Category Archives: Empire

100 Checks For $173 Million Found On Madoff Office Desk (Added link on 1/10/09)

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“NEW YORK – Prosecutors said Thursday that investigators found 100 signed checks worth $173 million in Bernard Madoff’s office desk that he was ready to send out to his closest family and friends at the time of his arrest last month.

The detail was provided in a court filing Thursday as prosecutors argued that Madoff should have his bail revoked and be sent to jail. They said the checks were further evidence that he wants to keep his assets away from burned investors….”

More at The New York Times.

And a report from December that I missed:

PARIS (AFP)–A Paris court Thursday cleared the banks Societe Generale SA ( 13080.FR) and Barclays PLC (BCS) of complicity in money-laundering between France and Israel, but convicted a top Pakistani bank and a U.K.-owned lender. The court also sentenced a former French prosecutor to 20 months for corruption, and gave two executives from the National Bank of Pakistan (NBP.KA) two-year suspended jail terms following a mammoth trial.

Judges heard how the four banks handled money from merchants in Paris‘ Sentier garment district – the proceeds of tax evasion, embezzlement or stolen checks laundered through banks or money exchange offices in Israel.

The banks had all denied any wrongdoing in the case, dubbed “Sentier 2.”

Read more of this Dow Jones newswire report on a money-laundering investigation in France.

(I found this link Friday 1/09/09)

Madoff Funds Not To Be Disclosed Publicly

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“THE US Securities and Exchange Commission, which sued Bernard Madoff last month for allegedly directing a $US50 billion ($71 billion) fraud, is to withhold public access to a list of his assets filed on Wednesday.

A federal judge ordered Madoff to provide the commission with an account of all investments, loans, lines of credit, business interests, brokerage accounts and other holdings. The court

did not authorise its public disclosure, said a commission spokesman, Andrew Calamari, who confirmed receipt of the list.

“I think one of the fears here is that much of this money may be in offshore funds,” said Professor John Coffee, of Columbia Law School, adding the commission wanted to keep the assets secret to protect them. “There is the danger that foreign regulators and foreign creditors may seek to seize that money if the names and sources are made public.”

More at The Sidney Morning Herald.

Madoff Mess Hits Everyone: Fairfield Group Sold Madoff to Foreign Funds

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The Wall Street Journal.

“Over the past few years, Fairfield was successful selling in Europe, thanks to the ability of Mr. Noel’s sons-in-law to tap wealthy individuals and banks there. Andres Piedrahita, who married Mr. Noel’s eldest daughter, was particularly skilled at weaving a social network in Madrid and London, those who know the fund say.

In a presentation about 18 months ago, Mr. Piedrahita pitched a Madoff-related fund to a wealthy London individual investor, according to David Giampaolo, chief executive of Pi Capital, a money-management firm, who was invited by the investor to sit in on the presentation. Mr. Piedrahita stressed the fund’s years of steady and attractive performance. “The thing I remember hearing that I liked was the longevity and the consistency” of returns, Mr. Giampaolo said.

But he says the presentation was thin on details about the investment strategy. When pressed to articulate how the fund generated the performance, Mr. Giampaolo said, “There was no deep scientific or intellectual response.” The wealthy individual didn’t invest. A spokesman said Mr. Piedrahita wasn’t available for comment.

Still, banks on two continents offered investors souped-up versions of the Fairfield Sentry fund, designed for funds-of-funds clients and wealthy private-bank clients clamoring for consistent investment returns and access to Mr. Madoff. These products were backed by loans from banks including Banco Bilbao Vizcaya Argentaria SA and Nomura Holdings Inc., according to documents reviewed by The Wall Street Journal. These banks loaned money designed to amplify the gains of the Sentry funds. Nomura on Monday said its exposure to Mr. Madoff was about 27.5 billion yen, or about $304 million. A Nomura spokesman Thursday declined to comment further….”

Comment:

The WSJ is reporting that Walter Noel’s Fairfield Group, which actually had a former SEC officer on board, was the channel through which the Madoff fund was sold to a range of foreign investors looking for steady positive returns. Fairfield charged stiffly – 20% of the return plus 1% in fees – for what they claimed was their technical skill in analyzing/supervising the investments. In practice, they simply turned the fund over to Madoff.

