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HomePress Release: Madoff Investors Accuse SIPC of Forcing Investors to Bail Out Wall Street
Posted by Larry Doyle on November 14th, 2009 2:07 PM |
Having interviewed noted attorney Helen Davis Chaitman on No Quarter Radio’s Sense on Cents with Larry Doyle on November 1st (a recording of that show can be heard here), I am compelled to share this press release. Investors need to fully understand and appreciate the critically important role that SIPC is supposed to fulfill and the fact that it has largely served at the behest of the industry much like its regulatory brethren at FINRA.
LD
MADOFF VICTIMS ACCUSE SIPC OF FORCING INVESTORS TO BAIL OUT WALL STREET
Group of Madoff victims files brief saying Securities Investment Protection Corp. was grossly under funded and is defaulting on its obligations to investors
New York, NY – Lawyers representing victims of Bernie Madoff’s Ponzi scheme filed papers in federal bankruptcy court Friday charging the Securities Investment Protection Commission (SIPC) with attempting to enrich Wall Street at the expense of customers of SEC-regulated broker/dealers. The brief argues that SIPC has withheld insurance money rightfully owed to Madoff investors by using an illegal definition of “net equity,” thereby depriving investors of the $500,000 in SIPC insurance which Wall Street is obligated to pay them.
“Just as American taxpayers were required to bail out Wall Street to the tune of hundreds of billions of dollars after Wall Street recklessly brought the global economy to its knees, so to, Madoff’s destitute customers are being forced to bail out SIPC,” the brief reads. (more…)
‘There’s Something About Mary’ as Madoff Calls Schapiro “a Dear Friend”
Posted by Larry Doyle on October 30th, 2009 7:57 PM |
Did FINRA invest its own funds from its internal investment portfolio with Bernie Madoff? Would FINRA’s head Mary Schapiro invest with her “dear friend” Bernie? Stick with me on this and let’s navigate the newest development in this ongoing scam. My concluding remarks provide insights you won’t find in many mainstream media outlets.
High five to JD for tipping me off to a segment about Bernie Madoff that just aired on CNBC. While little is truly new in this segment, Bernie’s assessment of his relationship with former FINRA head and current SEC chief Mary Schapiro is startling. While Ms. Schapiro and her colleagues at FINRA have downplayed any sort of relationship with Madoff, Bernie has a different take.
There’s something about Mary as Bernie calls her “a dear friend.”
Will the government powers have the cojones to more fully explore this relationship? Or, are they already aware of it? As I wrote in my commentary of October 22nd, “Nasdaq Sale: Why Would Schapiro and FINRA Execs Lie?”:
Did Ms. Schapiro receive the “E-Z Pass” to the SEC from FINRA with the support of the powers that be on Wall Street? Was the chair of the SEC the ultimate payoff to Ms. Schapiro for the successful completion of the merger between NASD and NYSE Regulation to form FINRA?
What does Bernie have to say? Let’s review the CNBC segment, Madoff: It’s ‘Amazing’ I Didn’t Get Caught Sooner. . .
Jailed swindler Bernie Madoff said it was “amazing” that he didn’t get caught sooner in his multi-billion-dollar Ponzi scheme, and that everything the SEC did to investigate him prior to 2006 was a waste of time, according to a jailhouse interview he gave to SEC Inspector General H. David Kotz.
Madoff also told Kotz that SEC Chairwoman Mary Schapiro was a “dear friend,” although she “probably thinks, ‘I wish I never knew this guy.'” (more…)
Is the Wall Street Cop, FINRA, Ready to Talk?
Posted by Larry Doyle on September 22nd, 2009 9:00 AM |
Pressure does funny things to people.
Is the pressure boiling inside the pot of the Wall Street “cop” known as FINRA getting ready to blow? A Bloomberg report indicates the steam is rising inside FINRA. I am not surprised that FINRA is feeling real pressure at this point in time. FINRA should be sweating. Why? Try the following:
>> Lawsuits Trying for Transparency at FINRA (September 21, 2009)
>> Attorney Claims Wall Street’s Cop, FINRA, Invested in Madoff (September 15, 2009)
>> An Open Letter to the Board of FINRA Regarding Auction-Rate Securities (July 27, 2009)
>> U.S. Attorney and SEC Investigating Lehman’s Auction Rate Securities Sales; They Should Also Investigate FINRA’s (May 29, 2009)
Bloomberg reports this morning, FINRA Board Said to Debate Releasing Report on Madoff, Stanford:
The U.S. brokerage regulator’s board is debating whether to release an internal report of its examinations of firms run by Bernard Madoff and R. Allen Stanford, according to people familiar with the matter.
