Bernard L. Madoff Investment Securities LLC
885 Third Avenue
New York, NY 10022
Fax: (212) 486-8178
Main Telephone: (212) 230-2424
Client Service Desk: (212) 230-2435
Sales Trading Desk: (212) 230-2456
New Clients: (212) 230-2422
Madoff Securities International Limited (Regulated by FSA)
12 Berkeley Street Mayfair,
London WIJ8DT
Telephone: 44-207-493 6222
Fax: 44-207-493 6082
I posted these because they had been taken off by the offending party to avoid more exposure. The reason why 50 B is possible is that greed and unreasonable thinking are running rampant
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BOSTON (Reuters) - The alleged $50 billion fraud by former Nasdaq Chairman Bernard Madoff has rippled deep into Boston's wealthy elite, forcing a charitable foundation to close and triggering losses by prominent philanthropists.
The Robert I. Lappin Charitable Foundation, which financed trips for Jewish youth to Israel, said the money that supported its programs was invested with Madoff, a 70-year-old Wall Street trader arrested on Thursday.
"The money needed to fund the programs of the Lappin Foundation is gone," the Salem, Massachusetts-based foundation said on its website, adding all staff had been let go.
"It is with a heavy heart that I make this announcement," Robert I. Lappin, the foundation's trustee, said in a statement.
The Boston Globe reported on Saturday that other clients of Madoff included philanthropists Carl and Ruth Shapiro, big donors to the Museum of Fine Arts, Brandeis University and the Beth Israel Deaconess Medical Center.
The Shapiro family foundation lost almost half its money, or about $145 million, to Madoff, the newspaper said.
Other clients included Avram and Carol Goldberg, a previous owner of the Stop&Shop supermarket chain, and Stephen Fine, president of privately held Biltrite Corp.
Federal agents arrested Madoff at his apartment on Thursday after prosecutors said he told senior employees that his money management operations were "all just one big lie" and "a giant Ponzi scheme."
A Ponzi scheme is an illegal investment vehicle that pays off old investors with money from new ones and is dependent on a constant stream of new investment. Because the invested capital is not earning a sufficient return on its own, such schemes eventually collapse under their own weight.
Madoff is the founder of Bernard L. Madoff Investment Securities LLC, a market-making firm he launched in 1960. His separate investment advisory business had $17.1 billion of assets under management.
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"The Robert I. Lappin Charitable Foundation, which financed trips for Jewish youth to Israel, said the money that supported its programs was invested with Madoff, a 70-year-old Wall Street trader arrested on Thursday."
Odd, why would they need to invest with Madoff, how many trips to Israel did they actually fund?
Looks like they disbursed peanuts considering Madoff likley did not deal with punters?
Sonn & Erez Attorneys Hired to Represent Victims of Bernard Madoff
Last update: 6:15 p.m. EST Dec. 13, 2008
FT. LAUDERDALE, Fla., Dec 13, 2008 (GlobeNewswire via COMTEX) -- The securities law firm of Sonn & Erez PLC ( http://www.sonnerez.com) announces that it has been hired by victims of Bernard Madoff, the head of Bernard Madoff Securities LLC. Madoff has been charged with running what may be the largest Ponzi Scheme in Wall Street history, allegedly costing $50 billion in investment losses. Jeff Sonn, Esq. presently serves as special counsel to the SEC in a separate Ponzi Scheme case, and is lead class action counsel in another Ponzi Scheme case. In the Madoff Ponzi Scheme, Sonn will be representing both individual and institutional victims of Bernard Madoff. "There are a lot of lawyers out there, but not many who handle Ponzi Scheme cases as often as we do," added Sonn. For example, there are victims who are "net winners," those who took out more than they deposited, and "net losers," those who took out less then they deposited. "Lawyers cannot represent both 'net winners' and 'net losers' because there will be fraudulent transfer cases where the net losers are suing the net winners, either by the receiver, or in separate actions," said Sonn. "We are only representing net losers of the Madoff Ponzi scheme."
"In a typical Ponzi Scheme case, later investors' monies are used to pay the returns to earlier investors," said Sonn. "There may be situations where Madoff, his family, employees or close friends received monies that just don't belong to them, and they will have to give it back to the investors who did not take out more than they put in," Sonn added. Sonn also pointed out that there may be insurance available to pay something to the victims, such as those professionals who were supposed to audit the books, and coverage by the Securities Investor Protection Corporation (SIPC), who is supposed to insure against theft by broker-dealers. Sonn & Erez will represent victims to recover their lost investments via the receivership, and other legal action to recover stolen assets.
"Let's face it, self-regulation by Wall Street via the Financial Regulatory Authority (FINRA) just doesn't work," said Sonn. Bernard Madoff used to serve on the board of governors of the NASD, the predecessor to FINRA, so the fox was guarding the henhouse. This should be a wake-up call to Congress to act and take away self-regulation," added Sonn. "FINRA is supposed to conduct branch audits of broker dealers, and they should have caught this blatant theft long ago," said Sonn.
Sonn & Erez is an AV-Rated law firm that represents investors nationwide in stockbroker misconduct and investment fraud cases. The firm has represented individual and institutional investors against most major Wall Street brokerage firms in claims involving stocks, bonds, options, auction rate securities, mutual funds, hedge funds, and other structured products. If you lost money in the Madoff Ponzi Scheme, please contact Jeffrey Sonn, Esq. or Jeff Erez at 1-866-372-8311, or 305-785-0497 for a free evaluation. You also may visit the firm on the web at www.sonnerez.com .
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Sonn & Erez PLC
Sonn & Erez PLC
1-866-372-8311
305-785-0497
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December 14, 2008
Wilpons Losses in Fraud Case May Affect Mets
By MICHAEL S. SCHMIDT
Fred Wilpon and Bernard L. Madoff grew up in the 1940s less than a dozen miles from each other in middle-class neighborhoods of New York City. Wilpon went on to become a wealthy real estate investor and the principal owner of the Mets, and Madoff one of the most successful traders on Wall Street.
