Thursday, December 18, 2008

Why is Bernie Madoff Not in Jail?


Why is Bernine Madoff here.....


... and not here?


I've been scratching my head for the past couple of days (which hurts, and is creating a bald spot) trying to figure out why Bernie Madoff, who by his own admission masterminded the biggest Ponzi scheme in history, is not situated where he belongs -- in the palatial surroundings of Manhattan Correctional Center, where scum like him are supposed to reside.

Instead, he was released on a mere $10 million bail, even though he didn't meet the conditions for his bail. He was sent back home to his apartment at 133 East 64th Street.

This is absolutely astounding. Madoff faces life in prison for ripping off, literally, widows and orphans -- philanthropies serving the needy, along with a lot of rich people and funds-of-funds.

He is very likely to get a prison term that, for a seventy-year-old man, is going to be the equivalent of a life sentence.

He has tons of money.

If that doesn't spell "flight risk," I don't know what does.

Let's compare the two possible residences for Bernie Made-Off:

Metropolitan Correctional Center: I've been there (ahem... visiting). It is not a pleasant place. You have to go through about fifty layers of security, just to get in to the damn place. And it is a damned place, by design. The atmosphere is oppressive, regimented.

133 West 64th Street: Much nicer. Never been there, so that's all I can say.

And that's not all. For some reason that completely escapes me, Madoff will be allowed to travel throughout Connecticut, where he can enjoy such wonderful attractions as Mystic Seaport, the Barnum Museum, and of course the world-famous Oddfellows Playhouse in my old stomping grounds of Middletown, Conn.

He can eat grinders on Bank Street in New London and go camping at Pachaug State Forest.

In other words, he will do everything that a free man can do, rather than eating dry baloney sandwiches and staring at the ceiling, which is the main occupation of MCC inmates.

Doesn't seem quite right, does it?

© 2008 Gary Weiss. All rights reserved.

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Wednesday, December 17, 2008

Meet Mary Schapiro, Obama's Horrendous Pick as SEC Chairman


The future SEC chairperson gracing a stock promotion rag

Barack Obama calls his transition website change.gov, and his campaign slogal used "change" about a million times, so I am utterly flummoxed -- and disgusted -- by his selection of Mary Schapiro as SEC chairman, to replace the awful Chris Cox.

What that signals to me is that Obama wants no change at all in the desultory regulatory apparatus that has utterly failed the American people. Either that, or he is a victim of a con job that would do Bernie Madoff proud by his establishmentarian finance advisors.

Schapiro is a career bureaucrat who served on the SEC during the Artie Levitt era, and is now head of FINRA, the big self-non-regulatory apparatus.

To give you an idea of how out to lunch this lady is, she let her puss be plastered on the cover of Equities Magazine last year. As if that's not bad enough, as I pointed out in a blog item at the time, she praised this stock-promotion rag.

The chances of Schapiro shaking things up in the securities industry -- instituting real, meaningful, desperately desired change -- are about the same as the chances you can make a black bear curtsy and serve tea. This is a terribly disappointing selection.

UPDATE: And then there's the Bayou mess, which happened on Schapiro's watch. See Greg Newton's blog, which was all over the story at the time.

© 2008 Gary Weiss. All rights reserved.

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Tuesday, December 16, 2008

News Flash: Chris Cox Makes it Unanimous

Ever the consummate politician, SEC chairman Chris Cox admitted tonight that yes, it does get dark when the sun goes down; yes, water is wet; and yes, the SEC screwed the pooch on Bernie Madoff.

I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them. Moreover, a consequence of the failure to seek a formal order of investigation from the Commission is that subpoena power was not used to obtain information, but rather the staff relied upon information voluntarily produced by Mr. Madoff and his firm.
Poor dear, being "gravely concerned" and all that, particularly since this is an SEC chairman who single-handedly emasculated his own enforcement staff. Oh yes, there would have been a formal investigation launched, and action taken. Yessir! What a joke. Madoff is a psychopath, but at least he is keeping his mouth shut. Chris Cox should follow his example.

There will probably be an effort now to shift the blame to underlings, or back to Artie Levitt perhaps, but this fish rots from the head down. Enough already.

