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By Sarmad Shahid: K1155752, Amandeep Kaur: K1056929,

Maria Mirabela Stefan:

K1164241.

1. The Madoff fraud 2. The rise and fall of Polly Peck

Content
Madoffs epic fraud Polly Peck International bankruptcy The Board of Directors The Auditors Lessons learned from the two scandals Lessons in Corporate Governance Conclusions and Extensions

Madoffs epic fraud

Greatest Ponzi scheme in history ($64.8 billion) Famous names who lost money with Madoff include: JPMorgan Chase, UBS, HSBC, Citigroup, governors etc. In 2009 Madoff was sentenced to 150 years in prison Several people lost their lives as an aftermath of this disaster Madoffs own son committed suicide.

Polly Peck
In 1980, Asil Nadir acquired struggling UK textile firm Polly Peck and built it into a successful portfolio company with diverse interest; In1990 it was discovered that Nadir was transferring cash out of Polly Peck in his own personal accounts in Northern Cyprus; His total theft amounted 150 million. The company collapsed and Nadir skipped bail and returned to Northern Cyprus; He came back to UK in 2010 where he is currently awaiting trial.

The Board of Directors

Bernie Madoff
Madoff Securities was mainly a family run business The board of directors for Madoff Securities was small and homogenous Most of the companies that listed money to Madoff had small number of board of directors: three on average.

Polly Peck
Asil Nadir - chairman and chief executive He was the major shareholder owning 24% In 1990 the Polly Peck board of directors were the ones who confronted Asil Nadir over the theft.

The Auditors
Bernie Madoff
The world greatest multi-billion dollar Ponzi scheme in history that was not discovered by its regulators and watchdogs; External auditors have colluded fraud, underlying un-existent assets; Bernard Madoffs longtime auditor was guilty of preparing inaccurate tax returns on purpose, committing investment adviser and security fraud.

Polly Peck
The three auditors of Polly Peck provided false figures for the major auditor of the company, hindering the progress of proper and diligent audit; They had also hidden the companys actual accounts information over the time; The auditors were accused of fraud and constraint to pay 125000.

Lessons learned from the two scandals

Bernie Madoff
The investors should invest into different types of securities at the same time They should make investments among several advisors.

Polly Peck
The stakeholders should make further research if they dont understand the process under which the company is becoming so profitable Persons at the top of company should not be allowed to make transactions without providing cheques and balances.

The investors should not blindly trust the Corporate Governance; Need of good non-executives on the Board who act independently and are prepared to face challenge.

Lessons in Corporate Governance

Bernie Madoff
The Dodd-Frank Act addresses Ponzi schemes under Title IV; Title IV empowers SEC to evaluate the intention and type of hedge fund activities within the U.S. financial markets; It allows SEC to take action in what concerns the investment advisers on hedge funds, to ensure the clients assets.

Polly Peck
The recommendations made through Cadbury Report (1992) mentioned that the major accountancy firms should become more transparent and should provide more accurate information concerning the processes and practices; The role of audit committees had to be strengthened; The examination of mandatory audit firm rotation should be emphasized.

Conclusions and Extensions

Bernie Madoff
It is recommended that the rules adopted under section 411 in Dodd-Frank Act separate the investment adviser from the control over client assets; The successful protection of investors from fraud and the correct assessment of the level of systemic risk through unique, global regulatory framework.

Polly Peck
The governance debate on Polly Peck collapse has not brought any major change in the accounting industry; The same old problems have remained: shareholders represent a minority within the company, pay schemes for executives have to be aligned with the interests of long-time investors, lack of strategic focus on operating performance etc.

THANK YOU!