Also peculiar in the extreme is the asserted fact that Madoff’s family, as was everyone but those who worked on the 17th floor, apparently was barred from the floor where the chicanery went on. If this was true, didn’t his family think it was peculiar that they, who were close to their father, brother, uncle, were barred? And if they weren’t barred, and ever went down there, didn’t they ever see anything or ask anybody about what was going on?
Curiously, Madoff would sometimes claim that his trades were handled in Europe by counterparties (whatever that means), but would tell other people he was making big money on commissions obtained because his firm was handling the trades. If the counterparties were other than his UK office, didn’t his family members ever notice the discrepancy, and didn’t they ever wonder why they were being denied the vast financial benefits that would have occurred if his New York office was handling the trades? Yet they never inquired about any of this?
Given the close relationships involved, it is extremely difficult to believe that none of his family members ever had the slightest inkling that something untoward was happening. And his family, of course, also had close professional and personal relationships with the SEC. His niece, an official of the business, even married an SEC official who had worked on the agency’s minimalistic investigations of Madoff. The family’s relationships with the SEC are, I gather, to be one subject of an investigation being conducted by the SEC’s inspector general.
There were, of course, people on Wall Street who suspected, as did Markopolos, that the Madoff deal was not on the up and up. Suspicions were so strong that their companies refused to do any business with Madoff. I believe Goldman Sachs and J.P. Morgan were two of them. In his 2005 memo to the SEC, Markopolos gave the SEC the names of four highly placed Wall Street executives it should speak with -- one being at Goldman and a second at Citigroup -- because these executives were convinced, based on their expertise in and experience with derivatives, that Madoff’s returns could not be for real.
There were large institutions, and major-league-rich investors, including Arab investors, which hired due diligence firms to investigate whether the institutions or investors should invest with Madoff, and the due diligence firms, after looking into the situation, cautioned against investing with him because of red flags like some of those mentioned by Markopolos. There were fund managers, whom Markopolos talked with, who had money in Madoff but did not themselves believe that Madoff could make money month in and month out, and thought that he was subsidizing losses in bad months. Translation: they didn’t believe him, but left their funds’ money with him anyway because he was doing well by them overall. So all these experts and big league money managers thought Madoff was fraudulent but never spoke with the SEC, and thousands of people who invested with Madoff knew nothing of their views.*
TO BE CONTINUED.
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