150 Years For Madoff

Is a crime a crime, or the severity dependent on the amount that was "fraudulently obtained" by the perpetrator? Court rulings have maintained that the sum of money lost is a primary factor. Another factor has to be how many people were defrauded or affected? If Madoff had bilked the US Treasury for the same amount, somehow I don't think the media would make such a big hoo-hah over the case. Collective mob anger (which is understandable and justified) do sway the severity of the crime. So, if you are going to 'steal money', steal from one party only, or at least try to minimise the number of affected parties.

Sentenced to 150 years in prison on Monday, Bernard L. Madoff, the convicted Ponzi schemer, got one of the nation’s most severe sentences ever handed out in a white-collar crime case.

In recent years, some of the most notorious financial miscreants have received sentences of about 15 to 30 years. Below, a graphical look at of some of the longest prison terms for financial fraud, including sentences for former executives at WorldCom, Enron and the hedge fund Bayou Group.

At the relatively low end of the spectrum is Phillip R. Bennett who was 59 when he was sentenced to 16 years in prison for his role in the financial cover-up that eventually led to the collapse of the commodities brokerage Refco and about $1.5 billion in investor losses. Mr. Bennett, who had been Refco’s chief executive, previously pleaded guilty to 20 crimes, including conspiracy to commit securities fraud.

At the high end is Lance K. Poulsen, the founder of National Century Financial Enterprises, who in March received a 30 year prison sentence — one of the nation’s harshest for a white-collar crime. Mr. Poulsen was convicted of leading a $2.9 billion fraud that brought down National Century and triggered the bankruptcy filings of about 275 health care institutions.

“Mr. Poulsen is an architect of a fraud of such magnitude that it would make sophisticated financial analysts shudder,” the judge said in handing down the sentence.

Source: The New York Times; Google Charts


p/s photos: Yu Yamada

We Do Need Another Hero - Harry Markopolos

The world has a new hero. I watched his testimony for a couple of hours last night, and he is extremely bright and brave for what he did. Deservedly, he bashed the SEC and many other regulators for being incompetent and not having the proper understanding of financial instruments -i.e. as in many regulators (including the Bursa and our own Securities Commission) too over-lawyering... just too many lawyers with not sufficient appreciation of financial instruments and accounting forensics intuition. What was fun to watch was Harry's direct and assured statements, he did not cushion any of his views, he just let it rip. I guess that is understandable, he and his team must have weathered through thousand of hours of hell with the regulators, and at the same time fearing for his life as there were a substantial amount of black market money with Madoff funds, and he could have easily been rubbed off Soprano style. Mark my words, this will be turned into a movie very soon... I think Phillip Seymour Hoffman or John Stamos (he has Greek ancestry anyway) or Billy Zane (yes, the ahole in Titanic, and has Greek ancestry as well). Still, I hope the Congress will see it fit to reward Harry and his team with a substantial financial sum, its only fair.

Wikipedia: Harry Markopolos is a former securities industry executive turned independent financial fraud investigator for institutional investors and others seeking forensic accounting expertise. He has risen to prominence as an early whistleblower of suspected suspected securities fraud by Bernard Madoff, tipping off the SEC repeatedly both verbally and in writing starting in 1999, when he argued that it was not legally possible for Madoff to deliver the returns he'd claimed to deliver.

In November 2005, Markopolos submitted a 21-page document to the SEC entitled "The World's Largest Hedge Fund is a Fraud" in which he documented numerous issues that caused him to allege that it was highly likely that "Madoff Securities is the world's largest Ponzi scheme," or at the very least was engaging in illegal front running.

Describing Madoff as “one of the most powerful men on Wall Street,” Markopoulos states that there was “great danger” in raising questions about him: "My team and I surmised that if Mr. Madoff gained knowledge of our activities, he may feel threatened enough to seek to stifle us,” He will also testify that he feared for his, as well as his family's safety, until after Madoff's arrest, when the SEC finally acknowledged that it had received "credible evidence" of Madoff's scheme years before.

Markopoulos originally concealed his identity from SEC regulators in May 1999, although he met face-to-face with an SEC official in Boston in 2001. After the SEC did not respond, Markopoulos was fearful of taking his complaints to the industry's self-regulatory authority, FINRA (the Financial Industry Regulatory Authority), because of the power Bernie Madoff's brother, Peter, had in that organization. Markopoulos believed the FBI would reject his allegations without the SEC staff's endorsement. He believed only one SEC staff member understood Madoff’s scheme and “the threat it posed to the public.” “My experiences with other SEC officials proved to be a systemic disappointment and lead me to conclude that the SEC securities' lawyers, if only through their investigative ineptitude and financial illiteracy, colluded to maintain large frauds such as the one to which Madoff later confessed."

Markopolos is a past president of Boston Security Analysts Society Inc. and worked at Boston based Rampart Investment Management Co. from 1991 through 2004, ultimately becoming its chief investment officer.

p/s photos: Zhou Wei Tong