Why should there even be a debate? Why isn’t it standard operating procedure that a financial self-regulatory organization such as FINRA would be mandated to provide total transparency of all its business dealings? Where FINRA has failed, transparency will serve as the leverage to compel them to improve their policies and procedures. If current policies and procedures and past failures are exposed in the process, so be it. History has always shown that coverups only make bad situations worse.
I am heartened that FINRA board member Charles Bowsher, a man of real integrity, seems to be pushing FINRA to release information. Bloomberg asserts:
Bowsher, the committee’s chairman, is adamant the document be released, according to one person. He didn’t return a phone call seeking comment.
Finra spokeswoman Nancy Condon said the board formed the committee to review the examination program “in light of the Madoff and Stanford cases.” A draft was shared with the board, which will decide whether to release it, she said yesterday. She declined to comment on whether any board members oppose making the document public.
Finra, funded by Wall Street firms and overseen by the SEC, inspects and write rules for more than 5,000 U.S. brokerages. The board includes 10 representatives of the financial industry along with former regulators and academics.
Recall that to this point, FINRA has never willingly released information on its internal investment or oversight activities over and above what has been published in its annual reports. FINRA spokespersons, Herb Perone and Nancy Condon, have always maintained FINRA has released more information in its reports than it is required. If in fact that is true, then clearly FINRA’s overseer, the SEC, needs to increase those requirements.
The simple fact is, given the historic times in which we live any self-respecting financial regulator should be obligated to provide full and total transparency across all its initiatives. While FINRA may be embarrassed – if not worse – in the process, FINRA must provide this transparency if we are ever to regain confidence in our markets and our regulators.
Why else may FINRA want to talk? In a current lawsuit brought by Standard Investment vs. FINRA, the judge assigned to hear the case is none other than our friend of the American public, Jed Rakoff. Yes, the same Jed Rakoff who recently undressed the SEC’s contrived $33 million fine levied on Bank of America and stated the fine, “does not comport with the most elementary notions of justice and morality.”
Yes, indeed, pressure does funny things to people!!
LD
Bernie Madoff: “This Conversation Never Took Place…”
Posted by Larry Doyle on September 10th, 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
Attorney Representing Amerivet Securities Makes Claim FINRA Insider Confirms Investment in Madoff
Posted by Larry Doyle on September 4th, 2009 1:20 PM |
Did we just find the smoking gun which indicates that FINRA (Financial Industry Regulatory Authority) actually invested in the Madoff Ponzi scheme?
I was on a panel last evening on America’s Nightly Scoreboard on Fox Business News (the entire transcript can be found at this link). The topic was one which regular readers of Sense on Cents are most familiar, that being FINRA.
The show is hosted by David Asman. Panelists included Richard Greenfield, an attorney representing Amerivet Securities in its suit against FINRA; former SEC chair Harvey Pitt; Madoff Victims Coalition head Ronnie Sue Ambrosino and her husband Dominic; and yours truly.
I commend the host of the show, David Asman, for being thorough, professional, balanced, and aggressive in addressing the topic. We covered a number of angles including:
1. Amerivet Securities complaint vs. FINRA
2. Mary Schapiro’s tenure and compensation at FINRA
3. FINRA’s investment portfolio, including its sale of auction-rate securities.
4. Did FINRA invest in Bernard Madoff’s Ponzi scheme?
There were a few bombshells that came out of our discussion, including a claim by Mr. Greenfield, the Amerivet Securities attorney, that “somebody well-placed within the organization (FINRA) that told us, in no uncertain terms, there was an investment with Madoff.”
Additionally, former SEC chairman Harvey Pitt provided a qualified endorsement of FINRA opening its books and records in an acknowledgement of the need for greater transparency.
I am happy to provide the transcript of the dialogue which encompassed these two momentous statements:
ASMAN: Harvey, for example, I used to work at the “Wall Street Journal” and we had very strict restrictions about what we could buy, how long we could hold stocks if we bought it, and how we had to disclose it and that sort of thing. It doesn’t seem at least that those disclosure policies apply to FINRA, at least in the case finding out whether they invested with Madoff.
