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Bernard Lawrence "Bernie" Madoff

Born April 29, 1938 Grew up in New York City Graduated from Hofstra Wife and two children

http://en.wikipedia.org/wiki/File:BernardMadoff.jpg

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The Scam Madoff was the chairman of the Bernard

L Madoff Securities LLC( limited liabilitycompany)

Starting in the early 1990s, Madoff toldfamily and friends that if they investedmoney in him, he would add 10%interest to their account each year.

Investors believed the 10% was put intotheir account and spread the word thatMadoff was reliable, and he became

more and more popular each year.

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The Scam Cont. Since people believed the 10% was being added

each year, they had no reason to take their moneyout.

If they did take the money out, Madoff would paythem with other peoples money

Madoff continued doing this until October of 2008

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6

Returns are way too high to be legit

Madoff split strike conversion strategy should have earnedclose to the Risk Free Rate. Instead, it earned nearly threetimes that.

Madoff vs 90 dayT-Bills annual returns

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Madoff

90 day T-Bills

Madoff avg. 10.8%

T-Bill avg. 3.9%

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The Catch

Due to the economy, everyone started taking their money out andMadoff could not pay them back.

His sons found out and informed authorities

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Magnitude of Scam Madoff committed the

biggest scam by a

human being,scamming close to 65billion dollars

Afffected thousandsof investors

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Who discovered the fraud

In 1999, when financial analyst Harry Markopolos informed the U.S.Securities and Exchange Commission (SEC) that he believed it waslegally and mathematically impossible to achieve the gains Madoffclaimed to deliver. According to Markopolos, he knew within fiveminutes that Madoff's numbers didn't add up, and it took four hours offailed attempts to replicate them to conclude Madoff was a fraud.Hewas ignored by the Boston SEC in 2000 and 2001, as well as byMeaghan Cheung at the New York SEC in 2005 and 2007 when hepresented further evidence. He has since published abook, No One Would Listen , about the frustrating effortshe and his team made over a ten-year period to alert thegovt. the industry, and the press about the Madoff fraud.

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Role of SEC

In the Madoff scandal, there were plenty of suggestionsof conflicts of interest, such as Madoffs personal ties toregulators like chairman Arthur Levitt,as well as lowerlevel connections such as the fact that Madoffs niece

married a former SEC attorney who-prior to therelationship, it appears- had supervisory authority in thearea in which Madoff operated.To this point, however,there has been no credible evidence that anyone at theSEC deliberately protected Madoff. This was almostsurely a sin of omission, not commission. of course nodoubt the savvy regulator understands the desirability ofkeeping Wall Street a vibrant, profitable, deal-generatingplace.

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Friehling & Horowitz

Friehling was charged on March 18, 2009, with securities fraud,aiding and abetting investment adviser fraud, and four counts offiling false audit reports with the Securities and ExchangeCommission.

Friehling essentially rubber-stamped Madoff's books for 17 years,serving as Madoff's auditor from 1991 through 2008 while he workedas the sole practitioner at Friehling & Horowitz.

Investigators also said that Friehling and his family had sizableinvestments with Madoff, accumulating a balance of more than $14

million by late last year and withdrawing more than $5.5 millionsince 2000. Prosecutors said it's a conflict of interest for an auditorto have such a large investment.

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WHY????

He was paid a tidy sum by Madoff: Prosecutors said hemade between $12,000 and $14,500 a month from 2004to 2007. That works out to $144,000 to $174,000 a year.

HIS PENALTY He faces a maximum

sentence of 105 years inprison if convicted on allcounts.Though he was releasedafter his arraignment on bail of$2.5 million.

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Legal System On December 11, 2008

madoff was arrested for the largest financial

crime. Remains in jail until

hearing.

Faces 150 years incharges. Madoff's lawyer's plea

for a lighter sentenceof 12 years.

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