Madoff and Wilpon have had a close personal and financial relationship for more than two decades, and Wilpon entrusted Madoff with hundreds of millions of dollars to invest, according to several people with knowledge of their relationship. But Madoffs investment firm has collapsed in what federal authorities are describing as a $50 billion Ponzi scheme, and questions are being raised about whether the fraud could harm the Mets status as a big-payroll franchise.
Bob DuPuy, the president and chief operating officer of Major League Baseball, said Saturday that he and Commissioner Bud Selig had spoken with Wilpon on Friday. DuPuy said that all three believed that the fraud case would have no effect on the Mets operation.
But interviews Saturday with several people with knowledge of Wilpons business dealings revealed concern about significant problems that Wilpon and the Mets could encounter because of the reported fraud. Although it is unclear how much money Wilpon may recoup, any significant financial loss by a team owner raises questions about how those losses may affect the franchise.
Any fraud that has been committed against Fred is something of deep distress to all of us and we feel very badly about the entire matter, but we all believe that this will not affect the team, DuPuy said in a telephone interview.
Wilpon invested his own money and that of his investments firm, Sterling Equities, with Bernard L. Madoff Investment Securities. That company had a long track record of strong and steady returns, but Madoff was arrested Thursday morning by federal agents at his apartment in Manhattan and later charged with securities fraud for operating what the authorities were portraying as the biggest Ponzi scheme in financial history.
DuPuy said that the Mets were a separate entity from Sterling Equities and Wilpons other investments.
The Mets are completely self-sufficient, and we have confidence that none of the other investments will affect the team, DuPuy said. They have been one of our most successful franchises on and off the field, and they are going into a magnificent ballpark next spring, and we expect it to be business as usual.
Wilpon bought the Mets in 1980 in a partnership with Nelson Doubleday and became the teams principal owner in 2002, when he bought Doubledays share of the team. The losses that Wilpon has sustained as a result of the Madoff fraud case could hamper his ability to pay back debt related to that buyout.
The losses could also hurt Wilpons ability to help the Mets weather the current economic downturn. Many sports leagues, including Major League Baseball, are bracing for lower revenue next season as consumers cut back on discretionary spending.
Perhaps most troubling is the possibility that losses incurred by Sterling Equities could put pressure on Wilpon to raise money by selling other assets. Because Sterling invested money directly with Madoff, Wilpon may have to come up with money to reimburse some of his own investors for losses. That may cause him to sell valuable assets, including a portion of his ownership in the Mets.
This year, Forbes magazine estimated the value of the Mets to be $824 million, making it the second-most valuable baseball franchise, behind only the Yankees.
After Wilpon became the Mets principal owner, the team had several down years. In recent years, Wilpon has made a concerted effort to put a more competitive team on the field. The payroll has surged as the team started its own television network, SportsNet New York, which broadcasts Mets games.
In 2008, the Mets had the second-highest payroll in baseball. Despite the current economy, the Mets have planned to keep their payroll at the same level in 2009. This week, the Mets signed Francisco Rodríguez to a three-year, $37 million contract to be the teams new closer.
One person who has worked directly with Wilpon said that Wilpon and Saul Katz, the president of the Mets, who is a co-founder and president of Sterling Equities, were very close with Madoff.
They were more than just business associates; they were friends and there was an enormous amount of trust, the person said.
That friendship may or may not end up being something that Mets fans regret.
Eric Dash and Jack Styczynski contributed reporting.
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By THOMAS CATAN, DAVID GAUTHIER-VILLARS and DANA CIMILLUCA
European banks, including Spain's Grupo Santander SA and France's BNP Paribas, said Sunday their clients and shareholders face billions of euros of losses on investments with Bernard Madoff, underscoring the global reach of the alleged Ponzi scheme run by the veteran New York money manager.
Santander, the eurozone's largest bank by market value, said its clients had an exposure of 2.33 billion ($3.1 billion) to Madoff's investment funds, mainly through its Optimal Strategic US Equity fund. More than 2 billion belongs to institutional investors and international clients of its private-banking business, which provides services to wealthy individuals, it said. The remaining 320 million belongs to private-banking customers in Spain, where Santander is based.
BNP, France's largest bank by market value, said it could lose as much as 350 million as a result of the alleged fraud. The bank said it has no investment of its own in the hedge funds managed by Bernard Madoff Investment Services. BNP Paribas, however, said it is exposed to these funds through its trading business and lending to hedge funds that had invested in Madoff's funds.
The losses could prove particularly embarrassing for banks' private-banking businesses, which charge high fees to wealthy investors in return for what is supposed to be superior advice and due diligence. Most of the European banks' exposures were on client investments they managed, rather than on the banks' own balance sheets. It's not yet clear how much, if anything, investors in Madoff's funds may be able to recover.
Santander, which has so far survived the global financial crisis relatively unscathed, said it had hired Madoff's firm to execute the Optimal fund's investments. Santander vowed to "undertake the legal actions which may be needed to defend the interests of investors." The bank said its own direct exposure was only 17 million.
Exposures to Madoff's funds have also emerged among a growing number of smaller European private banks. In a letter published on its website, the Swiss private bank Reichmuth & Co. said its clients had an exposure of some 385 million Swiss francs to Madoff funds. The bank said Reichmuth Matterhorn, a fund that invests in other hedge funds, faced a potential loss of about 8.6% on its exposure to Madoff. That amount represented about 3.5% of the 11 billion Swiss francs Reichmuth & Co. has under management, the bank said.
Another European bank, Geneva-based Union Bancaire Privee, has investment vehicles designed for wealthy individuals that invested in Mr. Madoff's funds, according to a person familiar with the matter. A UBP spokesman said the bank's clients have "limited" losses related to Madoff, but wouldn't be more specific or comment further.
Through private-banking networks, EIM Group, the European investment manager with about $11 billion in assets, had a number of non-U.S. investors into funds overseen by Mr. Madoff, according to people familiar with the matter. Overall, EIM assets at risk are less than 2% of what it manages, which means losses could top $200 million, according to a person familiar with the firm.