PITT: I don’t — there has been a fair amount of, shall we say, opacity with respect to what the investment activities are and the like. In a real sense, I think that’s probably ill-advised for an enterprise that has regulatory responsibilities.
But so putting that to one side, I do think that people are entitled to know where their money is coming from, where their money is going, what it is being spent and the like. The fact of the matter is the SEC does oversee all these operations. It does overlook all these things. FINRA has been under the microscope at the SEC for many, many years, long before Mary Schapiro got to the SEC.
ASMAN: I want to bring in other parties. But I want to go back to Counselor Greenfield.
Richard Greenfield, how did you get information suggesting that indeed FINRA was investing with Madoff?
GREENFIELD: Well, we got the information, number one, in two different ways. Number one, it has been rumored through many people on Wall Street that there was an investment either through a feeder fund or some other means. Secondly, we also got information from somebody well-placed within the organization that told us, in no uncertain terms, there was an investment with Madoff.
ASMAN: OK. All right. So I think it’s fair to say that FINRA owes the public some answers here.
So joining us now with — are some people who are demanding answers. Larry Doyle, a Wall Street veteran, 23 years, who currently operates his own web site, Sense on Cents — “sense” with an “S” and “cents” with a “C” — which is geared to help people navigate the landscape.
Ronnie Sue and Dominic Ambrosino, good friends of “Scoreboard”, they are Madoff victims who are mobilizing a campaign for greater transparency.
Thanks for coming in.
RONNIE SUE AMBROSINO: Thank you.
ASMAN: Larry, first to you. What do you think about Harvey’s description of the situation?
LARRY DOYLE, WALL STREET VETERAN & SENSE ON CENTS WEB SITE OWNER: I would say two things in regard to the former chairman’s statement. First and foremost, Madoff did not become a registered investment advisor until 2006. FINRA obviously wasn’t formed until 2007. FINRA’s parent, that being, FINRA was formed from the regulatory arms of the New York Stock Exchange, and the NASD.
ASMAN: Right.
DOYLE: The fact is, the NASD did have oversight of Madoff, and so there is an obligation by, to look into the NASD’s activities because, at that point, it was just a broker-dealer.
ASMAN: Have you formulated your own opinion whether there was a conflict of interest here?
DOYLE: Without a doubt. Without a doubt. The fact of the matter is FINRA is a big-money organization. We know they invested in hedge funds, fund of funds, private equity. And they also had a significant investment in auction rate securities, which is sector of the market that has been designated as a fraud by federal judges. The fact of the matter is we know, and have learned from FINRA, that FINRA exited their auction rates securities position, $647 million worth, in mid 2007, as the market was failing, and when they were supposed to be protecting investors.
Further along in the dialogue, we engage in the need for FINRA to open its books and records:
ASMAN: That is great point, Ronnie Sue.
And, Larry, it goes to the point that a lot of people are looking from the outside at what goes on inside in Wall Street and Washington. It’s that Wall Street, Washington nexus. They see all these folks kind of related with each other. The SEC related with FINRA, and related with NASD. You look at Mary Schapiro’s career and you see that. They can miss things because they’re only talking to each other.
DOYLE: I think the term there is incestuous. So the fact of the matter is Washington has an opportunity through this financial regulatory reform to bring total transparency.
ASMAN: How would you do that? Open the records of FINRA?
DOYLE: Open the books. What — what individual in America right now wouldn’t make — doesn’t it make sense for FINRA to be forced to open their books and records, full and total transparency? The markets demand it. The economy demands it. Ronnie Sue and Dominic demand it. For market confidence.
ASMAN: Harvey, if we demand it of banks, why not FINRA or for that matter, why not the Fed? We have a lot of people in Congress saying everybody needs to open the books, everybody needs to be transparent?
PITT: Well I think there’s no question that we need far more transparency throughout the regulatory environment, both for those regulated and those doing the regulation. That, I think, is a very clear proposition, and one that I’m hopeful will be addressed in whatever new legislation comes about.
ASMAN: So we have to leave.
But, Harvey, does that mean you’re in favor of FINRA opening the books so we can find out if they invested in Madoff?
PITT: I’m in favor of there being far more transparency, permitting privacy concerns to allow certain information to be withheld, as long as somebody is overseeing what they’re doing.