The SEC official, Tucker, was at the Commission from 1970-1978. He left and went on to co-found Fairfield Group with Walter Noel, to whom he introduced Madoff in 1989. The firm was apparently a family-run outfit, like Madoff’s, in this case, with 4 sons-in-law of Noel (and Tucker) in charge.

Apparently, investigations in 2006 found no proof of fraud, but determined that Fairfield hadn’t properly disclosed its connection to Madoff.
The Times (UK) is reporting that Mary Schapiro, Barack Obama’s choice to head the SEC, picked one of Madoff’s sons, Mark, to serve on the board of the very division (the National Adjudicatory Council) that reviews disciplinary actions by the Financial Industry Regulatory Authority (FINRA), of which she is the current chief executive. (my emphasis)

And this:

” At the time of Mark Madoff’s appointment, Ms Schapiro was serving as president of the National Association of Securities Dealers (NASD), according to the Wall Street Journal, which was consolidated with the New York Stock Exchange Member Regulation in 2007 to form Finra. ”

The whole business is so peculiar and so irregular it boggles the mind that no one caught on. (Actually, someone did and sent tips to the SEC, which was why it looked at Madoff in 2006).

It’s clear where the problem lies:

Consolidation, Centralization, and Corruption

The three go together. The people who want to control and corrupt the process are usually the people pushing for consolidation and centralization. Without that, with local authorities, with inefficiencies between different markets, different regulatory environments, its hard to make changes, fiddle with books or do anything on a grand scale. The greater the degree of centralization, the more power in any one spot, the more the potential for that spot to be taken over by a cabal.

Financial Follies: Goldman Alum to Head CFTC

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“Obama to appoint Gary Gensler to lead Commodities Futures Trading Commission — AP.”

Gensler is a former undersecretary of the treasury and assistant secretary of the treasury.

Gensler is a Goldman Sachs alum and a Treasury man. Obama is putting one of the key figures in the Gold Cartel scheme into the top role at the CFTC. Talk about the fox guarding the henhouse!”

More by Bill Murphy of the Gold Anti-Trust Action Committee

Propaganda Nation: Rubinomics and the Madoff Mess

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Notice how the Madoff scandal is being covered by the media. Madoff’s ethnicity is being played up. Frankly, it was not the first thing most people thought of. The first thing that came to my mind was “Ye gods! A Nasdaq chairman FAKED account statements for maybe 2 decades and no one noticed!”

However, leave it to the mainstream media to drag anti-Semitism into it and then try and deflect this imputed anti-Semitism by offering us outright fibs. The main targets of Madoff’s fraud were Jewish charities, is the suggestion. They were not. Even with the latest upward revision of the amount lost by Jewish charities, the main victims were foreign banks, like Santander and Medici, and American funds like Fairfield Group in Greenwich, Connecticut.

Also, unnoticed went the filing of a lawsuit against Robert Rubin, former chairman of Citigroup, for defrauding shareholders. The suit calls it a type of Ponzi scheme.

The media coverage of Madoff distracts from the fact that subprime debt itself was the mother-of-all-Ponzi schemes, and ripped off investors all over the world.

And the culprits, members in good standing of the Banking Mafia of Sachs & Citi et. al., are far bigger than Madoff…..

Madoff Fraud Hits Everyone..

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“NEW YORK – The list of investors who say they were duped in one of Wall Street‘s biggest Ponzi schemes is growing, snaring some of the world’s biggest banking institutions and hedge funds, the super rich and the famous, pensioners and charities.

The alleged victims who sunk cash into veteran Wall Street money manager Bernard Madoff’s investment pool include real estate magnate Mortimer Zuckerman, the foundation of Nobel laureate Elie Wiesel, and a charity of movie director Steven Spielberg, according to the Wall Street Journal.