Swiss bank UBS AG has "very limited" direct exposure to the Madoff funds, according to a person familiar with the matter. But the Zurich-based bank's wealth-management arm helped clients in Europe and possibly elsewhere invest with Mr. Madoff, according to investment professionals in Europe who spoke with some of these clients. UBS is currently reviewing its clients' exposure to Mr. Madoff's funds, according to the person familiar with the matter. The person said the funds weren't on UBS's list of "recommended" investments for its U.S. clients, but that they may have been among the firm's suggested investments for overseas clients.
The Madoff debacle could pose another black eye for UBS's giant wealth-management business, which has suffered an exodus of clients as the bank has suffered heavy losses and become the target of a U.S. investigation into alleged tax evasion by its U.S. clients.
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HSBC "has emerged as one the largest victims of Bernard Madoffs alleged fraud with potential exposure of about $1bn...HSBCs exposure stemmed from loans it provided to institutional clients, mainly hedge funds of funds, that wanted to invest with Mr Madoff. HSBCs direct exposure is believed to be about $1bn in loans provided to clients who invested some $500m of their own funds in Mr Madoffs venture. Under the typical terms of these deals, if the US authorities recover any funds from Mr Madoff, HSBC will be paid first, with its clients suffering the first tranche of losses." (FT:)
Access International. $1.4 billion
Fortis Bank. $1.4 billion
Man Groups RMF division has about $350m invested in funds which outsourced their management to Madoff securities, although this is a tiny fraction of the divisions $25bn of assets. (FT)
Tremont Capital. Fund of funds. $3.3 billion invested. (FT)
Pioneer Investments, an arm of Italys UniCredit, had substantially all of $835m invested with Madoff. (FT)
Union Bancaire Privet: $1.1 billion
Benbasset & Cie: $935 million
BBVA: $404 million
Maxam Capital Management LLC. Combined loss of $280 million. "I'm wiped out," said Sandra Manzke, Maxam's founder and chairman. The Darien, Conn., fund of hedge funds will have to close as a result of the losses, she said. (WSJ)
Fairfield Greenwich Group. Bloomberg: The biggest loser may be Walter Noels Fairfield Greenwich Group, whose $7.3 billion Fairfield Sentry Ltd. invested with Madoffs eponymous firm, three people familiar with the matter said... Fairfield Sentry has a record of more than 15 years with an annual return of 4 to 6 percentage points above benchmark interest rates, according to a marketing document dated this month that was prepared by Zurich-based NPB New Private Bank Ltd. On an absolute basis, returns exceeded 10 percent every year from 1991 through 2000. Since then, they ranged from 6.4 percent to 9.8 percent...The strategy is a split-strike conversion, where the investment manager buys shares of large U.S. companies and enters into options contracts to limit the risk, the document says.
Fix Asset Management. Bloomberg: Fix Asset Management, which had an account worth at least $400 million with Madoff Investments. The firm said its checking with lawyers about the holdings. We are very shocked, John Fix, the son of founder Charles Fix, said by phone from Greece. We put in redemptions in the past few months and got our money back no problem. We are just so surprised about all this.
Kingate Management Ltd. Bloomberg says $2.8 billion Kingate Global Fund Ltd. invested with Madoff.
Santander. WSJ: The eurozone's largest bank by market value, said its clients had an exposure of 2.33 billion ($3.1 billion) to Madoff's investment funds, mainly through its Optimal Strategic US Equity fund. More than 2 billion belongs to institutional investors and international clients of its private-banking business, which provides services to wealthy individuals, it said. The remaining 320 million belongs to private-banking customers in Spain, where Santander is based.
Thyssen Family. Source sends the following: Thybo Investments grew out of a family office for Thyssen. They have been in fund of funds it seems since 1989. Thybo International is a "proper" fund of fund but it's newer share class G invests only in one manager - and i'm 99% sure it's Madoff as the returns are almost the same. Some more info. The fund started in Jan 2007. Ernst & Young. Luxembourg are the auditors. UBS Luxembourg is the administrator. Thybo states on their webpage: "Our track record incorporates audited financial statements at both a composite firm-wide and individual portfolios level."
Ira Roth's family. WSJ: Ira Roth, a New Jersey resident, who says his family has about $1 million invested through Mr. Madoff's firm, is "in a state of panic." He said his 86-year-old mother-in-law has been living on the investments' returns, and he has been using the funds to pay college tuition.
Sterling Equities. Fund controlled by Fred Wilpon, co-owner of the NY Mets, confirms it had money with Madoff.
Stephen Abbott, a San Francisco lawyer. WSJ: [Abbott] and two siblings had several hundred thousand dollars invested with Mr. Madoff. They inherited the trust from their father, who had befriended Mr. Madoff years ago. Performance remained steady through the current bear market, he said. "People were floored," he says. "We were making money in this lousy market." He says he is concerned about recovering the money but "you have to get philosophical about this stuff. It could be worse; we still have our health."
Palm Beach Country Club. Source: CNBC's David Faber
Lawrence Velvel, "69, dean of the Massachusetts School of Law, said he and a friend may have lost millions of dollars between them (AP). "This is a major disaster for a lot of people," Velvel said in a telephone interview from his Andover, Mass., office. "You work all your life, you finally manage to save up something, and somebody who's entrusted with it, it turns out suddenly he's a crook. Lots of people are getting fully or partially wiped out." Velvel said he wants to know where government regulators, as well as accountants and others at Madoff's company, were when the money was being lost." (AP)
Loeb Family. Source: CNBC's David Faber
J. Ezra Merkin. GMAC LLC Chairman. WSJ: Mr. Merkin, the chairman of former General Motors Corp. financing arm GMAC, is also a money manager at Ascot Partners LLC in New York. Ascot, which had $1.8 billion under management as of Sept. 30, had substantially all of its assets invested with Mr. Madoff, according to a letter to Mr. Merkin sent to clients Thursday night. Mr. Merkin said as one of the largest investors in Ascot, he believed he had personally "suffered major losses from this catastrophe."