I am thrilled that these issues which Sense on Cents has been focused on for the last 8 months are coming into the public light. That said, there remains plenty of work left to do to generate the truth, transparency, and integrity that our markets, economy, and country so badly need.
You can help by spreading this story amongst friends and colleagues. While the Amerivet complaint vs. FINRA will be addressed in the Washington D.C. courts, the fact is the issues revolving around FINRA and regulatory transparency need to be highlighted in the court of public opinion.
What do you think?
LD
If you like what you see and read here, please subscribe to Sense on Cents via e-mail, Twitter, Facebook, or an RSS feed. Thanks for your support.
Related Sense on Cents Commentary
Madoff Victims Call Out FINRA (September 3, 2009)
Amerivet Complaint Against FINRA Alleges Madoff Investment (August 25, 2009)
How Courageous is Mary Schapiro? (June 4, 2009)
U.S. Attorney and SEC Investigating Lehman’s Auction Rate Securities Sales; They Should Also Investigate FINRA’s (May 21, 2009)
FINRA Is Supposed to Police the Market (April 29, 2009)
NoQuarter Radio’s Sense on Cents with Larry Doyle Interviews Head of Bernard Madoff Victims Coalition, Sunday Night at 8PM
Posted by Larry Doyle on August 15th, 2009 5:04 PM |
UPDATE: The show has concluded, but you can listen to a recording in its entirety by clicking the Play button on the audio player below. Once the playback has started, you can forward or rewind to any portion of the show by clicking at any point along the play bar. My interview with Ronnie Sue Ambrosino was extremely interesting, touching upon elements of investor protection that concern us all. For your reference, I’d like to provide two important websites that my guest mentioned: Bernie Madoff Victims Coalition and an online petition to show a unified support for investors to receive fair and legal treatment by the Securities Investor Protection Corp (SIPC).
************************
Has our government ever failed us to the extent involved in the regulatory oversight connected to the Bernard Madoff Ponzi scheme? How could these failures have perpetuated for such an extended period? How are these failures and their impact on the victims being handled? Is insult being added to injury?
Can the victims possibly receive real justice in terms of restitution and retribution? Where did the system falter? How are the victims of this travesty being treated by the powers that be on Wall Street, Washington, and in the media?
I am thrilled to address all these issues on my weekly program, No Quarter Radio’s Sense on Cents with Larry Doyle, this Sunday evening August 16th from 8-9pm as I welcome Ronnie Sue Ambrosino, head of the Bernard Madoff Victims Coalition.
As a sneak preview, Ms. Ambrosino was interviewed by Charlie Rose on June 29th, the day Bernard Madoff was sentenced to 150 years in prison. Ms. Ambrosino appears in the video clip at the 3 minute, 5 second mark.
The issues I will address with Ms. Ambrosino run well beyond the immediate concerns of the Madoff victims. The integrity and transparency of our financial regulatory system and legal process remain very much in question.
Don’t miss this important discussion Sunday evening on NQR’s Sense on Cents with Larry Doyle.
LD
Related Sense on Cents Commentary:
Madoff Victim Makes Impassioned Plea (August 12, 2009)
SEC Complaint vs. Frank DiPascali, Jr. (August 13, 2009)
SEC Complaint vs. Frank DiPascali, Jr
Posted by Larry Doyle on August 13th, 2009 3:23 PM |
I just reviewed the complaint filed by the SEC as plaintiff against Madoff CFO Frank DiPascali Jr. as defendant. For anybody interested in the dynamics of our markets and regulatory system, this 31 page document is a must read:
Securities and Exchange Commission, Plaintiff versus Frank DiPascali, Jr. Defendant.
Many highlights, but to me the following jump out:
1. DiPascali was a college dropout who rose to become CFO of a supposed major financial money manager. Come on. Any legitimate feeder fund and any legitimate regulator should have immediately questioned the credibility and qualifications of this individual rising to that position.
2. Madoff did not officially become a registered investment adviser until 2006. To that point, his entire business would have been regulated by the SEC and NASD. Why does the regulatory arm of NASD, the parent organization of FINRA, seem to get a pass in this scandal? (more…)
Madoff Victim Makes Impassioned Plea
Posted by Larry Doyle on August 12th, 2009 6:10 AM |
I recently received an e-mail from the head of a Madoff Victims Coalition. The e-mail was in response to a post I had written about Madoff CFO Frank DiPascali. The e-mail truly moved me.