Oh please won't you go now, Mr. Chairman, and not let the door hit you on the way out?

© 2008 Gary Weiss. All rights reserved.

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Bernard Madoff Was an 'Admirer' of Arthur Levitt's SEC (and no wonder....)

In my last item I discussed how former SEC chairman Artie Levitt was vigorously protesting what I think is pretty obvious to everybody, which is that the SEC -- including Artie's SEC -- screwed the pooch when it come to discovering Bernie Made-Off's Ponzi scheme.

But now it appears that what we had was something of a mutual admiration society. Madoff, it seems, was an "admirer" of Levitt's -- which makes perfect sense. Hey, if you were getting away with murder, wouldn't you admire the dufus who let you do it?

A reader reminded me about this puff piece that appeared in Business Week in 2000, just as Levitt was leaving the SEC, as Artie was taking what Michael Lewis was to describe as a "victory lap" of admiring media attention such as the BW article. At issue was a completely inconsequential proposal for a "central limit order book," which is as trivial as it sounds and which Levitt was focusing upon as he ignored far more significant issues.

The BW article says:

For markets and brokers, "this is a life-and-death debate," Levitt says. He maintains that he hasn't made up his mind. But his public remarks emphasize the risks of fragmented trading over the advantages of market competition. That worries Schwab and other advocates of market-driven linkages. Even Levitt's admirers say he should slow down: "I'd hate for him to take [the competition] back a step by overreacting," says Bernard L. Madoff of stock wholesaler Bernard L. Madoff Investment Securities.
"Life or death debate." Yeah, right. Because of the SEC's nonfeasance under Levitt, the oafish Harvey Pitt and his incompetent successor Chris Cox, untold numbers of investors and philanthropies have been hacked to financial death by investing with Artie Levitt's "admirer".

UPDATE: Politico reports that Bernie was buying influence in Washington via the lobbying firm of Dow Lohnes.

As shown by public records, D-L also represents the corporate crime poster child Overstock.com in its jihad to waste regulator resources on the naked shorting hobgoblin. According to OpenSecrets.org, the cash-starved Internet retailer wasted $180,000 pushing Overstock CEO Patrick Byrne's paranoid fantasies.

As a result, regulators were so busy chasing down Byrne's imaginary demons that they neglected to properly investigate Artie Levitt's admirer and his real-life depredations.

© 2008 Gary Weiss. All rights reserved.

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Inside the Mind of Bernie Madoff





Yeshiva web page, before and after

It's easy to understand the revulsion and even hate that has surrounded disgraced alleged Ponzi-schemer Bernie Madoff (aka Bernie Made-Off) or why one of his victims, Yeshiva University's business school, decided to white-out his visage from the web page of its annual dinner.

I'm sure that the people victimized by this scum would be delighted to white-out the actual Bernie Madoff, and not just his punum in some photograph.

But it's less easy to figure out exactly what motivated this gent (assuming, again, that he actually did all the stuff attributed to him.... we do have a presumption of innocence and all that). In other words, what was Bernie Made-Off made of? Was he a schmuck or a shtarker? (Forgive the lapsing into pidgin Yiddish.)

This was not some sleazebucket penny stock pimp, but rather a respected trader who was a pillar of his community and philanthropist. I have to admit: I've been writing about scam artists for the longest time and I just can't figure this one out. (I'm having similar difficulty figuring out how the CEO of National Lampoon got mixed up with stock scamsters.)

Several possibilities occur to me:

1. Madoff commenced the scam in the hope that it could be terminated at some point and his investors made whole without their knowing anything had happened. Sort of like the bank teller who steals and then tries to put it back.

2. Madoff was a sociopath, who knew precisely what he was doing at all times and felt that he could get away with it indefinitely, and had that mindset from day one.

3. Madoff commenced in the hope that he could make his investors whole, but after a while realized that it was easy money and that he could get away with it indefinitely.

This is all pure speculation, of course. His statements just before his arrest, as described by the feds, give the impression that Nos. 1 or 3 are probably the closest to what happened. But then you have the nature of the victims, elderly people and charities that Madoff allowed to "invest" in his scam knowing that they were flushing their money down the toilet. He may have begun the scam as a boob, but he ended up as a criminal.

