The actor has recently teamed up with the FBI to create a video which encourages would be tipsters to come forward with any insider trading news, and outlines, that greed is not good. Here is the video:

Tipsters who decide to turn into rats and go to the government might do better then to follow Douglas’ advice. Whistleblower lawyer David K. Colapinto outlines that, “If they just go to the FBI, they are probably going to get zero,” Colapinto said. “The FBI’s not obligated to do anything for them.”

Colapinto said that if informants want a reward for information that exposes financial fraud, they should consult a lawyer — and file a whistleblower claim with the SEC.

Under the SEC’s , tipsters are entitled to 10 to 30 percent of the money the SEC collects if the whistleblower’s information leads to an enforcement action in which sanctions of more than $1 million are ordered.  The bounties were ordered by Congress in the aftermath of the financial crisis and were intended to be powerful weapond in the war on Wall Street fraud. That being said Harry Markopolos, who reported the Madoff fraud to the SEC for years, got nothing.

Attempting to diagnose whether or not a hedge fund has the potential to be exposed to insider trading scandals can be a critical part of analysis of a fund’s compliance and trading functions during the operational due diligence process. Investors should attempt to evaluate such risks during a review of operational risk factors including personal trading policies.

Click here to discuss this post.

Permalink.

To refresh memories regarding Mr. Stanford’s alleged crimes and his passion for cricket see the previous post here and here – and some good lessons on operational due diligence.

The first day of jury selection has ended in the oft-delayed trial of jailed Texas financier R Allen Stanford, who is accused of bilking investors out of $7billion in a vast Ponzi scheme. A federal judge spent Monday questioning 80 potential jurors. Stanford emerged in chains.

In other Stanford news, Bloomberg is reporting that the SEC is asking a judge to determine a payout plan for Stanford victims.

Here are old videos of Stanford in his own words talking about Antigua:

And video of Stanford being treated after being beaten by fellow inmates in prison:

Click here to discuss this post.

Permalink.

It is also being reported that Madoff claims that many of the large banks and fund of hedge funds who invested with him were “wilfully blind” and “chose to ignore con.” Here is a video about it:

It also seems a secondary market has developed for betting on how successful Irving Picard will be in recovering Madoff claims…

Finally, the Financial Times is reporting that motivated by continued paranoia (is it paranoia if the government really is out to get hedge funds?…) surrounding government oversight of insider trading hedge funds have begun to hire security firms to perform sweeps their offices and homes for electronic bugs (aka: listening devices). Here’s a video about some of the technology used in these sweeps including hidden camera detectors, fiber optic cameras, spectrum analyzers, and non-linear junction detectors:

So what happens when they find one? Maybe it would be like when a man named Yasir Afifi found an FBI tracking device on his car and asked the Internet community to tell him if he was being spied upon. Perhaps hedge funds familiar with reverse engineering strategies could similarly reverse engineer the technology and begin spying on the government – or would that be considered insider trading….?

Click here to discuss this post.

Permalink.

The Galleon Case:

Or perhaps so-called insider trading should be legalized?

And then of course there is the Wilpons and Madoff:

From CNBC:

ESPN’s take on the Wilpon / Madoff scandal (which the Wilpon’s claimed would not affect the NY Mets baseball team they own) including Larry King’s take on the subject:

Interesting Irving Picard’s lawsuit to clawback capital centers around the issue of operational due diligence red flags. Another interesting argument made Picard is that the Wilpon’s should have been even more aware of Madoff’s red flags because of their previous experience with Ponzi schemes. The Wilpon’s have a history of of investing with Ponzi’s schemes before – they invested in Sam Israel’s Bayou – perhaps Mario Cuomo may be able to mediate a settlement…

Click here to discuss this post.

Permalink.

Details are still emerging regarding JPMorgan Chase’s alleged knowledge of the Madoff fraud. Here is a video about the investigation:

It is  being reported that the latest avenue being pursued by Madoff trustee Irving Picard is that one of the many operational due diligence red flags which should have alerted JP Morgan Chase & Co. to the Madoff Ponzi scheme was the number and volume of suspicious transactions by one of Madoff’s so-called “surrogate father” a man named Norman F. Levy. Mr. Levy, who is now deceased, was a real estate broker who made transfers from1998 to 2001 to the tune of more than $83 billion in and out of his account with Madoff. Levy’s  supermodel girlfriend, supermodel Carmen Dell’Orefice, would lose her life savings with Madoff. Here is a video showing Ms. Dell’Orefice modeling:

Levy’s estate is being pursued by the IRS as a result of revelations from the Madoff fraud.

The other so-called “surrogate father” to Madoff was, according to Vanity Fair, philanthropist Carl J. Shapiro. Shaprio (who’s wife is also named Ruth) lives in both Boston and Palm Beach and was the founder of Kay Windsor, Inc. a maker of women’s apparel.

Despite heavy Madoff losses for Shapiro personally, and his charities, Shapiro agreed to return $625 million to Irving Picard which included $38 million which was paid by Shapiro’s son in-law (Robert M. Jaffe).