Among the world’s biggest banking institutions, Britain’s HSBC Holdings PLC, Royal Bank of Scotland Group PLC and Man Group PLC, Spain’s Grupo Santander SA, France‘s BNP Paribas and Japan’s Nomura Holdings all reported that they had fallen victim to Madoff’s alleged $50 billion Ponzi scheme.

The 70-year-old Madoff (MAY-doff), well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they’ve been wiped out, while others are still likely to come forward….”

More at AP.

Comment:

I have been watching the unfolding of the Madoff story keenly. A fund manager in a European country confided in me recently that he feared his own extremely conservative fund might have unwittingly been exposed to Madoff’s fund. He thought he might have taken a big hit and being a conscientious guy was agonizing over how to repay his clients.

This is why I’ve avoided saying that any country’s banks are free of exposure (even India’s). No one knows for sure where a lot of the debt passed around the globe actually is – slicing and bundling risk separates it out.

Here are some pointers:

1. Be suspicious if you have had exceptionally high rates of interest. High returns usually mean risky investments.

2. Be suspicious if the product is marketed aggressively.

3. Be suspicious if the rate of return has been exceptionally stable, even if it isn’t very high. In the kind of volatile market we’ve had in the past few years, no one can be that good on a regular basis. (That’s what tipped me off about Goldman Sachs two years ago. I figured they couldn’t be doing all that well. Well, they weren’t.)
4. Be suspicious of alternative investments you don’t understand.

5. Be suspicious of traditional “safe” investments you do understand. Take a look at their fee structure. Many “safe” investments like mutual funds have horrendous fee structures that prevent you from making anything, after taxes.

6. Be suspicious of funds touted heavily by the mainstream financial press. They are in bed (some financially, some politically) with the financial establishment, or they are ignorant, or careless, or too much in awe of Wall Street, or overworked, or brainwashed, …..or all of the above.

7. Be suspicious of funds touted heavily by the alternative financial press. Just because they are right about the big crooks on Wall Street, it doesn’t mean they aren’t crooks too….who would be doing the same if they could get away with it.

8. Be suspicious of people who tell you they made huge killings on this or that and want to let you in on it. If they made that much money on it already, chances are there’s nothing left for you….

9. Be suspicious of very quick returns. Easy come, easy go. What goes up that fast can go down twice as fast.

10. Be suspicious of very slow returns. Locking up your investments forever guarantees that any mistake you make in picking the investment will last a life time.

Bottom line? BE SUSPICIOUS.

Guantanamo Prosecutor Resigns Over Evidence Being Withheld

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“Vandeveld believed that Jawad was a war criminal who had been taught by an Al Qaeda-linked group to kill American troops and, if caught, to make up claims he had been tortured and was underage. Vandeveld insisted that he had been providing all evidence to the defense.

But by July, Vandeveld told The Times, he had grown increasingly troubled. He kept finding sources of information and documents that appeared to bolster Frakt’s claims that evidence was being withheld — including some favorable to the defense, such as information suggesting that Jawad was underage, that he had been drugged before the incident and that he had been abused by U.S. forces afterward…….

On Sept. 9, Vandeveld e-mailed Dear to say he had resigned from the Guantanamo military tribunals: “The reaction was the expected outrage and condemnation. I have and will maintain my equanimity and, while scared for me and for my family, know that Christ will watch over me….”More at the LA Times.

Blow Up And Brush Off…. (Update)

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“As a result of the downturn, developed countries are not expected to help 28 countries facing twin shocks of rising food and fuel prices, Zoellick said. “For the poor, the costs of the crisis could be lifelong,” he said.”

Thanks, Mr. Zoellick.

First, developed countries will have to think twice about lecturing any other country on transparency, legality, freedom or democracy. Their moral position is bankrupt, not just their  banks.

Second, leaving the poorest people to fend for themselves seems to be in line with one strain of US government policy since WW II – which sees third world populations as a dire threat to world resources.

Third, Mr. Zoellick, do us a favor and leave the world alone. Stop managing world trade in your favor, creating crises, and then “helping”….

Update:

AFP has this update on Zoellick’s remarks, which seems to suggest that aid to third-world countries will be maintained. Aid doesn’t seem to have done India much good. Still, in a crisis caused by foreign governments, it might be necessary, although how is the question.

