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Bernie Madoff: “This Conversation Never Took Place…”

Posted by Larry Doyle on September 10, 2009 2:40 PM |

If there was ever a doubt as to whether Bernie Madoff was aided and abetted in his Ponzi scheme, that doubt should now be extinguished. How so? An hour-long discussion between Madoff and executives from Fairfield Greenwich reveals Madoff giving these ‘co-conspirators’ instructions on how to deal with regulators from the SEC.

The conversation is riveting and exposes the calculating mindset of both Madoff and the executives from Fairfield Greenwich. The conversation encompasses a wide array of topics, including:

1. Madoff’s model and strategy

2. Fairfield Greenwich’s model and strategy, in which Madoff was supposedly merely an executing broker.

3. Madoff recommends to Fairfield Greenwich to never reference writing things down “because any time you say you have something in writing, they ask for it.”

4. Fairfield Greenwich should not acknowledge that they knew when Madoff entered and exited the market.

5. Fairfield Greenwich requests info on Chinese walls and controls at Madoff. Bernie acknowledges that the SEC already knows of Chinese walls at Madoff.

6. Bernie talks about funds which promote transparency. Bernie views the flow of information as problematic for managers in regard to accusations of front-running.

7. Bernie acknowledges he knows how to handle regulators based upon his relationship with them.

8. Bernie says, ” . . . the hedge funds operate in totally different ways than they used to . . . it’s changed the landscape and the commission (SEC) has no idea what the hell is going on.”

9. Bernie indicates that he is the only one who pulls the trigger at Madoff. Bernie says the execs at Fairfield Greenwich do not need to know that. The SEC will try to draw information out, but the less the Fairfield Greenwich execs know of Madoff, the better.

In listening to this conversation, there is truly only one conclusion which one can draw:

The Fairfield Greenwich executives on this call were not only stooges for Madoff, but also co-conspirators. Any entity who invested the amount of money Fairfield Greenwich did without fully understanding the trading strategy and model should be exposed. The senior exec at Fairfield, Walter Noel, must have fully known of the Madoff fraud.

Having worked in the industry for 23 years, I have never heard of a conversation in which strict instructions and guidance of this sort was ever provided when it came to regulatory oversight.

If I were an investor in Madoff through the Fairfield Greenwich feeder fund and listened to this audiotape, I would instruct my lawyers to get even more aggressive in seeking damages.

The audiotape embedded in this CNBC story, Madoff, Caught on Tape, Reveals Ways to Dodge SEC, runs 69 minutes. It is well worth a listen.

Shame on every regulator who did not perform in unearthing this greatest of scams.

LD

  • Larry –

    This is fascinating and damning for Fairfield Greenwich. Question – what do you mean by #5? Sorry for my ignorance, but what does “Chinese walls” mean?

    Matt

  • Larry Doyle

    “Chinese walls” is the Wall Street term used for lines of demarcation in which information could not be shared with people in different divisions or departments.

    If people were brought “over the wall” then they were bound not to share that info, otherwise they would be in violation of an SEC rule.

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