Norman Braman. Former Philadelphia Eagles owner
Leonard Feinstein, co-founder of retailer Bed Bath & Beyond. (WSJ)
Mort Zuckerman. Mr. Zuckerman, the chairman of real-estate firm Boston Properties and owner of the New York Daily News and U.S. News & World Report, had significant exposure through a fund that invested substantially all of its assets with Mr. Madoff (WSJ)
Richard Spring. WSJ: A Boca Raton resident and former securities analyst, says he had about $11 million -- or 95% of his net worth -- invested with Mr. Madoff. "That's how much I believed in him," Mr. Spring said.
Elie Wiesel's Foundation For Humanity. Lost $37 million.
Members of half-a-dozen country clubs: WSJ: "Mr. Madoff tapped social networks in Dallas, Chicago, Boston and Minneapolis. In Minnesota, he attracted investors from Hillcrest Golf Club of St. Paul and Oak Ridge Country Club in Hopkins, investors say. One of them estimated that investors from the two clubs may have invested more than $100 million combined. One of the largest clusters of Madoff investors was in Florida, where losses could be substantial. Mr. Madoff relied on a network of friends, family and business colleagues to attract investors. According to investors and agents, some of these agents were paid commissions for harvesting investors. Others had separate, lucrative business relationships with Mr. Madoff. "If you were eating lunch at the club or golfing, everyone was always talking about how Madoff was making them all this money," one investor says. "Everyone wanted to sign up." Jeff Fischer, a top divorce attorney in Palm Beach, says many of his clients were also Mr. Madoff's clients. "Every big divorce that came through my office had portfolio positions with Madoff," he says. Two of his investors said that among his clients, Mr. Madoff was considered a money-management legend; they would joke that if Mr. Madoff was a fraud, he'd take down half the world with him."
Bramdean Alternatives in the U.K. 9% of portfolio.
Banque Benedict Hentsch, Geneva-based private bank, $47.5 million.
Nomura and Neue Privat Bank. "Marketed access to Fairfield Sentry Ltd., a fund overseen by Mr. Madoff and sold through Fairfield Greenwich. The shares offered by Neue Privat and Nomura were leveraged three times -- meaning $3 of borrowed money was added to every $1 of capital invested in order to magnify returns, greatly increasing the potential losses for those investors." (WSJ)
Unicredit. The Italian firm had unspecified amount with Madoff via its Dublin-based Pioneer alt-asset group. (MarketWatch)
Sen. Frank Lautenberg. Unspecified (Newsday).
Robert Lappin Foundation in Massachusetts closed its doors today and is citing relationship to Maddoff fund. $8MM foundation plus personal holdings. Foundation supported Jewish organizations throughout North Shore of Massachusetts. (source: Jewish Journal)
Wunderkinder Foundation, a Steven Spielberg charity. In the past the foundation "appears to have invested a significant portion of its assets with Mr. Madoff, based on regulatory filings. In 2006, the Madoff firm accounted for roughly 70% of the foundation's interest and dividend income, according to regulatory filings. A representative of Mr. Spielberg confirmed that the foundation has suffered losses on its investments with the Madoff firm. He said he didn't know the size of the losses and couldn't comment further, including on whether Mr. Spielberg had any of his own money invested with the Madoff firm." WSJ
BNP Paribas. "BNP Paribas's exposure, the extent of which is not clear, may stem from BNP's lending relationship with a fund of funds that was a big Madoff client, said people familiar with the matter. A BNP spokeswoman declined to comment." WSJ: BNP, France's largest bank by market value, said it could lose as much as 350 million euros as a result of the alleged fraud. The bank said it has no investment of its own in the hedge funds managed by Bernard Madoff Investment Services. BNP Paribas, however, said it is exposed to these funds through its trading business and lending to hedge funds that had invested in Madoff's funds.
Ira Rennert. Vicky Ward of Vanity Fair, said on CNBC."Heavily, heavily invested."
Englebardt family of Los Angeles. (Reader)
Swiss private bank Reichmuth & Co. "said its clients had an exposure of some 385 million Swiss francs to Madoff funds. The bank said Reichmuth Matterhorn, a fund that invests in other hedge funds, faced a potential loss of about 8.6% on its exposure to Madoff. That amount represented about 3.5% of the 11 billion Swiss Francs Reichmuth & Co. has under management, the bank said." (WSJ)
Union Bancaire Privee. UBP spokesman said the bank's clients have "limited" losses related to Madoff, but wouldn't be more specific or comment further. (WSJ)
EIM Group, the European investment manager with about $11 billion in assets, had a number of non-U.S. investors into funds overseen by Mr. Madoff, according to people familiar with the matter. Overall, EIM assets at risk are less than 2% of what it manages, which means losses could top $200 million. (WSJ).
UBS: ""Very limited" direct exposure to the Madoff funds...But the Zurich-based bank's wealth-management arm helped clients in Europe and possibly elsewhere invest with Mr. Madoff, according to investment professionals in Europe who spoke with some of these clients. UBS is currently reviewing its clients' exposure to Mr. Madoff's funds, according to the person familiar with the matter. The person said the funds weren't on UBS's list of "recommended" investments for its U.S. clients, but that they may have been among the firm's suggested investments for overseas clients." (WSJ)
Stephen A. Fine, president of Biltrite Corp. (Reader)
Avram and Carol Goldberg, former owners of the Stop & Shop supermarket chain (Reader)
Helfman family of Miami. (Reader)
Saul Katz, co-owner of the New York Mets.
Irwin Kellner, of Port Washington. (Reader)
Carl and Ruth Shapiro, donors to Brandeis University, and Beth Israel Deaconess Medical Center. The Boston Globe reported on Saturday that the Shapiro family foundation lost almost half its money, or about $145 million.