“Zoellick significantly told the news conference that the International Finance Corp, the private sector lending arm of the IMF, was exploring the possibility of a fund to help recapitalize banks in the developing world.With donor aid programs under pressure due to the financial crisis, the World Bank estimates that up to 100 hundred million people are at risk of falling into poverty because of higher food and energy prices.

“The large surge in food and energy prices — and an associated rise in inflation — present major policy challenges for most countries, further compounded by the uncertain global conditions as the financial crisis unfolds,” an update for the Development Committee said.

For his part, Zoellick stressed that “aid flows must be maintained,” adding that “today’s meeting of ministers was unanimous in that regard.”

Comment:

The private sector lending arm of the IMF…..again, those unnatural and dangerous public-private partnerships. What’s to stop a private investor lending on outrageous terms to foreign central banks? Do developing countries have the resources to monitor the kinds of financial instruments used?

IMF: Recession through 2009

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“The IMF — and many private economists — believe the U.S. economy will probably contract in the final three months of this year and the first three months of next year, meeting a classic definition of a recession. The economy’s last recession was in 2001.

The government’s bailout package is aimed at thawing lending by buying bad mortgage-related debt from troubled financial institutions. The idea is that the banks’ books would then be cleaner, putting them in a better position to lend and get the economy moving.

The IMF said this effort should help to stabilize markets but even so “the process of balance-sheet repair will be long and arduous.” Credit availability is likely to remain constrained throughout 2009, the IMF said.

Fed Chairman Ben Bernanke warned in a speech Tuesday that the economy’s outlook for this year has darkened and the pain could last for some time. His remarks were seen as foreshadowing Wednesday’s rate cut.

Looking at other countries, Germany’s growth will slow to 1.8 percent this year, down from 2.5 percent last year. France’s growth will weaken to just 0.8 percent, compared with 2.2 percent in 2007. Britain’s economy will see growth taper to 1 percent, down from 3 percent last year. Canada’s growth will tail off to 0.7 percent this year, from 2.7 percent last year.

In Japan, growth will cool to just 0.7 percent, from 2.1 percent last year.

Global powerhouses China and India will see growth clock in this year at a robust 9.7 percent and 7.9 percent, respectively. Even if those projections prove correct, they would still mark downgrades from their blistering performances last year. Russia’s economy should grow by a brisk 7 percent this year, down from 8.1 percent last year.

Inflation around the world remains high, driven up by surging energy and food prices through much of this year….”

ObamcCain: The Politics of Pose

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“Will anyone ask the Democratic candidate how he feels about stoking up a replication of the Iraq disaster, with a possible war between nuclear Pakistan and nuclear India as lagniappe? The dawn of an Obama administration is now scheduled, on the candidate’s pledges, to see escalation of a doomed and pointless war in Afghanistan and perhaps also termination of Karzai, now square in Uncle Sam’s sights as a failure and probably scheduled for assassination. There’s the heritage of JFK and Vietnam for you. It’s back to 1963.

Asked if Russia was evil, just like the Soviet Union in Ronald Reagan’s eyes, Obama said yes, McCain “maybe”. Trade? Latin America? Africa? Europe? Nothing from either man, though they both agreed that they would flout the UN at will.

Of the two performances, Obama’s was the more appalling since he is meant to be the candidate of change and new ideas. He has no detectable commitment to change and no new ideas. Neither does McCain. Yet the post-debate panelists mostly claimed the Town Hall Meeting an absorbing affair, rich in content. We have one more debate, in which McCain will have another chance to reduce Obama’s commanding lead, something he failed to do last night, even though it now seems Sarah Palin did slow McCain’s slump with her performance last week. McCain and Palin are trying to get traction by slurring Obama for association with Bill Ayers, a leader of the the bomb-throwing antiwar Weathermen in the 60s. Obama was eight when they threw the bombs. It doesn’t seem a productive line of attack for McCain and Palin, particularly when many Americans wouldn’t mind blowing up Wall St themselves….”

Alexander Cockburn in Counterpunch.