BERNIE MADOOF SCANDAL

Presented By: Mica S. Alnooh

Company Background
o Bernard L. Madoff Investment Securities LLC.
o founded by Bernard Lawrence "Bernie" Madoff in
1960.
o The firm headquartered in New York, New York.
o It operates as a securities broker/ dealer in the United
States and internationally.
o The firm was the sixth largest market maker on Wall
Street the year Madoffs arrest in 2008.

What happened?
o Tricked investors with The method
of a classic Ponzi scheme.
o The investors were tricked for
$64.8 billion.
Main players
o Bernard
Lawrence "Bernie" Madoff
- He was the master main of the scam
- chairman until his arrest on
December 11, 2008.
- He is the former non-executive
chairman of the NASDAQ.

Main players
o David G. Friehling:
- Madoff's "listed" accountant.
- He signed off on audits on Bernard L.
Madoff Investment Securities LLC's books.
- Friehling falsely represented to investors
and the Securities and Exchange Commission
that he and the firm had conducted audits,
and the Madoff firm was financially sound.

Main players
o Frank DiPascali:
- "Director of options trading" and as
"chief financial officer" at Madoff
Securities for 33 years.
- He admitted to the Court that he
learned in the late 1980s or early
1990s that no trading was occurring in
Mr. Madoff's investment-advisory
client accounts.
How did they do it
o According to Bernie Madoff it started as perfectly
legitimate business but he confessed that the return given
since approximately 1995 were fabricated.
o When a customer made an investment, he simply put the
money into a bank account and when asked for a
withdrawal he took the money piled up in that account.
o Withdrawals were simply covered by new investment
How did they do it
o At the end of each month Madoff sold all stocks
and financial instruments so that the hedge fund
only reported the amount of cash to the
authorities.
How they got caught?
When financial analyst Harry Markopolos informed
the SEC that he believed it was legally and
mathematically impossible to achieve the gains
Madoff claimed to deliver but he was ignored by
the Boston SEC in 2000 and 2001 as well as by
Meaghan Cheung at the New York SEC in 2005 and
2007 when he presented further evidence.

How they got caught?

o On December 10, 2008, Madoff's sons told
authorities that their father had confessed to them
that the asset management unit of his firm was a
massive Ponzi scheme, and quoted him as
describing it as "one big lie".

Penalties
o Bernard
Lawrence "Bernie" Madoff:
o sentenced to serve 150 years in
prison with restitution of $17
billion..
o David G. Friehling:
o sentence of 20 years. As of June
2012, he awaits sentencing.

Penalties
o Frank DiPascali: He
faces a maximum of 125
years in prison

Fun fact
o Madoff fraud was revealed
just months after the 2008 U.S
financial collapse
o Madoff's personal and
business asset freeze created
a chain reaction throughout
the world's business and
philanthropic community.
Conclusion and Recommendation
o As a conclusion, Since the internal auditor reports
to board of directors and the chairman of the
board and its members are members of Madoffs
relative and friends the internal auditor was
forced by Madoff to cover up the fraud by
falsifying audit reports to the Securities and
Exchange Commission.

Thank You