25 Mar Jury Says Madoff Employees Knew of Fraud

A jury in federal court in Manhattan has spoken. They found that five of convicted swindler Bernie Madoff’s employees knew that the multi-billion dollar Ponzi scheme he orchestrated was illegal and fraudulent. It looks like they are all headed for the hoosegow along with Bernie, his remaining son (the other committed suicide) and a few others that have pleaded guilty. His wife Ruth appears to be successfully avoiding prosecution. These employees allegedly falsified records for auditors and regulators to hide the plan that apparently dated back to the 1970s, according to Madoff’s right hand who has been cooperating with authorities to reduce his sentence.

For those who haven’t been following this sad saga, initially it appeared that over $60 billion had been lost or stolen. It now seems, according to the trustee overseeing things, that only  $17 billion was lost, and so far the trustee has recovered about $11 billion of that. Unfortunately part of the funds he retrieved was from mom and pop Madoff investors who received payouts on their accounts that turned out to be fraudulent, so the money had to go back.

The case put the Securities and Exchange Commission’s enforcement division in the spotlight since at least six formal complaints against Madoff Securities were lodged with the SEC and it appears their response was tepid at best. After all, Madoff had been the Chairman of the Nasdaq, a well respected gentleman, so they may have applied kid gloves. It was only when a reporter found things out and threatened to expose the scheme that Madoff finally came clean to his sons and confessed to authorities. To their credit, the SEC did a top to bottom review and has implemented real changes in enforcement going forward. Lessons learned as the various shoes continue to drop in this case that does not seem to yet find an end.