Fairfield County, Connecticut. Bloomberg: First Selectman Ken Flatto and other elected officials in Fairfield, Connecticut, thought the 58,000- person towns pension fund was holding up well amid the worst financial crisis since the Great Depression. The 18 percent decline in total assets since the end of June looked smart compared with the 31 percent plunge in the Standard & Poors 500 Index, and total assets of $286 million left a cushion over the $270 million of estimated liabilities. Flattos mood darkened yesterday when he heard Bernard Madoff, a Wall Street executive who oversaw $42 million of the assets, had been arrested and charged with fraud. We classified this on our portfolio as one of the more conservative investments, Flatto said in an interview. You rely on your experts and your managers to be honest.
Royal Bank of Scotland: $330 million
Nomura: $302 million
Aozora Bank: $137 million
Various Boston families: The Boston Globe.
Jeff Katzenberg. Dreamworks CEO has "millions" in Madoff losses. (WSJ)
Gerald Breslauer. Jeff Katzenberg and Steven Spielberg's financial advisor. WSJ: According to people familiar with the matter, Mr. Breslauer himself has likely sustained heavy losses in the Madoff affair. He customarily invests alongside his clients, say these people, and has sometimes been a larger investor than the people he represented. People familiar with the matter said Mr. Breslauer was known to be a Madoff investor.
Yeshiva University lost $100 million to $110 million. (NYT)
Jewish Federation of Greater Washington said it had $10 million invested with Mr. Madoff, about 8 percent of its endowment as of Nov. 30. The organization said it would work to recover the money. (NYT)
North Shore-Long Island Jewish Health System: $5.7 million exposure to Madoff Securities in the form of a gift from a donor who insisted that it be invested that way. The donor who contributed the funds has graciously agreed to reimburse the health system for any financial loss, the organization said in a statement. (NYT)
Ramaz School lost some $6 million invested with Mr. Madoff, according to a letter sent to board members and two parents whose children attend the school. (NYT)
SAR Academy, a Jewish school in the Bronx, had roughly a third of its $3.7 million in assets invested with Mr. Madoff, according to an e-mail message it sent to donors and parents. (NYT)
Chais Family Foundation in Encino, Calif., announced over the weekend that its losses had forced it to stop operating, according to the Jewish Telegraphic Agency. The foundation had $178 million in assets in May 2007, according to its tax form. (NYT)
JEHT Foundation. May have lost hundreds of millions. Will cease operations. (NYT)
Arpad Busson. Uma Thurman's billionaire fiance runs hedge fund, EIM, which was reportedly exposed to roughly $270 million of products sold by Madoff (Mail on Sunday)
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Credit Suisses clients could have suffered a loss of as much as SFr1bn (667m) in the alleged fraud perpetrated by New York financier Bernard Madoff, internal forecasts showed, according to a report in The Times, London.
"UBS supported clients by establishing fund-of-fund structures at their request," the firms spokesman Christopher Meier said, but refused to comment on media reports that the vehicles contain $1.4bn (999m) in client assets.
I don't mind the the institutional losses.. I think that the charities cases should be capital cases though.
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Update on the Madoff fraud case Questions & Answers Private and Confidential for the sole use of UBP Investors
Dec. 17, 2008
1. Who is Bernard Madoff? - Bernard Madoff, a figure in the securities industry in the US, is the founder and majority shareholder of Bernard L. Madoff Investment Securities, LLC, a broker/dealer with USD 700 mn of equity capital registered with the SEC and FINRA, the successor agency to the National Association of Securities Dealers (NASD) where he served as vice chairman. - He served as NASDAQ's chairman of the board of directors, and on its board of governors. He remained a member of the NASDAQ OMX Group Inc.s nominating committee. - Mr. Madoff has been active in the NASD, a self-regulatory organisation for the US securities industry. - The firm was founded in 1960. - His firm was one of the five most active firms in the development of the NASDAQ.
2. What is the structure of Bernard L. Madoff Investment Securities, LLC? - Bernard L. Madoff Investment Securities LLC was a leading international market maker. - The firm has been providing quality executions for broker-dealers, banks, and financial institutions since its inception in 1960. - According to the Form ADV filed with the SEC on 1 July 2008, Bernard L. Madoff Investment Securities LLC managed USD 17 billion across 23 accounts (in investment vehicles). - The media calculation that Madoff lost USD 50 billion is based on information within the US Attorney complaint. MADOFF also stated that he estimated the losses from this fraud to be at least approximately USD 50 billion. - The discovery process of ascertaining the exact amount of the loss and the nature of the fraud is still ongoing.
3. In which investment vehicles managed by Madoff did UBP clients invest? - UBP clients investments with Madoff were made mostly through four different investment vehicles with the following legal set ups, jurisdiction, auditors and regulatory oversights:
Kingate Euro Fund, Ltd - Incorporation: British Virgin Islands 19 April, 2000 - Regulatory Authority: BVI Financial Services Commission - Administrator: BISYS hedge Fund Services Ltd, Bermuda - Auditor: PwC, Bermuda
Madoff made all investment decisions and executed the trades while the investment vehicles were set up as separate entities and run by different individuals/service providers as listed above (among the 23 known investment vehicles), which themselves were clients of Madoffs broker/dealer operation. Essentially, these vehicles were used to gain exposure to Madoffs strategy. UBP initially invested through Ascot and Fairfield Sentry and subsequently through M-Invest.
4. What are the positions currently invested in Madoff investment vehicles across UBP Funds of Hedge Funds as at 1 November 2008?