In other Madoff news, it is being reported that Ruth Madoff was turned away from a memorial service for her son Mark by Mark’s widow. Apparently there are still hard feelings from when Ruth chose to visit Bernie in jail after he was reportedly beaten in prison.

Click here to discuss this post.

Permalink.

Continuing in the great spirit of Chicago crime and fraud, a former Chicago hedge fund manager was arrested on fraud charges today. Hedge fund manager James Brandolino turned himself in for allegedly running a Ponzi scheme via which he stole more than $3.5 million from approximately 48 victims.

Brandolino was charged with mail fraud in a criminal complaint filed in U.S. District Court. The announcement was made by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

Brandolino is 42 years old and a currently resident of Joliet, Illinois – the same place famous Blues Brother “Joliet” Jake Blues is from. He had been running the Ponzi scheme since 2003. Brandolino claimed to be running a managed futures strategy as commodity pool adviser (“CPO”).

Throughout the life of the Ponzi scheme he kept it going by providing about $1.1 million in investor redemptions. He then lost half of the money through poor trading decisions – no crime there. The problem, in part, was that Brandolino allegedly told investors that their funds, minus a commission, was being used to trade futures contracts, and always told that his trades were profitable, even though often it was not. This claim of constant (or almost constant) steady profitability is a familiar red flag reminiscent of many recently uncovered frauds and Ponzi schemes, including Madoff. Brandolino also allegedly lied about  his assets under management in investors statements. In October 2010 he claimed to have $7.5 million under management.

It is also alleged that Brandolino misused most of the remaining funds for his own benefit. It is unclear exactly what he spent the money on as his only remaining assets consisting of a luxury automobile, a watch and an interest in an unfinished condominium in Greece on which he put down 80,000 Euros, or more than $107,000.

Interestingly, Brandolino has previously held various National Futures Association registrations in the commodities brokerage business, (including exchange floor trading privileges at the Chicago Board of Trade (now CME Group). Here’s the link to his NFA broker report. Brandolino was previously a principal of several commodities trading businesses, including Brandolino Investment Group, Falcon Capital Partners LLC, Lloyd Lewis Capital, Inc., Falcon Trading Group, Inc. Here’s the link to his Twitter account.

Apparently all you need to do is watch this video to become a commodities broker…

Another operational due diligence red flag was the generation of false investor statements. Between 2003 and 2007, Brandolino allegedly accepted approximately $1.5 million from roughly 20 investors and  generated false statements showing steady returns even though by mid-2007 he had lost most of the money through bad trading decisions.

In mid-2007, he started a commodity pool known as Falcon Stock Index LP, without disclosing that he had previously defrauded investors. When this fund closed in July 2008, Brandolino allegedly traded equity index futures and earned actual net returns of about 15.5%, but didn’t tell any of his investors that he had stopped trading in mid-2008 and failed to return their money, according to the charges. The government is being represented by Assistant U.S. Attorney Samuel B. Cole.

Brandolino appeared this afternoon before U.S. Magistrate Judge Michael Mason and asked to remain in federal custody. He’s probably safer in custody then on the streets where defrauded investors may want to have a word with him….

Click here to discuss this post.

Permalink.

It seems as if wronged Madoff investors had a brief moment to recover thanks to the efforts of Madoff trustee Irving Picard in his continued pursuit of reclaiming (i.e. – clawing back) capital from those who reaped profits from the Madoff scandal. One of the biggest benefactors from Madoff appears to have been the late Jeffry Picower (see previous posts about Picower here).

Mr. Picard recently announced a deal struck with the Picower estate to repay $7.2 billion. Only approximately $5 billion will go to Madoff victims with the remainder being paid to the government. Not every investor was happy with this deal and several of them have banded together and filed a lawsuit objecting to the settlement. This settlement will not leave Picower’s widow destitute. Most of this money had been intended for a philanthropic foundation, not for Picower’s heirs. According to the Washington Post, Picower’s widow will retain $200 million and his daughter will retain $25 million, the funds for all of which reportedly derived from sources other than Madoff-related profits.

Here is a video from MSNBC regarding the settlement:

And from the Wall St. Journal:

Here is a nice summary of the Picower withdrawals from Madoff:

In other Madoff news, Madoff’s former secretary Annette Bongiorno was recently freed on bail.

Here is a video regarding the original charges brought against Bongiorno’s and another Madoff secretary Joanne Crupi (who was responsible for supervising the primary bank account used in BMIS’s investment advisory operations):

Bongiorno is accussed of assisting Madoff implement his Ponzi scheme. Clients recruited by Bongiorno and her electrician husband Rudy had their money put in accounts that were code-named RuAnn in company files, according to a former Madoff employee . It is reported that Bongiorno mined her old Queens neighborhood for investors. Not helping her case are Bongiorno’s considerable assets including a $2.6 million mansion in a gated community in Manhasset, New York, and three fancy cars, including a Mercedes that sells for nearly $100,000.

