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Bernie Madoff Targets Banks and Hedge Funds: “They Had to Know”

Posted by Larry Doyle on February 16, 2011 7:04 AM |

Bernie Madoff Bernie Madoff BiographyBernie Madoff deserves zero sympathy and less attention. On the other hand, those seriously impacted by his crimes deserve not only sympathy but also recompense. Irving Picard, the trustee pursuing that recompense on behalf of Madoff investors, is making some high profile claims and has generated substantial results. That said, selected Madoff investors have informed me that they give Picard very mixed reviews.

While Bernie rots away, he did speak out recently and slightly opened the window into his scheme. In the process, Madoff made an assertion that I think anybody with half a brain would have already assumed. The New York Times reports, From Prison, Madoff Says Banks ‘Had to Know’ of Fraud:

In his first interview for publication since his arrest in December 2008, Mr. Madoff — looking noticeably thinner and rumpled in khaki prison garb — maintained that family members knew nothing about his crimes.

But during a private two-hour interview in a visitor room here on Tuesday, and in earlier e-mail exchanges, he asserted that unidentified banks and hedge funds were somehow “complicit” in his elaborate fraud, an about-face from earlier claims that he was the only person involved.

In many ways, however, Mr. Madoff seemed unchanged. He spoke with great intensity and fluency about his dealings with various banks and hedge funds, pointing to their “willful blindness” and their failure to examine discrepancies between his regulatory filings and other information available to them.

“They had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know.’ ”

I have no doubt that the Wall Street banks and a variety of hedge funds knew, should have known, or did not want to know what was truly transpiring within Madoff’s operation.

But, let’s go deeper than that. Who is charged with keeping these banks honest? What about the regulators? Not that Bernie has any real credibility, but why isn’t he compelled to provide further testimony about those who regulated his enterprise, specifically the NASD, its offspring FINRA, and the SEC?

Why isn’t Bernie compelled to specifically address his relationship with ‘his good friend, Mary Schapiro’?

These are questions America not only wants addressed but deserves to have answered . . . completely!!

Perhaps, just perhaps, some light of day will shine on this corner of Bernie’s den if the Amerivet Securities suit vs FINRA continues to proceed through our judicial system. Recall that embedded in that suit is this very question of FINRA’s relationship with Madoff.

“They had to know.”

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own and not those of Greenwich Investment Management. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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