Of the 22 funds of hedge funds advised by UBP, the positions allocated* to Madoff are the following:
Dinvest - Total Return 3.05% Dinvest Concentrated Opportunities 2.31% Dinvest - Select I 6.51% Dinvest - Select II 6.32% Dinvest - Select III 6.35% Dinvest Concentrated Opportunities III Exquity 4.46% UBP Multi-Strategy Alpha Fund (direct & indirect) 6.92% TrendSquare I 2.90% Selectinvest ARV 5.79% Selectinvest ARV II 4.50% Selectinvest ABF Ltd 3.91% Selectinvest Multistrategy 0.00% Selectinvest Multistrategy Advantage 0.00% Selectinvest Event Driven 0.00% Selectinvest Global Equity L/S 0.00% Selectinvest Global Resources 0.00% Selectinvest Focus Recovery 0.00% Dinvest Concentrated Opportunities Distressed 0.00% Dinvest - L/S US 0.00% Dinvest Japan & Asia 0.00% Dinvest - L/S Europe 0.00% Dinvest Concentrated Opportunities II 0.00% * The percentages above include the amounts put up for redemption at the end of November, which are now unfortunately considered at risk.
5. What is the total amount invested through Madoff investment vehicles? - The aggregated amount in the discretionary portfolios and fund of hedge funds products at UBP is around USD 700 mn.
6. Will the position be fully written down? - We will take a write-down for our 30 November NAV across all portfolios but have not yet determined whether a full write-down is necessary as we will need to obtain feedback from the various administrators and auditors. However, given the situation, there is a high likelihood that a full write down might be required.
7. What was the underlying investment strategy followed by Madoff? - The Madoff strategy was described as trading in the stock and options markets based on proprietary trading signals, coupled with Bernard Madoffs oversight. - In more detail, the strategy was: (i) the purchase of a basket of long equities that were expected to highly correlate to the S&P 100 Index (known as the OEX); (ii) the simultaneous sale of an out-of-the-money call option on the S&P 100 with a notional value similar to that of the long equity portfolio; and (iii) the simultaneous purchase of an out of the money put option on the S&P 100 also with a notional value similar to the long equity portfolio. Each basket holds about 50 large capitalisation equities from the S&P 100, and the options traded are exchange-traded or over-the-counter-exchange-traded lookalikes. The split-strike conversion strategy was allegedly implemented 6-8 times per year and the investment cycle can range from 2-8 weeks. Between investment cycles, the funds assets are invested in US Treasuries.
- The investment presented the opportunity to participate in a unique return stream that combined a splitstrike option strategy with the market information of one of the worlds largest market-makers in equity securities.
- In essence, the perceived edge was Madoffs ability to gather and process market-order-flow information and use this information to time the implementation of the split strike option strategy.
8. What was the key rationale for investing with Madoff? - The reasons that led us to approve various investment vehicles for investment within the scope of our hedge fund mandates essentially relates to the perceived attractive investment opportunity offered and the highly recognized pedigree of the manager, Madoff, through his extensive reach and involvement in the financial services industry.
- From the outset, our analysts spent significant time understanding and following the strategy and the manager. Madoffs split-strike conversion strategy offered stable returns with a long and audited trackrecord. The downside to the strategy seemed very limited in the sense that around the core investment in S&P 100 stocks he sold out-of-the-money calls and used proceeds to buy out-of-the-money puts, thus creating a range which effectively limits both losses and profits. This strategy was therefore also very liquid.
- Furthermore, due to his significant volume size as a broker/dealer, we were assured that he had some visibility as to the momentum of the markets, allowing him to implement a bearish or bullish position within the parameters of the above-mentioned loss and profit limits. The outcome, proven by the long track record, audits and regulatory oversight, showed a compelling investment opportunity with stable returns, limited volatility and good liquidity, which we deemed appropriate to reduce overall volatility within a balanced portfolio.
- The various companies within the Madoff structure are regulated by the SEC, CFTC, FINRA as well as the FSA in the UK. These regulators performed regular audits with no material findings, contributing to our comfort with the manager, which was essential to approving the fund from a structural risk viewpoint.
9. Consistency of returns: was it too good to be true?
- Madoff was not betting on markets going up or down.
- With his split-strike approach, his system told him when to activate it and the rest of the time he was only invested in US treasuries.
- Our expectation for the returns is largely what they have been because systematic strategy predicated on his position as a market maker, seeing market volume, having data going back over the years, having technology to produce signals to indicate when to get in and out.
- This strategy was not supposed to generate outsized returns but stable returns and a good proxy for the expected returns was 2-3 times the risk-free rate (high single digit).
10. What was the size of Madoffs business? - Bernard L. Madoff Investment Securities, LLC had USD 700 mn of equity capital. - Madoff had 200 employees, with 100 people in trading, 50 in technology, and 50 in the back office. - 170 people in New York and 30 in London. - Madoff securities represented +/-10% of NYSE trading volume. - The auditors of the firm were Friehling & Horowitz (US) and KPMG (UK). - 12 people are dedicated to the split strike conversion strategy, lead by Bernard Madoff. - Bernard Madoff sat on many reputable boards (NASDAQ, Depository Trust and Clearing Corp., Securities Industry Association).
11. What about the non-segregation of investment management, executing broker and custodian functions? - We identified this as a risk of the investment from a structural risk perspective but found comfort in two mitigating elements: his status as a large and reputable broker/dealer which was subject to routine SEC and FINRA regulatory audits and Madoffs longstanding reputation in building Wall Streets financial markets infrastructure (through his work with NASDAQ, the NSCC, and the DTCC). - Madoff is a regulated broker/dealer executing trades and an investment advisor to the vehicles, thus it seemed to make sense that Madoff would have had the custody and be its own prime broker. - The investment vehicles managed by Madoff were separate legal entities with their own administrator and auditor, all large and reputable firms as highlighted under the point 3 of this document. The auditors of the investment vehicles provided us with clean opinions and attestations of their annual verifications.
12. Was Madoff only getting paid on commissions? - Madoff was predominantly a broker/dealer and as such was paid on commissions from the trades he was initiating and conducting.
13. And UBPs retrocession from Bernard Madoff Investment Securities LLC? - UBP did not get any retrocession from Bernard Madoff Investment Securities LLC nor from the various nvestment vehicles managed by Madoff (as listed above).