Bongiorno, 62, is facing charges of helping Madoff defraud investors of billions of dollars. Bongiorno, pleaded not guilty to conspiracy and fraud charges. U.S. District Judge Laura Taylor Swain in Manhattan cut Bongiorno’s bail from $5 million to $3 million after prosecutors seized most of her bank accounts and defense lawyers agreed to disclose others. The judge required eight people to guarantee the bail. This bail reduction allowed Bongiorno with enough flexibility to make bail, but she will remain under house arrest in her Manhasset mansion…

Click here to discuss this post.

Permalink.

The Madoff saga has yielded another unfortunate death -Madoff’s eldest son Mark Madoff. According to media reports Mark Madoff, 46, committed suicide by hanging himself  with a black dog leash while his 2-year-old son slept nearby. His death occurred two years to the day after his father (Bernard Madoff) was arrested by the FBI.

Mark Madoff had sent at least two e-mails to his wife and one to his lawyer in the early morning, a police official said, before killing himself. In the e-mails to his wife, he asked her to take care of their son and said that he loved her, the official said. If you will remember Stephanie Madoff, Mark’s wife, petitioned a Manhattan court in February to change her and her children’s last names to Morgan to avoid harassment and threats (see previous post). Here is a video about Mark’s death:

Madoff and his first wife, Suzanne, divorced in 2000.He has two other children from a previous marriage, ages 18 and 16. Mark Madoff graduated from the University of Michigan. He was a licensed broker with his father’s firm since 1987.

Mark’s death is the fourth major death surrounding the Madoff scandal and the second purported suicide. The first was investor’s Rene-Thierry Magon de la Villehuchet’s suicide and the second being the death of Jeffry Picower (see previous post regarding Picower) and the third was Stanley Chais a Beverly Hills, California investment advisor who operated feeder funds which allocated capital to Madoff funds (see previous post regarding Chais).

In recent weeks, federal investigators had charged a number of Bernard Madoff associates in indictments. The latest under indictment was key operative Annette Bongiorno, who was charged last month with fabricating documents and securities fraud in connection with the Ponzi scheme.

Madoff’s other son Andy, despite attempts to continue to keep a low profile, was featured in several media articles relating to a company he started with his girlfriend Catherine Hooper (who reportedly has a tattoo of the Madoff name) called Black Umbrella which provides disaster recovery planning for families. Andy and the now deceased Mark reportedly also were avid fisherman which was coincidentally a hobby equally shared by Madoff’s former Chief Financial Officer Frank DiPascali (see previous post). Here’s is a video with Mark Madoff showing off Abel Reels (a company he was the leader of an investment group which bought them):

Agents investigating the scheme recently had focused more attention on Mark Madoff, one investigator said. “He was next up to the tee,” said the investigator, who didn’t want to be named because of the pending probe, referring to the shift of attention to Mark Madoff. Mark Madoff wasn’t viewed as a major insider with vast knowledge of his father’s fraud but he is believed to have had some awareness of the fraudulent nature of the operation, the investigator said.

“This is a tragic development, and my sympathy goes out to Mark Madoff’s family,” Irving Picard the Madoff trustee said in a statement yesterday.

Jeff Wilpon, chief operating officer of the New York Mets, who went to Roslyn High School with Madoff in the 1980s, said, “It is shocking, it is sad, it is tragic.” Mr. Wilpon, who said in December 2008 that Mark Madoff had been a friend of his for 30 years, has been sued along with other members of his family by Picard in one of hundreds of lawsuits the trustee has filed to get back profits from Madoff investors.

Ira Sorkin, Bernard Madoff’s lawyer, said he was unable to get in touch with his client, who is serving a 150-year sentence at federal prison in North Carolina. Sorkin did say, “I’m very sure he has been informed. This is a great tragedy on many, many levels.”

A lawyer for Madoff’s mother said, “Ruth is heartbroken.” Mark Madoff had not spoken to his parents since his father’s arrest, on the advice of his lawyer.

There have been no reported statements made by Peter Madoff (Bernard’s brother and Mark’s uncle) or Peter’s daughter (Bernard Madoff’s niece and Mark and Andy’s cousin Shana Madoff). Both Peter and Shana were also named in a suit recently filed by Irving Picard.

Perhaps this fictional account of Mark and Andy teaming up with their own lawyers and distancing themselves from Bernard Madoff around the holidays puts Mark’s death this in perspective:

Click here to discuss this post.

Permalink.

Photos recently surfaced of Stanford beaten in prison over a dispute related to using the telephone.

Since the allegations against Stanford broke a number of interesting facts have come out regarding his business and operations including many operational risk red flags.

Here is part one of the BBC Panorama special on Stanford:

Part two:

Part three:

And here’s a video about Stanford being sued for gambling losses. This video also talks about allegations by James M. Davis, Mr. Stanford’s former CFO who has since agreed to a plea deal with the government, that Stanford participated in a  bizarre blood brothers ritual with Leroy King, Antigua’s chief banking supervisor – where Stanford’s offshore bank was located:

And here is a video of Stanford victims and former employee:

Click here to discuss this post.

Permalink.