Again, that does not answer the "why" question? Why did he do it? Did he have some kind of gambling or substance addiction? Were there third parties involved? Was he being extorted or muscled? Was he the only participant or beneficiary of this scam? I find it very hard to believe the story being circulated in the news media that he was the only person who knew about the scam. I also wonder if his public image was as manufactured as his financial statements.

I'm sure that criminologists will be studying this one for a long time.

UPDATE: Ex-SEC chairman Artie Levitt fires back at critics in the New York Post. The SEC ignored whistleblower allegations against Madoff way back in 1999, when he was still being feted by the media as the "investor's friend." Lots more on Levitt's atrocious record as SEC chairman (albeit exceeded in sheer awfulness by current SEC boss Chris Cox) can be found in Wall Street Versus America.

© 2008 Gary Weiss. All rights reserved.

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Friday, December 12, 2008

How Did Bernie Madoff Do It -- And For How Long?

Make no mistake about it: the arrest of Bernie Madoff kicks off one of the biggest scandals in U.S. history. Not Wall Street history. U.S. history.

The stunning criminal complaint -- not an indictment, as some are reporting -- filed in the case gives no perspective on how long Madoff has been operating a $50 billion (his estimate) Ponzi scheme. But the possibility is mind-boggling that he has been doing it for years, under the very noses of regulators (to the extent that what he did was regulated at all).

The SEC complaint says that he was doing it for an "indeterminate period." Wrong. He was engaged in that scheme for a determinate period, but the geniuses at the SEC simply haven't got the foggiest notion how long. Why should they? They're just the friggin' market regulators, after all.

Here are some excerpts from an article that ran in Barron's in 2001. The title is, ahem, "Don't Ask, Don't Tell." (The subhead: Bernie Madoff is so secretive, he even asks investors to keep mum.")

. . .what few on the Street know is that Bernie Madoff also manages $6 billion-to-$7 billion for wealthy individuals. That's enough to rank Madoff's operation among the world's three largest hedge funds, according to a May 2001 report in MAR Hedge, a trade publication.

What's more, these private accounts, have produced compound average annual returns of 15% for more than a decade. Remarkably, some of the larger, billion-dollar Madoff-run funds have never had a down year.

When Barron's asked Madoff Friday how he accomplishes this, he said, "It's a proprietary strategy. I can't go into it in great detail."

Nor were the firms that market Madoff's funds forthcoming when contacted earlier. "It's a private fund. And so our inclination has been not to discuss its returns," says Jeffrey Tucker, partner and co-founder of Fairfield Greenwich, a New York City-based hedge-fund marketer. "Why Barron's would have any interest in this fund I don't know."
Was Bernie Madoff running a Ponzi scheme when these immortal words were written? Was he running a Ponzi scheme when he was vice-chairman of Nasdaq? And what about SEC filings like this one, in which he listed stocks that were supposedly in his portfolio? Did he actually own those stocks?

I have no idea. But I can say that if the hedge fund industry had any hope of fending off regulation--well, that has just about vanished.

It also may be a nail in the coffin of the SEC, whose incompetence in just about every area under its purview is growing more apparent with every passing day. The Wall Street Journal reports today:
An executive in the securities industry, Harry Markopolos, contacted the SEC's Boston office in May 1999, urging regulators to investigate Mr. Madoff. Mr. Markopolos continued to pursue his accusations over the past nine years, he said in an interview on Thursday, and according to documents he sent to the SEC that were reviewed by The Wall Street Journal.

"Bernie Madoff's returns aren't real and if they are real, then they would almost certainly have been generated by front-running customer order flow from the broker-dealer arm of Madoff Investment Securities LLC," Mr. Markopolos wrote to the SEC in November 2005.
I can easily imagine why the Markopolous complaints were disregarded. Madoff was a pillar of the Street establishment. Nuff said.

What else is the SEC ignoring -- in addition to the obvious stuff I've been writing about in this blog for the past two years? The mind boggles (at least for anyone who hasn't read Wall Street Versus America, which described the SEC's failings in detail).