14. What about Madoffs auditors? - Madoffs auditors Friehling & Horowitz were accredited by the SEC and all the investment vehicles were audited by the largest auditing firms. Despite the supposedly size weakness of Madoffs auditors, the SEC has each year renewed its approval; SEC reports on the firm were regularly made available.
15. How was the NAV calculated? - The Bank relied on the NAV calculation made by the third party funds to the extent this calculation was checked by the funds' administrators, custodians and auditors. - Although Ascot had their NAVs calculated in house, it was possible to compare it against Fairfield Sentrys, M-Invests and Kingates which benefited from an independent calculation of NAVs. - Regarding M-Invest, Citco as the administrator, received daily trade tickets and provided us with monthly statements and NAVs.
16. Did it seem unlikely that the S&P 100 options market that Madoff purported to trade could handle the size of the combined investment vehicles? - Madoff traded all large cap stocks on the exchange (top 100) with a market cap close to USD 5 tn and an average daily volume of approximately USD 20 bn. - He traded OTC options on the S&P 100 Index. - Madoff was more focused on OTC derivatives so that you might not see a corresponding cover in the listed markets to his options. His counterparties were large financial institutions dealing under ISDA agreements.
17. What about due diligence and meetings over the years? - Various due diligence visits were repeatedly conducted at different levels Madoff, Fairfield and Ascot. - Structural Risk Analysis considered the ongoing regulatory supervision of SEC and FINRA as mitigating factors. Madoff was SEC registered and reviewed twice a year. In addition to the broker dealer activity, Madoffs investment management activity has been registered with the SEC since 2006 when the SEC wanted to force all money managers to register; when the SEC lifted this constraint later on, Madoff did not de-register as many other managers did subsequently. Again we took additional comfort in this approach. - We have met with Bernard Madoff and various principals several times at Madoffs office, twice within the last year and have had numerous conversations in between. - Fairfield Sentry reviews were conducted in 2002, 2004, 2006, 2007 and 2008. - Several Senior Investment Professionals met with Madoff in 2004 and 2007; Structural Risk Analysis had a full review in 2006 and recently in 2008 with Madoff himself. - We had insight into the portfolio through the M-Invest investment vehicle. - transparency into trades; - review of the statements for reasonableness; - Citco and PwC in their administrator and auditor capacities for the investment vehicles visited Madoffs premises periodically.
18. Some of our peers were not invested why did we pursue this investment idea? - As a FoF, you also want to differentiate yourself with different holdings and this investment had been appealing. - Through M-Invest, Citco as the administrator received individual trade tickets on which we were copied. This transparency gave us an additional element of comfort.
19. Is there any chance you will recoup assets from this fraud? - Given the limited amount of information available to us at the moment, it is not possible for us to predict the outcome of this situation. - Our external legal counsels are currently evaluating this situation to determine our appropriate legal course of action.
20. What implications will this have for the hedge fund industry? - This particular case was a situation where investors and the investment vehicles were victims of a massive fraud perpetrated by Madoff. Madoff was the manager of various hedge funds (Ascot, Fairfield, etc). - This would be no different than investors losing an investment in, for example, Enron. - The hedge fund industry has faced in 2008 a very challenging year, but no different from just about every other participant in the financial markets. - This situation could put further media pressure on hedge funds. That being said, hedge funds should be seen as the victim, not perpetrator or cause of the fraud.
21. Are there any funds you are invested with that you are now concerned about after what has happened to Madoff? - These events reinforce the need for manager diversification. - Irrespective of Madoff, since the middle of 2007, we have increased our level of scepticism with the hedge fund managers on our approved list and are reassessing our convictions on a continuous basis, taking action whenever we deem it necessary. - One has to emphasize the nature of this massive fraud, probably the largest and longest in history and which spanned over the longest period of time.
22. What is UBPs financial strength? - Investors should rest assured that this affair has not affected the Bank. Our financial robustness and the stability of our balance sheet are of the highest order: not only do we have a Tier 1 ratio of 16% in terms of shareholder equity, which is twice the minimum legal requirement of 8%, but we have also had a constant balance-sheet structure over several years and no investments at risk. The Bank does not have any own-account investments in the Madoff group. Credit exposure to Madoffs investment vehicles in diversified client portfolios is immaterial.
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It emerged last night that the Austrian Government may have to take control of Vienna-based Bank Medici.
This would make Bank Medici the first financial institution to collapse after its clients had lost money in funds invested with Mr Madoff. Out of a total of $3.6 billion (£2.5 billion) under management by the small private bank at the end of September, $2.1 billion was invested in funds ran by Mr Madoff.
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US banks drawn into Bernard Madoff scandal amid fear of more victims
Suzy Jagger and Christine Seib
The role of America's federally regulated banks in the $50 billion Bernard Madoff investment scandal has come into question after it emerged that a number of victims of his alleged Ponzi scheme thought they had invested their money with an ordinary bank. Two law firms in Florida, which are gathering claims from Madoff victims, are both representing a couple who say that they believed that they had invested about $1 million (£688,000) with the Westport National Bank, a regulated savings bank in Connecticut, rather than with Mr Madoff. The Florida case raises concern that a new wave of unwitting victims may emerge from Mr Madoff's investment scheme. The FBI and the Securities and Exchange Commission (SEC) are already investigating the role of certain hedge funds that provided Mr Madoff with new clients. The biggest of these is Fairfield Greenwich, a Connecticut hedge fund believed to have lost about half its assets, totalling $7.3 billion, to Mr Madoff's scheme. The Florida couple, whom lawyers declined to name, received a letter from the bank dated December 12, the day that Mr Madoff was charged with fraud, explaining:You currently have a custodian agreement with Westport National Bank [...] you gave full discretionary authority to Bernard L Madoff Investment Securities.
