question dubious company practices. The expenses were thus so high that the division made little if no money per year.
Bernie was known to pour clients' money he had laundered in London into the "legal" brokerage division to prop it up; it was a necessary shield for the illegal advisory business. SEC reviewers and investors were led into the office, where everything was legitimate, and saw what they thought was a thriving and successful brokerage house.
Peter Madoff, Bernie's brother, was in charge of compliance. He was one of the only family members who reportedly worked at least eight hours a day at the firm and was seldom absent.
Annette Bongiorno did not return calls from her Boca Raton, Florida, home. Peter Madoff's lawyer, John Wing, did not answer emails and phone messages.
Lucinda Franks is a Pulitzer Prize-winning journalist and author who was on the staff of the New York Times and has written for the New Yorker and the New York Times Book Review and Magazine. Her latest book is My Father's Secret War, about her father, who was a spy for the OSS during World War II.
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Lucinda Franks is a Pulitzer Prize-winning journalist and author who was on the staff of the New York Times and has written for the New Yorker and the New York Times Book Review and Magazine. Her latest book is My Father's Secret War, about her father, who was a spy for the OSS during World War II.
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Allan Dodds Frank is a business investigative correspondent who specializes in white collar crime. He also is President of the Overseas Press Club of America, one of the many journalism organizations that protests the arrests of journalists abroad and repression of freedom of speech.
Lucinda Franks is a Pulitzer Prize-winning journalist and author who was on the staff of the New York Times and has written for the New Yorker and the New York Times Book Review and Magazine. Her latest book is My Father's Secret War, about her father, who was a spy for the OSS during World War II.
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Lucinda Franks is a Pulitzer Prize-winning journalist and author who was on the staff of the New York Times and has written for the New Yorker and the New York Times Book Review and Magazine. Her latest book is My Father's Secret War, about her father, who was a spy for the OSS during World War II.
Genni2002
No doubt they knew and it sounds like evidence is there to prove that they did. The guy, his family and the whole ugly sordid episode gets grimier as it unfolds like a filthy rag. Yet, that he got a conscience and confessed, it still surprises me.
Btw, how did this creepy person get so many ladies? Goodness, they must have been getting excellent gifts.
artois
On the contrary, they were paying him...LOL
Genni2002
artois,
Right. Could it get any more revolting than that? Guess we just wait and see, eh?
GPatton
This is just the beginning, ladies and gentlemen! Perp walks to come at Goldman, JP Morgan, BoA, etc. etc. Stay Tuned! George Patton
djanimaequeen
Agreed. There's no way this could have gone on for as long as it did and NO one suspected or was involved.
Hotfrostins
This should be no big surprise, these disclosures prove what anyone with common sense new from the beginning,,, that no single person, no matter how brilliant, could have possibly pulled off a scheme to defraud of this scale, without involving an extensive network of co-conspirators having complete perpetuating knowledge that allowed it to go undetected for so long.
artois
From your lips to God's tin ears...
Hotfrostins
Yes, several key moments in my own life I have witnessed things that have caused me ponder, wondering if perhaps for some unrevealed reason it was being allowed to go on and then out of the blue the stars align and there are consequences. God and consequences, the creator made us with our imperfections, and has chosen to deny us knowledge of the true begining or end of the universe, but I suspect, in this case,we are going to find out everything we need to know about Bernies World.
oliverckerr
I want a spoon.
michaelslevinson dot commie
maddymappo
I didn't read anything here that makes me think the sons knew about the illegal activities. There is a lot of conjecture about how the family "must have know". I am not convinced that is the case at all. I think he may have protected his sons and he managed to keep his love affairs and pro massages a secret from his wife, why is everyone so coninvced that he told her about his huge scam? I doubt if the sons will be charged and I am quite sure Ruth won't be but the people who are robbed of their life savings will follow her like avenging furies all of her life.
artois
There is a doctrine in the law called "willful blindness". Many people are in prison today serving long sentences because of what they "should have known". Don't delude yourself. Ruth and the boys are easy indictment fodder. The only sound theory I heard thus far is that they haven't been charged because Bernie can be subpoenaed and undermine prosecutors by testifying that they knew nothing about it.
skibummin1
I wonder how many investors ,knew down deep. I think the feds shouldmake everyone give back every dime they took out in profits. and than redistribute accordingly whats left
christine
I always know when the byline is Lucinda Franks' that I am about to read something no other reporter following the Madoff story has been able to uncover. Kudos on more fine investigative work and I for one can't wait to see them all indicted. It will certainly be worth the wait if the cases the prosecutors bring in are all winnable.
