Madoff Remains Free, Judge Rules

The firm was the 23rd largest market maker on NASDAQ in October, handling a daily average of about 50 million shares a day. The firm specialized in handling orders from online brokers in some of the largest U.S. companies, including General Electric Co. and Citigroup Inc., Bloomberg News reported.

But on Dec. 10, Madoff allegedly told senior employees at his firm that his entire business was a fraud. According to the federal complaint, Madoff told those employees that he was "finished" and that "it's all one big lie." Madoff estimated "the losses from the fraud to be at least approximately $50 billion," the complaint states.

At that time Madoff also told those employees that he intended to surrender to authorities, but before he did he planned to use $200-300 million he had left to make payments to "selected employees, family and friends," the complaint states.

Madoff started his business in 1960 with $5000 in savings. He resides in New York City and, according to clients, also maintains a posh waterfront home. Known to his clients as Bernie, he has a long and significant history on Wall Street and has been a chairman of the board of the NASDAQ and was a founding member of the board of the International Securities Clearing Corp. in London.

The Web site for Madoff's firm, in its company profile, says, "Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."

Madoff was arrested last month by FBI agents and charged with criminal securities fraud by federal prosecutors in Manhattan. The complaint states that he used "manipulative and deceptive practices." The complaint cites two senior employees in describing how Madoff kept his client records "under lock and key" and how he left them in the dark about how he managed the private client funds. One of those employees, in interviews with the FBI, said that Madoff was "cryptic" in his statements. This, according to clients, is in keeping with the aura that Madoff cultivated among his clients, some of whom have kept funds under management with him for generations.

Madoff Struggled to Obtain Liquidity in December, Complaint Says

But by the first week of December, when clients began clamoring for redemptions -- to the tune of $7 billion -- the complaint states that Madoff began a struggle to obtain the necessary liquidity. The stress began to show, the employees said.

In a meeting at their boss's Manhattan apartment -- held there following a confrontation in the office because Madoff wasn't sure "he would be able to "hold it together" if the conversation took place in the office -- the employees came away believing that Madoff was "saying, in substance that he had for years been paying returns to certain investors out of the principal received from other, different investors."

The next day, Dec. 11, Madoff spoke with FBI agent Theodore Cacioppi and invited the agent and another agent to his apartment. Cacioppo stated in the complaint that he told Madoff he came by to see if "there's an innocent explanation."

"There is no innocent explanation," Madoff replied, according to the sworn complaint.

Madoff's lawyer, Dan Horwitz, a partner at Dickstein Shapiro in New York, has said his client is cooperating fully with the federal investigation.

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