The Few Specifics in the Madoff Charges
The Few Specifics in the Madoff Charges
March 10, 2009, 5:30 pm
While federal prosecutors have charged Bernard L. Madoff with enough felony counts to warrant life imprisonment, they shed only a little new light onto how his giant Ponzi scheme worked.
The 25-page criminal information document filed in federal district court on Tuesday offered precious few nuggets of information on the government’s case against the financier, serving mostly to reinforce the accusation that Mr. Madoff’s operations were fraudulent for more than two decades.
No other defendants are named in the charges; in fact, no names save Mr. Madoff’s appear in the document. What do appear are several numbers relating to his business, some of which are eye-popping.
– In the document, prosecutors say that Mr. Madoff promised certain clients annual returns up to at least 46 percent.
– They also say that from at least as early as 2002, Mr. Madoff directed more than $250 million from the locus of the fraud, his investment advisory arm, to London accounts for his legitimate market-making and proprietary trading operations.
He then redirected the funds back to one of two accounts in New York. The purpose of the transfers, according to prosecutors, was to give the appearance of securities transactions. (The money was used in part to buy property for himself, family members and associates.)
– As of about Nov. 30, 2008, Mr. Madoff’s investment advisory arm had about 4,800 client accounts. The business issued statements for November claiming a total balance of about $64.8 billion. They held only “a small fraction” of that number in reality.
Some of the examples prosecutors used to support the criminal charges are a little intriguing, as well.
– In describing the wire fraud count, prosecutors allege that on Aug. 5, 2008, Mr. Madoff had $2 million in investor funds wired from Bloomington, Minn. to New York City.
– In describing the theft from an employee benefit plan, prosecutors say that on Sept. 24, 2008, Mr. Madoff essentially pocketed $10 million in pension fund assets invested by a trust representing about 35 labor union pension plans.
– A lengthy passage is devoted to proving the perjury count, in which prosecutors excerpt testimony given on May 19, 2006 by Mr. Madoff to the Securities and Exchange Commission about his operations. Here’s an excerpt:
Q: Now you mentioned that there was a group of dealers to whom you put out this indication of interest each time. Generally, with how many of them do you end up trading in each execution?
A: Within the basket, we’re probably interacting with 40, close to 50.
Q: That’s for equities and options.
A: Equities. Options is a dozen.
Q: A dozen. Do all of them end up trading usually?
A: Pretty much. They all trade on a - yes. It’s usually that they all participate during the trading. They have an interest in these stocks. These stocks are the marketplace.
…
Q: Who are the counterparties to the options contracts?
A: They’re basically European banks.
…
Q: Who has the custody of the assets?
A: We do.
–Michael J. de la Merced
Votes:5
Comments: 0