Market maker Bernard L. Madoff arrested in $50B ‘giant Ponzi scheme’

Friday, December 12, 2008

Top broker and Wall Street adviser Bernard L. Madoff, aged 70, was arrested and charged by the FBI on Thursday with a single count of securities fraud, also known as stock fraud and investment fraud. He allegedly told senior employees of his firm on Wednesday that his $50 billion business “is all just one big lie” and that it was “basically, a giant Ponzi scheme (since at least 2005).” Mr. Madoff faces up to 20 years imprisonment and a fine of up to $5 million. FBI agent Theodore Cacioppi said Mr. Madoff’s investment advisory business had “deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in investors’ losses of approximately $50 billion dollars.”

The former chairman of the Nasdaq Stock Market is also the founder and primary owner of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. The firm is one of the top market maker firms on Wall Street. He founded his family firm with an initial investment of $5,000, after attending Hofstra University Law School. He saved the money earned from a job lifeguarding at Rockaway Beach in Queens and a part time job installing underground sprinkler systems.

A force in Wall Street trading for nearly 50 years, he has been active in the National Association of Securities Dealers (NASD), a self-regulatory organization for the U.S. securities industry. His firm was one of the five most active firms in the development of the NASDAQ, having been known for “paying for order flow,” in other word paying a broker to execute a customer’s order through Madoff. He argued that the payment to the broker did not alter the price that the customer received. He ran the investment advisory as a secretive business, however.

Dan Horwitz, counsel of Mr. Madoff, in an interview, said that “he is a longstanding leader in the financial-services industry with an unblemished record; he is a person of integrity; he intends to fight to get through this unfortunate event.” Mr. Madoff was released on his own recognizance on the same day of his arrest, after his 2 sons turned him in, and posting $10 million bail secured by his Manhattan apartment. Without entering any plea, the Court set the preliminary hearing for January 12.

Madoff’s hedge fund scheme may rank among the biggest fraud in history. When former energy trading giant Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets. The scheme would dwarf past Ponzis, and it would further be nearly five times the telecommunication company WorldCom fraud and bankruptcy proceedings in 2002.

The Securities and Exchange Commission filed a separate civil suit on Thursday against Bernard L. Madoff Investment Securities and its eponymous founder Mr. Madoff. It was docketed as “U.S. v. Madoff,” 08-MAG-02735, by the U.S. District Court for the Southern District of New York (Manhattan). SEC, New York associate director of enforcement, Andrew M. Calamari, asked the judge to issue seizure orders on the firm and its assets, and appoint a receiver. The SEC pleads, among others, that “it was an ongoing $50 billion swindle; our complaint alleges a stunning fraud that appears to be of epic proportions.” It further accused the defendant of “paying returns to certain investors out of the principal received from other, different investors” for years. Madoff’s hedge fund business had previously claimed to have served between 11 and 25 clients and had $17.1 billion in assets under management. But virtually all of the assets were missing.

United States District Court for the Southern District of New York Louis L. Stanton on Thursday appointed Lee Richards, a Manhattan lawyer, as the firm’s receiver. A hearing is set for Friday, for a ruling on the SEC’s petition to grant plenary powers to the receiver over the entire firm, and an absolute asset sequestration.

Doug Kass, president of hedge fund Seabreeze Partners Management said that “this is a major blow to confidence that is already shattered — anyone on the fence will probably try to take their money out.”

Monday, May 14, 2007

Buffalo, New York —A massive warehouse complex of at least 5 buildings caught on fire in Buffalo, New York on 111 Tonawanda Street, sending a plume of thick, jet black colored smoke into the air that could be seen as far away as 40 miles.

As of 6:40 a.m., the fire was under control, and firefighters were attempting to stop it from spreading, but could not get to the center of the fire because of severe amounts of debris. Later in the morning, the fire was extinguished.

“The fire is mostly under debris at this point. It’s under control, but it’s under some debris. We really can’t get to it. We’re just going to have to keep on pouring water on it so it doesn’t spread,” said Thomas Ashe, the fire chief for the North Buffalo based fire division who also added that at one point, at least 125 firefighters were on the scene battling the blaze. One suffered minor injures and was able to take himself to the hospital to seek medical attention.