Times OnlineJanuary 4, 2009 Letter: Westport National Bank January 2, 2009 To Our Customers and Employees: You may have seen recent press articles regarding the Bank and Bernard L. Madoff Investment Securities. The press is incomplete and inaccurate. First, be assured that the Bank has not invested any of its own funds or the funds of its depositors with Madoff, and the Bank has not advised any customer or anybody else to invest with Madoff. Here are the facts: In 1999, at the request of a local company, the Bank replaced another financial institution as the custodian for a number of individuals and entities that were investing with Bernard L. Madoff Investment Securities. Nearly all of these individuals and entities had been investing with Madoff long before the Bank was founded in 1998. Each of these Madoff investors entered into a Custodian Agreement with the Bank, and became a custodial client of the Bank. This Agreement reflected the fact that each custodial client directed the Bank to give Madoff full discretionary authority to invest the custodial clients funds. Each custodial client specifically acknowledged in writing that the client had not relied on the Bank in choosing to invest with Madoff. In providing custodial services, the Bank was directed by these custodial clients from time to time to transfer funds to Madoff and redeem funds from Madoff. The Bank also performed record keeping, tax reporting and other ministerial services for its custodial clients. The Bank never introduced any custodial client or anybody else to Madoff. The Bank does not provide investment advice to any of its clients, except with respect to Bank products such as checking accounts, savings accounts and certificates of deposit. Again, the Bank did not invest any of its own funds with Madoff. The Bank continues to work with its custodial clients in accordance with the terms of the Custodian Agreements. If you have any questions about this letter, please contact Rich Cummings, President of Westport National Bank, at 203.319.6260.
Santanders private banking unit may have to compensate rich clients who suffered huge losses on exposure to bonds of Lehman Brothers, the collapsed Wall Street giant, according to a report in The Times, London
The Spanish bank may also have to compensate customers who lost money in the Bernard Madoff scandal after putting money into its Optimal strategic US equity fund, which lost nearly 2.3bn ($3.1bn) of clients cash in the scam.
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Morgan Stanley and Citigroup plan to pull out clients money from a nearly $8 billion fund run by Swiss banking giant Union Bancaire Privée, after learning that it was exposed to Bernard L. Madoffs operations, people briefed on the matter said.
This message has been edited by USCaribbean from IP address 66.177.37.107 on Jan 19, 2009 10:24 AM
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Fund of funds managers who put money with Bernard Madoff are expecting claims from their investors even if they reduced or redeemed their positions before the authorities knew he was running an allegedly fraudulent scheme, according to the Financial Times.
These funds are now being targeted by Irving Picard, the trustee appointed by the Securities Investor Protection Corp to get money back for Mr Madoffs current investors. A source close to Mr Picards team of lawyers told the FT they are looking back to the legal precedents from the 2005 collapse of the $450 million Bayou hedge fund.
In that case, the authorities were able to recover investors profits going back six years because none were real. They will reach back into every entity that ever invested with Mr Madoff, said the head of a large fund of hedge funds which had never invested with Mr Madoff.
Prosecutors have not said at what point they believe Mr Madoffs operation became a pyramid scheme.
The Swiss bank Union Bancaire Privée, which said it had $700 million invested with Mr Madoff after his arrest, had much more money invested earlier in the year, according to people familiar with the matter, the FT reports. One person is reported to have said that UBP received $200 million shortly before the collapse of Mr Madoffs fund. A spokesperson declined to comment to the newspaper.
Funds that channelled money to Mr Madoff may also have difficulties finding new investor money as the alleged fraud means their performance was overstated and volatility understated, the FT believes.
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Bernard Madoff's broking business is likely to fetch less than $10 million in a sale, dealing a blow to the Ponzi scammer's victims.
Cash raised from the sale of the broker-dealer division of Bernard L Madoff Investment Securities (BMIS) will be used to compensate people who lost money in Mr Madoff's $50 billion scam.
Larry Tabb, founder of the Tabb Group, a financial research and advisory firm, told Bloomberg that, with earnings of just $1.1 million last year, bidders were unlikely to offer more than eight-times profit to buy the brokerage. Mr Tabb based his figures on profit information released by Lazard, the investment bank handling the auction of BMIS.
"If folks are looking at the sale of the broker-dealer to make up the $50 billion that was lost from the Ponzi scheme, I am not sure they will be happy with the outcome," Mr Tabb said. "I can't see how they would get more than $10 million."
BMIS was taken over by the Securities Investor Protection Corporation after Mr Madoff was arrested on fraud charges on December 11, a day after confessing to his sons that his fund management business had been using new investments to pay out returns to existing customers.
The broker-dealer is thought to have been a legitimate business, while Mr Madoff conducted his fraud at the more secretive investment management division of his company.
The brokerage employed about $90 million of capital during an average day, according to the Lazard documents. Its proprietary trading desk lost $11 million last year, pushing the company's profit down from $8.76 million in 2007 and $41.4 million in 2006.
But the company paid employees, excluding members of the Madoff family, more than $7 million in bonuses over the past two years.
It emerged that BMIS appeared not to have ever traded shares on behalf of Mr Madoff's fraudulent fund management business.
The Financial Industry Regulatory Authority (Finra), which regulated the brokerage, said that it had examined 40 years of financial years and found no sign that BMIS conducted share trades for Mr Madoff.
This contradicts statements by Mr Madoff's clients, who received documents showing that thousands of trades were done by the broker-dealer on their behalf as investors with Mr Madoff.
Meanwhile, the accountant who was auditing BMIS at the time the scandal was uncovered, has put his house up for sale after apparently losing money in Mr Madoff's scam.
BMIS's books were audited by Friehling & Horowitz, a small accounting office in New Yorks northern suburbs, originally by Jerome Horowitz, an account now living at Palm Beach in Florida.
Mr Horowitz, who is gravely ill with cancer, handed over his accountancy business to his son-in-law in the early 1990s.
The son-in-law, David Friehling, is apparently seeking $995,000 for his five-bedroom house in Rockland County, New York. The 29-year-old house has a swimming pool and 4,437 square feet of space.
Friends and family of the accountants insisted that neither had any inkling of Mr Madoff's activities and had instead invested their own and others' money in the fund. They have not been charged with any wrongdoing.