With the permission of the writer, I share it with you. There is nothing more for me to add to the message embedded in this communication. America has failed these brothers and sisters of ours. Will we allow our elected representatives to permit this failure to go unheeded or merely be glossed over? Please read, ponder, and share this post with those whom you believe love this country. These people deserve our support.
Larry,
I feel the sincerity in your email. Thank you. It’s been a tough struggle for the last 8 months. I don’t think anyone, no matter how empathetic, can fully understand what it means to have everything you ever worked for taken away in the blink of an eye. Initially, we reeled from the loss of money, but as time goes on we realize that it wasn’t just a financial loss. Many victims feel betrayed by our country, unprotected by the alleged laws that are in place, and helpless because of those in charge of executing the laws. That’s a huge loss. Then there’s the loss of homes, medical care, legacies to children and grandchildren. The list of horrors goes on and on.
There are so many aspects of our battles. We have the failure of the SEC to find the fraud. Then we have their failure to recognize it when Harry Markopolos handed them the facts. They even missed warnings from their own internal counsel. This must be addressed so that no one else will ever have to experience the devastation we are feeling.
Another aspect, and one I think is more applicable now is the fact that one man (Irving Picard) has unilaterally opted to change the SIPC protection by arbitrarily changing the basis for payment of claims. I’ve researched past SIPC cases, and am in contact with my counterpart in the Stanford case and see the SIPC pattern-their rules are so vague (intentionally?) that they can be interpreted any way that suits SIPC’s needs. This is also a complaint issued by the GAO in an report they issued. Picard Is literally robbing people of money they are owed. The travesty continues with the fact that the SEC has oversight over SIPC and is standing by an letting this happen. Where is the justice? Where is the trust? How can an investor have confidence? (more…)
Is the Securities Investor Protection Corporation (SIPC) a Mere Facade?
Posted by Larry Doyle on August 11th, 2009 4:55 PM |
What good is insurance if after the storm you do not get paid? What good is insurance if the premiums charged are so badly mispriced that they misrepresent and do not cover the embedded risks? Welcome to the world of the Securities Investor Protection Corporation.
Is SIPC a mere facade presented by the Wall Street titans?
Let’s get the take of those who recently relied upon SIPC to fulfill its obligations. To whom do I refer? The victims of the Madoff scam.
If these investors were not protected, then how are we to believe that other investors will be protected on a going forward basis?
Why do I make that statement? None other than current head of the SEC Mary Schapiro addressed this topic in recent Congressional testimony. In a press release put out by Madoff victims, Schapiro admitted that SIPC did not have sufficient funds to pay all of the Madoff claims.
Who funds SIPC? The Wall Street banks. Yes, those banks that have been printing massive revenues and believe that they are back to ‘business as usual.’ Why aren’t the premiums immediately increased on these institutions to properly compensate Madoff victims?
To the extent that certain Madoff investors were aware of the Ponzi scam, obviously they should not receive restitution. I have to believe that number is in the distinct minority.
Given the general lack of confidence in our financial regulators,(the SEC and FINRA) would Congress have the heart and courage to take on the financial behemoths on Wall Street in an attempt to protect the investing public?
These questions and issues lie at the core of badly needed financial regulatory reform. Yes, that reform which seems to be on the back burner now that the markets have rebounded and Wall Street is printing money once again.
Make no mistake, though, that pot is still boiling and these questions need to be fully addressed and answered to the public’s satisfaction.
For a deeper understanding of these questions from the perspectives of the victims of the Madoff scam, please read this recent press release from the Bernard Madoff Victims Coalition. Click on the image below to access a PDF of the full 2-page press release. Let me know what you think.
LD
Did the SEC Have Any Experienced People Looking at Madoff? You Betcha!!
Posted by Larry Doyle on September 7th, 2009 11:24 AM |
While the SEC Inspector General David Kotz would have the American public believe the SEC fell down in its oversight of Bernie Madoff largely due to inexperienced investigators, this claim is very shallow.
Former SEC lawyer Genevievette Walker-Lightfoot was investigating Madoff in 2004 but was reassigned when she started to ask the hard questions. The Wall Street Journal highlights Ms. Walker-Lightfoot’s time working for the SEC in writing, Ex-SEC Lawyer: Madoff Report Misses Point:
Who made this decision? Why? (more…)
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