I hope that Barack Obama is playing close attention. His transition advisors in this area are top-heavy with former SEC members and other establishmentarians, so it is not clear whether it will get through to him that an overhaul of the regulatory system is urgently needed.

© 2008 Gary Weiss. All rights reserved.

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Thursday, December 11, 2008

Where Are the Condolences for Overstock.com Shareholders?


Overstock shares since filing of the junk lawsuit

The clown prince of Corporate America, Overstock.com's wack-a-doo CEO Patrick Byrne, issued a gloating press release today on the liquidation of Copper River, a hedge fund (formerly known as Rocker Partners) against which he has filed a junk lawsuit.

That's to be expected from this odious and small man, known mainly for his inept management of a company that is a mockery of corporate governance. His antics are so nutty that the company was forced to disclose in an SEC filing that he is destroying the company's already-slim reputation with his paranoid ravings.

You have to wonder who will offer condolences for Overstock shareholders. When he filed his junk lawsuit against Rocker, the company's shares were trading in the forties. They have never returned to those levels, and now they are struggling to stay in the double digits.

© 2008 Gary Weiss. All rights reserved.

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Tuesday, December 09, 2008

Wrapping Baloney in the Flag

Jeff Matthews has an enjoyable item today on one of the more loathsome conspiracy theories being circulated on the Internet: that "naked shortsellers" are attacking a company called Force Protection, and that by some twisted logic "American soldiers were being punished by naked short selling."

Though not mentioned by Matthews for some reason, the author of the Big Lie described in his item is none other than the most the entertaining CEO in America, the always entertaining overlord of Overstock.com, Patrick Byrne. Showing his customary good taste, Byrne illustrated his item with a photograph of flag-draped coffins (above).

Byrne, when not driving his creepy little company into the ground, spends most of his time writing nutty items for an Overstock-hosted blog called "Deep Capture." His latest missive claims that Force Protection, which makes vehicles for the Army in Iraq, was a victim of naked shorting.

Matthews notes that the company actually is a victim of itself. Apart from competitive factors:
. . . Force Protection has had a few issues particular to itself.

Not being in compliance with Nasdaq Marketplace Rule 4310 (c)(14) for a period of time, as a result of not filing its June quarter 10Q, for one.

Announcing in August, 2008 that its 2007 financial statements “should no longer be relied upon,” for another.

Announcing it had identifyied “material weakness in its internal control over financial reporting,” in November 2007, for a third.
Hey, sounds a lot like Overstock.com. The difference is that Force Protection's management has not, as far as I know, endorsed the screwball theories being advanced by Internet creatures like Byrne. (And not repudiated them either, for that matter.) As I pointed out a few months ago, a member of Overstock's somnolent board of directors, Joseph Tobacco, is representing investors suing Force Protection.

I said at the time that Tobacco has some explaining to do. He still does, in spades. It's hard for me to see how Tobacco can represent aggrieved Force Protection investors while serving on the board of a company that officially sponsors a website publishing crap like this about Force Protection and taking an anti-investor slant in general.

Byrne's latest craziness is par for the course for naked shorting nuts, but wrapping the flag around their conspiracy theories is especially odious, even by their standards.

Obviously Byrne is exploiting the Iraq dead as a kind of publicity stunt -- the Deep Capture website, though run by a full-time staff of thugs lead by the nauseating cyberstalker Judd Bagley, has failed to gain much readership despite constant hyping, a "$75,000 contest" that fizzled, and a link on the Overstock site. But I doubt very much that the parents of the Iraqi war dead appreciate this crass exploitation of their tragedy.

© 2008 Gary Weiss. All rights reserved.

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A New Deal for Ink-Stained Wretches?

I was about to write a blog item on the John Thain bonus controversy --now the subject of a New York Times editorial, which makes it an Official Controversy -- when I saw an article in the New Republic by Mark Pinsky entitled, "Write Now."

I kinda, sorta agree with the Times, which is against the bonus, just as I kinda, sorta agree with the Wall Street Journal's Deal Blog, which is for it. Both have good points but you know what? I honestly don't give a hoot. But Pinsky's article involves something that matters a great deal more to me than John Thain's net worth, or the implications of CEOs getting mucho gelt while their employees are let go.