Shortly after 8:00 p.m. as many as 3 explosions rocked the warehouse sending large mushroom clouds of thick black smoke into the air. After the third explosion, heat could be felt more than 100 feet away. The fire started in the front, one story building then quickly spread to three others, but fire fighters managed to stop the flames from spreading onto the 3 story building all the way at the back.

According to a Buffalo Police officer, who wished not to be named, the fire began at about 7:00 p.m. [Eastern time], starting as a one alarm fire. By 8:00 p.m., three fire companies were on the scene battling the blaze. Police also say that a smaller fire was reported in the same building on Saturday night, which caused little damage.

At the start of the fire, traffic was backed up nearly 4 miles on the 198 expressway going west toward the 190 Interstate and police had to shut down the Tonawanda street exit because the road is too close to the fire.

At one point, traffic on the 198 was moving so slow, at least a dozen people were seen getting out of their cars and walking down the expressway to watch the fire. That prompted as many as 10 police cars to be dispatched to the scene to force individuals back into their cars and close off one of the 2 lanes on the westbound side.

One woman, who wished not to be named as she is close to the owner of the warehouse, said the building is filled with “classic cars, forklifts, and money” and that owner “does not have insurance” coverage on the property. The building is not considered abandoned, but firefighters said that it is vacant.

Officials in Fort Erie, Ontario were also swamped with calls to fire departments when the wind blew the smoke over the Niagra River and into Canada.

It is not known what caused the fire, but a car is suspected to have caught on fire and there are reports from police and hazmat crews, that there were also large barrels of diesel fuel being stored in one building. Firefighters say the cause of the blaze is being treated as “suspicious.” The ATF is investigating the fire and will bring dogs in to search the debris.

Tuesday, October 8, 2013

Unlike some parts of the US Federal Government, the Consumer Financial Protection Bureau (CFPB) has been open during the federal government shutdown and recording a record-low number of complaints submitted by consumers against mortgage companies, credit card companies, student loan providers, banks, money transfer providers, companies who provide credit reports, and other companies providing consumer loans.

With data not available for yesterday, the first four days of the shutdown had daily totals of 37, 16, 13, and 3 complaints. With the exceptions of September 29 with 15 complaints and September 28 with 23, it is the lowest daily total since March 16 of this year when 36 total complaints were recorded and February 23 of this year with 14. The total complaints are also down from the same dates last year, when the total complaints per day for the first four days of October 2012 were 272, 298, 288, and 225.

Of the 69 filed complaints recorded so far this month, 27 were complaints about mortgage companies, 21 were about bank accounts and 10 were about credit card companies. 40% of credit card companies complaints, 42.9% of bank account complaints and 48.1% of mortgage complaints are currently listed as still in progress. Most of the rest have been closed with an explanation.

Bank of America leads all companies in terms of total complaints filed this month with 9. Bayview Loan Servicing, LLC andJPMorgan Chase have 7 complaints each. Ally Bank, Sovereign Bank, and Wells Fargo have 4 each. Flagstar Bankand Equifax have 3 each. Citibank, Nationstar Mortgage, TD Bank, Amex, and FirstMerit Bank have 2 complaints each. 18 financial services companies have 1 complaint each filed against them.

During the government shutdown, some CFPB staff have voiced their opinions on Twitter. Dan Munz, deputy assistant director for consumer engagement at the CFPB, tweeted, “Boy, shutdown week has really created a sudden bumper crop of amateur federal management experts.”; “Also, seems like Boehner is singlehandedly undoing whatever progress he’d made in portraying this as a Dem [Democratic Party] shutdown.”; and “Basically, there’s now a strong incentive to fill legislation with minor symbolic things you can bargain away later to protect the core.”

The agency has been able to stay open during the government shutdown because it is funded by the Federal Reserve. According to Amanda Terkel at the Huffington Post, Republican members of the United States House of Representatives have put closing the CFPB on their wish list of items in negotiating for a new debt ceiling limit. Party members have previously stalled the appointment of Richard Cordray as the CFPB boss as a way of hindering it from engaging in oversight of financial organizations in the the US.