artois
Prosecutors win these types of cases not because they're good at what they do (they usually have no idea of what they're talking about) but because judges (former prosecutors) give them so much lattitude.irrespective of the prejudice to defendants. Have no delusions, this is a witchunt (with great pains taken not to look like one) with prosecutors only thinking about the political capital this prosecution will garner for them. But the truth is that sometimes the witches are guilty....
siegeljja
What a perfectly ridiculous generalization about judges and prosecutors. This case will be tried in a federal courtroom and whether the judge was a prosecutor or a legal aid lawyer before going on the bench, the defendants will get fair trials. Yes, there are exceptiongs (see The Benchwarmers) but the SDNY has the most outstanding group of judges and prosecutors in the entire country. Your suggestion about "political capital for the US Attorney is equally absurd - I doubt you can even name the US Attorney who is presiding over this investigation.
artois
My point is that all cases are "winnable" because prosecutors are allowed to cheat by judges...so the waiting they're subjecting the public to is just a ploy to maintain the tension.
Tastidlite
Can't understand why its all taking so long. Two indictments in seven months with the entire force and power of the US Gov't behind this high profile investigation? What about Shana Madoff? She was the friggin compliance officer.
jjfranco
So when do the investigations into the SEC begin?
Nuld001
Great breaking story, Lucinda. Thanks for your continued and future writing on this scandal. The House of Cards are indeed about to all fall.
Tastidlite
How about the fact that the entire family was using the business Amex for personal expenses? Can't there be an IRS//Tax implication for all of them? Isn't it undeclared income?
philosopher8
Personally, I am so sick of a certain group of people amongst us that continue to lie, cheat and steal while hiding behind, and being camouflaged by, their cloaks of professionalism.
Bernie is just one example of the horrors inflicted upon unassuming, innocent Americans in the recent past.
Some examples include: Enron, Adelphia, sub-prime mortgages, short-selling, derivatives, hedge funds, ballooning APR's, overdraft fees, $5.00 / gallon gasoline, and on and on.
When is somebody going to stand up and just tell everybody to stop cheating and stealing from one another for personal gain? Someone must coin a new word for the fleecing of society to further one's material desires.
Seems as though the people who perpetrate this anti-social behavior often have outsized ego's and dreams of lifestyles beyond that which we see paraded on televison. $18,000. umbrella stands, $100 million dollar art collections, multiple mansions, etc. Capitalism is a great system, but it is vulnerable in that there is plenty of room for people to take advantage, and skew things to primarily their own personal benefit.
We hear now of the super computers at the big brokerage houses that can make hundreds of trades per second thereby assuring (penny by penny) a hefty profit for them at the end of the day. Again, everyday Americans do not stand a chance of succeeding with the rules now set by big business, banking, investment, etc.
I wonder why after billions of dollars worth of taxpayer bailouts, and even more billions of bonuses awarded, all the while in the same news broadcast we hear of Americans being thrown out of their homes by Marshalls, that more people aren't connecting the dots and seeing how manipulated we all are by big American Business and how we now exist to serve them, rather than the other way around.
Life is becoming very difficult for many of our fellow citizens and these greedy, dishonest entities are wreaking havoc with society and future henerations of Americans who deserve to enjoy the benefits of a set of rules our forefathers created to make our Nation as mighty as it once was.
It is bad enough to know that outside forces are trying to destroy our way of life, but when you have people like Bernie Madoff, Dick Fuld, Ken Lay and all of the others working against us, it then becomes very sad and could be considered modern day cannibalism.
exploora
It is just a matter of time, more heads than we possibly could imagine, related to this case, will be dropping in the bucket with a thump.
exploora
I say Stop Extracting Cash, that is not yours. And voila, I just spelled out SEC.
bindish
Ms. Franks continues to supply us with the information about
which we have questions. I, for one, am glad that they are being
"meticulous," because somebody -- probably a number of somebodies -- had to know that all was not kosher. Thanks
again to Ms. Franks and to The Daily Beast.
exploora
It is obvious what was missing was proper risk analysis, and if the details were so difficult to trace back, then it is obvious the audit was possibly bogus.
And of course that is what happened, Madoff's accountant allegedly was rubber stamping financial documents as if said assets had been validated as still existing.
That is the real story.
People didn't ask how and why, possibly because they feltthey weren't knowledgeable enough in financial matters, which is why they were going to a so called expert to start with.
Thank you.
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