Pinsky's article involves a subject that newspaper editorialists are loathe to mention: the desperate straits of the news business. Journalism was in the toilet even before the Tribune Company declared bankruptcy, and journalists are being thrown out of work.

At least journalists do, heaven knows. Pinsky's solution is a revival of the old Federal Writers Project.

Today, there are many dislocated "old media" journalists from newspapers, radio, and television on the street--here I declare my personal interest, as one of them--who could provide a skilled pool to staff a new FWP. But since these journalists represent only a fraction of the larger displaced workforce, it is fair to ask what the public benefit would be of money spent.

This time, the FWP could begin by documenting the ground-level impact of the Great Recession; chronicling the transition to a green economy; or capturing the experiences of the thousands of immigrants who are changing the American complexion. Like the original FWP, the new version would focus in particular on those segments of society largely ignored by commercial and even public media. At the same time, the multimedia fruits of this research would be open-sourced to all media, as well as to academics. As an example, oral history as a discipline has made great strides in the past 70 years, and with the development of video techniques, the forum of the Internet could make these multi-media interviews widely available to schools and scholars, as well as to average Americans.
It's a corking good idea. Too many old colleagues of mine are struggling to stay afloat in marginal jobs or in p.r. It's a terrible waste of talent.

© 2008 Gary Weiss. All rights reserved.

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Tuesday, December 02, 2008

America's Most Comical Attorney General, Mark Shurtleff, Pimps Usana



The State Seal of Utah, which Shurtleff used to hawk a dental product

Utah Attorney General Mark Shurtleff, the nation's most comical and least effective attorney general, has put himself in the spotlight again with a Youtube video hyping the loathsome corporate cretins at Usana Health Sciences. So reports a Salt Lake Tribune blog.

Shurtleff, let us not forget, is the flaming clown who has put up a "for sale" sign on his office, and the less reputable elements of Corporate Utah have gladly taken advantage. Shurtleff is being investigated by the Lt. Governor's office after the Trib discovered "he wrote an endorsement for a private company under the state seal. That the company, Digital Bridge, donated $10,000 to his campaign two weeks before he wrote the letter is just a coincidence, says Mark." (Misusing the state seal is a felony in Utah, I am told.)

Now KUTV 2 News uncovered a hysterical YouTube video of Shurtleff huckstering for Usana:

It is now time to change the name of our state. From now, on we will be known as Utahna. Woo-oo!

(I am not making this up — not even the idiotic "woo-oo!")

Shurtleff goes on to endorse Usana, a multilevel-marketing-company-none-dare-call-it-a-pyramid scheme.
Another big, fat coincidence is Shurtleff smearing corporate crime fighter Sam Antar after getting a big, fat, coincidental campaign contribution from Overstock.com.

I've never understood why the voters of Utah reelected this clown as its attorney general. Apart from being a Republican in a jet-red Republican state, his only qualification for top law enforcement officer seems to be his propensity for pushing public officer ethics to the limit. With a buffoon like this as attorney general, it helps explain why Utah has a reputation as a happy breeding ground for securities fraud.

UPDATE: Salt Lake Weekly has more on details on this gag-inducing imitation of a public official. To be read only on an empty stomach.

Here's a Google Cache version of the letter, which was removed from the Digital Bridge website.

© 2008 Gary Weiss. All rights reserved.

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Monday, December 01, 2008

You Too Can Be Featured on 'Weiss, Gary'

I was amused to find the following junk email in my mailbox this morning. Apparently I am on some mailing list as a self-employed writer. "Gary Weiss," employed by "Weiss, Gary." The result was the following highly personalized and appealing pitch:

Hello Gary!

As Freelance Writer for Weiss, Gary , we know you hate receiving form emails. But we're a tiny post-college startup (4 people), and we're really hoping to get the word out to as many people as possible. We're going to do our best to follow up with phone calls as well.

We're proud to announce the beta version of [company name deleted], an online community of college students and employers.

. . .

Simply put, we would LOVE to be featured, mentioned, or quoted in Weiss, Gary . I can be reached at . . .

So there! Simply put, you've been quoted in "Weiss, Gary"

© 2008 Gary Weiss. All rights reserved.

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