Saturday, September 3, 2005

Over twenty five nations have offered aid in the wake of Hurricane Katrina. In particular, France has offered the use of its resources in the Caribbean sea, including 2 navy ships, 1 navy hospital, 8 planes, 600 tents, 1000 beds, and rescuers. President George W. Bush has refused such material aid to the hurricane’s victims, although cash donations will be accepted. He explained his reasons to ABC News:

I’m not expecting much from foreign nations because we hadn’t asked for it. I do expect a lot of sympathy and perhaps some will send cash dollars. But this country’s going to rise up and take care of it. You know, we would love help, but we’re going to take care of our own business as well, and there’s no doubt in my mind we’ll succeed. And there’s no doubt in my mind, as I sit here talking to you, that New Orleans is going to rise up again as a great city.

A few of these nations, such as Venezuela and Cuba, are disliked by the administration, but the majority are considered allies of the United States. Venezuela’s Citgo Petroleum Corp. pledged a $1 million donation for hurricane aid. Cuba refused U.S. aid following Hurricane Dennis. In order to reduce the side effects of hurricane Katrina, Japan, Venezuela, and most EU countries offer to provide oil reserves to the U.S.

Thursday, June 22, 2006

The Creative Archive project is a BBC led initiative which aims to make archive audio and video footage available to be freely downloaded, distributed, and ‘remixed’. The project is still in a pilot stage, and is only available to UK residents, but the long-term future of the project could have a major impact on the way audiences interact with BBC content.

The project is partly inspired by the Creative Commons movements, and also by a general move within the BBC to be more open with its assets. Additionally, educational audiences such as schools have expressed an interest in using BBC content within the classroom, both to watch and to create multimedia content from.

So far, clips made available under the licence have included archive news footage, nature documentary footage, and video clips content designed for educational uses. “It’s done very well with the audiences we’ve directed them towards – heavy BBC users,” says Paul Gerhardt, project leader. Users downloading the clips are also prompted to fill in a questionnaire, and so far 10-15% of people seem to be doing something with the material, although the BBC can’t be sure what exactly that is.

One of the biggest limitations within the licence as it currently stands during the pilot scheme is that the material is only available for use by people resident in the UK. The BBC’s Creative Archive sites use ‘geo-IP filtering’ to limit downloads to the UK, but there is some confusion over whether people who create their own content using the material can upload their creations to their own websites. A question within the FAQs for one of the more recent selections of clips suggests that this isn’t possible, saying “during this pilot phase material released under the terms of the Creative Archive Licence cannot be used outside the UK – therefore, unless a website has its use restricted to the UK only, content from the ‘Regions on Film’ archive cannot be published on it.”

“We want people to make full use of this content, whether they cut and paste it or whether they share it, and we completely accept that we’ve got a bit of a contradiction at the moment by saying UK-only and yet encouraging people to put it on their sites to share it with others, because you can’t expect people to have geo-IP restriction technology,” admits Mr Gerhardt. “We’re thinking hard about how to deal with this after the pilot – at the moment it’s quite likely that we’re probably going to need to find a distribution partner outside of the UK, so that if you’re outside of the UK you’ve got roughly the same experience as in the UK, but the content could be surrounded by sponsorship messages or advertising or whatever. Once we’ve done that then leakage from one to the other won’t really matter very much.”

The Creative Archive project has not been without critics from the commercial sector, worried that the BBC giving away their content for free would make it difficult for them to be able to make money from their own content. The BBC has explained to some of the commercial players that the content would be limited during the pilot, would not be available in broadcast quality, and that watermarking technologies would be trialled so that content could be recognised when it crops up elsewhere. The BBC is also investigating a business model for the future where there would be a “close relationship between public access to low-resolution content and a click through to monetising that content if you want to buy a high-resolution version”. People who want to play around with the material might discover they have a talent and then find they need to get a commercial license to use it properly, Mr Gerhardt explains, and the project wants to make it easy for this to happen.

Before the project can go ahead with the full scale launch, it will have to go through a ‘public value test’ to assess its overall impact on the marketplace, and commercial media companies will have a chance to input at this point.

For ease in clearing the rights, all of the content available under the pilot project is factual, but in the future the project could include drama and entertainment content. The BBC may also, in the future, work the Creative Archive licences into the commissioning process for new programmes. “This raises some really interesting ideas – if you have a documentary series, you could use the Creative Archive to release the longer form footage, for instance – that would create a digital legacy of that documentary series,” Mr Gerhardt explains. “The other interesting thought in the longer term would be for the BBC, or another broadcaster, to contribute to a digital pool of archive material on a theme, and then invite people to assemble their own content out of that. We could end up broadcasting both the BBC professionally produced programme accompanied by other programmes that other people had made out of the same material.”

