Madof’s Scandal Essay Example for Free

Madof’s Scandal Essay In the first two weeks of December 2008, the stressed that 70-year old businessman, Bernard Madoff is suffering becomes apparent to his employees, most particularly to his two sons. It concerns a $7 billion redemption request that Madoff had been ‘struggling to obtain the liquidity necessary to meet his obligation’. This made them approach him directly what the problem is all about. The answer is unexpected. Prior to this incident, Madoff is well known throughout the world of economics and investment as a genius and a trustworthy owner of Madoff Investment Securities LLC. The firm is generally a broker-dealer and investment advisor concerned with the management of investors’ assets, giving advice to investment management and is associated with some nonprofit organizations (Helyar et al. , 2009). At the age of 22, Bernard Lawrence Madoff managed to build his firm from his $5,000 savings. Since its first few years in the business, Madoff’s Securities reputation was tantamount to success. Madoff also served as chairman of the board of directors of the NASDQ Stock Market (Byrne et al. , 2005). Madoff confessed, according to Theodore Cacioppi (BackgroundNow. com 2008), that ‘There is no innocent explanation’ pertaining to the fraud that he committed. Cacioppi’s testimony also revealed that Madoff stated to his ‘senior employees’ that he is already ‘finished’ and the firm is actually ‘one giant Ponzi scheme’. The Hennessee Group, represented by Charles Gradante, had also been suspicious of the Madoff’s success when their reports showed that Madoff’s only had 5 months down in a span of 13 years despite several market fluctuations and economic changes. Helyar and colleagues (2009) reported that Madoff’s strategy of split-strike conversion turns out to be front-running. This strategy involves â€Å"brokers’ for their own account†. This is known to be illegal yet Mardoff’s investors didn’t care. Helyar and colleagues believes that investors are concerned about the money they get. In my opinion, Madoff’s scandal opens the public’s eyes to the fact that cheating is indeed prevalent in the American Society. Even successful people cheat and are cheated. The effect cripples the economy and results to distrust. New policies are being and will be initiated to avoid and detect possible frauds. When I heard about the scandal, the first thing that came to my mind was the quote ‘when everything is going your way, you’re probably in the wrong lane’. Taken literally this indicates driving at the other side of the road. Nonetheless, another interpretation reveals that ‘everything coming your way’ resembles things are being ‘too good to be true’ or turning out as you expected. In the case of Madoff’s investors, they looked at the facts; they listen to what former investors say and followed that path expecting the same returns. Despite the fact that Madoff’s offer and profiles seem ‘too good to be true’. They grabbed the chance and hope for the best. At the end, it is the ‘wrong lane’ after all. Madoff fraud strategy is well-known as ‘Ponzi scheme’. This type of fraud had been in the business industry for several decades yet people still fell for it. The good promises are simply too great to refuse. These same things eluded logical thinking and provoke greed. The scandal affects the investors and their reputation. It also raised doubts regarding implementation of laws and economic policies. It posed new challenges for proper investment management and questions the liability of security firms. Moreover, it is not simply an issue of crime or fraud; rather it undermines societal values and trends. References BackgroundNow. com. (2008). Bernard L. Madoff Charged In Multi-Billion Dollar Ponzi Scheme. Retrieved on February 17, 2009 from http://books. google. com/books? id=m2_yfK582ukC Helyar, J. , Burton, K. , and Silver, V. (2009). Roots of a $50 billion Ponzi Scheme. Retrieved on February 17, 2009, from http://www. businessmirror. com. ph/index. php? option=com_contentview=articleid=5577:roots-of-a-50-billion-ponzi-scheme-catid=46:bloomberg-specialsItemid=70 McShane, L. (2008). Bernard Bernie Madoff: From Queens lifeguard to soaking fraud. Retrieved on February 17, 2009, from http://www. nydailynews. com/news/ny_crime/2008/12/13/2008-12-13_bernard_bernie_madoff_from_queens_lifegu. html Schwartz, R. A. , Byrne, J. A. , and Colaninno, A. (2005). Coping with Institutional Order Flow. Springer. US Security and Exchange Commission. (2001). â€Å"Ponzi† Schemes. Retrieved on February 17, 2009, from http://www. sec. gov/answers/ponzi. htm