I Just Don't Get It

Bernie Madoff was investigated eight times in the last sixteen years by the SEC and never once did anyone uncover the ponzi scheme? That's according to the Wall Street Journal.

While SEC officials had their guts ripped out of them by Congress today, Harry Markopolos, a former investment manager, declined to appear at the last minute. He's the guy who wrote to the SEC three times, telling them that Madoff couldn't be making the profits he claimed by investing legally. According to Markopolos' lawyer, he is ill with a sinus infection and will eventually testify voluntarily.

Meanwhile in New York, Bernie and Ruth Madoff appeared before a federal judge after prosecutors asked to have their bail revoked. While you and I were forgoing holiday shopping--car sales alone were down 35%, it seems the Madoffs were sending out packages filled with mittens, inexpensive cufflinks, along with heirloom jewelry valued at $1 million. This is chutzpah, because they sent the valuables to their sons, brother, and other family members, all of whom might be implicated in the scandal although Bernie claims he did it alone.

But my favorite Madoff story comes from the maven of plastic surgery, Joan Rivers, in her interview Sunday in the New York Times Magazine.

Deborah Solomon's interview with Rivers ended like this:

I love my life, except for losing all that money with Ruth and Bernie. I’m pleading with you, please say, “She lost a bundle with Bernie Madoff.”

Did you?

No, but everybody is walking around now saying that, and that shows that you used to be very rich.

SEC Vacations for Eight Years Under Bush

ProPublica.org reports that Bernard Madoff's nemesis, Harry Markopolos, an independent fraud investigator and derivatives expert, tried in 1999 to replicate the returns on the Madoff mix of investments and found it impossible after several of his clients asked for comparable investments. Markopolos approached the SEC in 1999, 2001, and again in 2005 with analysis that questioned the validity of the Madoff formula.

His nineteen page 2005 submission is called "World's Largest Hedge Fund is a Fraud," and contains 29 "red flags." A link for download was posted yesterday and is also available on ProPublica's webpage.

The SEC's opening and closing report has been posted by the Wall Street Journal and is available for download on ProPublica.org.

The SEC concluded that there was no evidence of fraud. But it never subpoenaed anything from Madoff.

When greed has been listed as a deadly sin for thousands of years, what led to the delusional belief that the financial markets could self-regulate?

Oy Veh, Not Another One!

Bloomberg.com reported on December 16th that AIG, the failing insurance company, once the largest in the world, somehow managed to give out bonuses, euphemistically named "retention pay," to over 7,000 employees. Some of these bonuses ran into the millions, $4 million, to be exact. They were based upon annual salary and in many cases, equaled annual salary.

Edward Liddy, CEO of AIG, which is now 80% owned by the American taxpayers, was unapologetic, although hopefully, he will be hauled before a Congressional hearing to explain his actions.

Because, frankly, where are these AIG employees going anyway? Anyone in the financial services industry who has a job will likely not be moving anywhere voluntarily.

U.S. finance companies cut 220,506 jobs this year through November, placement firm Challenger Grey & Christmas Inc. said in a Dec. 3 report.

Entitlement rears its head again.

Assistant Treasury Secretary Neel Kashkari, who supervises the U.S. financial rescue program, has called some of AIG’s bonuses “excessive for a failing institution.” Neel embarrassed himself last week when he couldn't answer many questions before Congress about just where the $350 billion has gone so far.

Sounds like what happened to the reconstruction money in Iraq. Ah, self regulation!

This might be the understatement of the week, in a week when Bernard Madoff has felled so many rich people, charitable foundations, and banking institutions.

According to talkingpointsmemo.com, in 2005, a submission was filed with the SEC by Harry Markopolos, a money manager and investment investigator, explaining how Madoff's hedge fund couldn't possibly be making that kind of money. Click here to read the actual document.