One of the ways that the Creative Archive licence differs from the other ‘copyleft’ licences like Creative Commons, aside from the UK-only limitation, is that the licence currently allows the BBC to update and modify the licence, which may worry those using the licence that their rights could suddenly become more restricted. “The licence at the moment is a draft, and we’ve given warning that we may well improve it, but we wouldn’t do that more than once or twice. The ambition is that by the time we scale up to the full service we would have a fixed licence that everyone was comfortable with, and it wouldn’t change after that.”

“The ambition is to think about creating a single portal where people can search and see what stuff is out there under the same licence terms, from a range of different suppliers. The idea is that if we can create something compelling like that, we will attract other archives in the UK to contribute their material, so we’d be aggregating quite a large quantity.”

The Creative Archive project has captured the interest of many Internet users, who are growing increasingly, used the idea of being able to ‘remix’ technologies and content. Some groups have been frustrated with the speed at which the project is developing though, and with some of the restrictions imposed in the licence. An open letter to the BBC urges the dropping of the UK-only limitation, the use of ‘open formats’, and to allow the material to be usable commercially.

Mr Gerhardt has publicly welcomed debate of the licence, but makes it clear to me that the whole BBC archive will never all be available under the Creative Archive terms. “We will make all our archive available, under different terms, over the next five to ten years, at a pace to be determined. There would be three modes in which people access it – some of the content would only be available commercially, for the first five year or so after broadcast, say. The second route is through a ‘view again’ strategy where you can view the programmes, but they’d be DRM-restricted. And the third mode is Creative Archive. Over time, programmes would move from one mode to another, with some programmes going straight to the Creative Archive after broadcast.”

Others who disagree with the ‘UK-only’ restriction within the licence include Suw Charman, from the Open Rights Group, who has said “it doesn’t make sense in a world where information moves between continents in seconds, and where it is difficult for the average user to exclude visitors based on geography.” On the project generally, though, she said “I think that it is a good step along the way to a more open attitude towards content. It is a toe in the water, which is far preferable to the attitude of most of the industry players, who are simply burying their heads in the sand and hoping that lawsuits and lobbying for new legislation will bolster their out-dated business plan.”

Other organisations currently participating in the Creative Archive scheme include the British Film Institute, the Open University and Teachers’ TV. Two artists have been awarded scholarships to create artworks using BBC archive material, and BBC Radio 1 has held a competition asking people to use the footage in creative ways as backing visuals to music. The process of making the BBC’s archive material fully available may be a long one, but it could end up changing the way that people interact with the UK’s public service broadcaster.

Friday, November 27, 2009

The head of the International Atomic Energy Agency, Mohamed ElBaradei, said earlier on Thursday that the organization has reached a “dead end” in a probe into Iran’s nuclear program. The IAEA’s board is meeting to consider a resolution condemning Iran’s nuclear program.File:Elbaradei.png

In remarks to the IAEA’s board, ElBaradei expressed frustration over Iran’s failure to cooperate with the Vienna-based agency. ElBaradei leaves office in a few days, at the end of this November, and his remarks have grown sharply more critical of Iran in recent months.

Today, he said he was disappointed that Iran had not agreed on a deal to further enrich its uranium overseas. The deal has the support of the United States, Russia and France and it aims to provide a safeguard that Iran’s uranium is not being used to make a nuclear weapon.

“It is now well over a year since the agency was last able to engage Iran in discussions about these outstanding issues. We have effectively reached a dead end, unless Iran engages fully with us,” he commented.

“In my view the proposed agreement presents a unique opportunity after many years of animosity and hostility to address a humanitarian need and create a space for negotiation. This opportunity should be seized and it would be highly regrettable if it was missed,” he said.

ElBaradei’s comments come as the IAEA board is considering a draft resolution on Iran. According to press reports, the draft urges Iran to stop construction of the uranium enrichment site, and to confirm that it has no other hidden nuclear activities. Diplomats are reportedly confident the measure will be passed, but Iran’s ambassador to the IAEA told a German newspaper that Tehran would reduce its cooperation with the IAEA to a minimum if that happens.

Some members of the international community believe that Iran is trying to build a nuclear weapon; Tehran, however, maintains that its efforts are for peaceful purposes only.