Welcome to Ruth Madoff Rehabilitation Week

Bernie and Ruth taking a break between ripping off people/not know hubby was ripping off people

ABC News is reporting that the feds have given back Ruth Madoff's passport. This means, and it is a close question, that either the government is being more incompetent than usual or that Ruth Madoff is not going to be charged criminally for being the rather obvious accomplice to her hubby Bernie.

So this seems to be Ruth Madoff Rehabilitation Week. In its latest issue, New York magazine falls just a few inches short of taking her side, in an article with a title that asks the clueless question, "Why does Bernie's better half inspire such vitriol?" Because she's probably guilty, that's why.

The article goes on to quote Gloria Steinem unconvincingly trotting out the gender card:

Ruth’s problem seems to be a particularly female one. “It’s the gender politics of the culture,” says Gloria Steinem. “It’s easier to blame the person with less power.” And, she adds, why aren’t people blaming her sons? “They would be much more likely to be in cahoots, because they were in the same professional field. And the answer is, they’re men, that’s why.”

Why aren't people blaming her sons? Hello? In its current issue, Vanity Fair has an article by David Margolick describing just how much people are blaming her sons. I wouldn't have minded the Steinem quote so much if it weren't preceded by the ridiculous, approving topic sentence that Ruth's problem is a "particularly female one."

Not to worry. Looks like Ruth will be walking off with her $2.5 million, unprosecuted. One can only hope that the lawsuits snatch away from her that outrageous bonanza, and quickly. Then we can get another naively sympathetic article about "poor Ruth."

© 2009 Gary Weiss. All rights reserved.

Why Not Confine Bernie Madoff to a Supermax?

Bernie Madoff will need to adapt to prison cuisine

There was no real doubt today about the 150-year sentence Judge Denny Chin imposed today on Bernie Madoff.

After all, he did nothing to warrant leniency. The only concession that Madoff was in a position to make, which was a full and truthful account of his scam, was not provided. We know that didn't happen, for otherwise a flock other defendants would already be charged.

So far, Madoff has done an excellent job of keeping his accomplices out of prison. Hopefully his string of luck in that regard will win out.

Right now the only leverage that can be imposed on him is in the hands of the Bureau of Prisons. The conventional wisdom is that he'll get sentenced to a medium security prison, possibly the one in Otisville northwest of New York.

That strikes me as absurd. Why throw away the only remaining leverage the government has on Madoff?

Medium security prisons are no picnic, believe me. They're surrounded by forbidding barriers of razor wire, and the atmosphere is suitably cramped and depressing. Still, they're nothing compared to maximum or supermax prisons, which is where the really worst offenders are held--terorists, top-ranking Mafiosi and convicted spies.

I'd toss him in one of the supermaxes. There is one supermax facility in Florence, Colorado. (There used to be one in Marion, Illinois, but it ain't supermax no more.)

After a few weeks in ADX Florence, I'll bet his stonewalling on his accomplices will come to an end, and that he'll be squealing like a rat in heat--even if it means turning in his sons, his wife, or even his mother if she were still alive.

Besides, it's just the most suitable place to hold someone who committed the kind of crime that he perpetrated, hurting so many innocent people and destroying the little faith that the public had in the financial system.

Can someone please explain to me in what way Bernie Madoff is less deserving of confinement in the supermax than John Gotti, Ramzi Yousef (the 1993 World Trade Center bomber) or Jonathan Pollard?

I thought not.

If he talks, Bernie can be confined to one of the maximum security institutions, such as Leavenworth, and if he's a really good boy, if his ratting results in convictions, if every loose cent is accounted for, then maybe then he can go to Otisville.

And in the unlikely event that he's been telling the truth--that he alone was responsible for such a massive scam--then he'd be in just the right place.

Strikes me as a win-win proposition all around.

UPDATE: A commenter points out that Andrew Fastow of Enron fame is at Florence.

I rest my case.

© 2009 Gary Weiss. All rights reserved.

A Seattle Reporter's Scoop on IPOs

The Seattle Times had a terrific report yesterday from its deputy business editor, Rami Grunbaum, on how a Seattle lawyer has been serving as a conduit for IPOs from a string of OTC stock offerings for little Russian and Ukrainian companies.

It's the kind of thing that we don't see often enough in business journalism, which too often is obsessed with "CEO porn" and puff pieces.

The deals are almost laughable. Green Bikes Rental Corp. of Ternopil, Ukraine, raised $50,830 in its initial stock offering, only to abandon its business plan months later because "our marketing research showed that in [Kiev, Ukraine's capital,] roads are not designed to have bicycle traffic."

But the implausible IPOs from Dean, whose Dean Law Corp. has offices in Seattle and Vancouver, B.C., serve the purpose of an Eastern European assembly line producing shell companies ready-made for penny-stock promoters. Local bank accounts and a Seattle CPA also form part of the network.

These are tiny deals, raising as little as $50,000, but are often exploited by stock promoters into scams of far greater magnitude. Hopefully Grunbaum will keep his eye on these schemes.

© 2009 Gary Weiss. All rights reserved.

Where Was the Press While an Analyst Was Being Crushed?

Gretchen Morgenson today has a great column in the New York Times today on the successful effort to crush an independent analyst by Matrixx Initiatives, the criticism-phobic pharmaceutical company whose OTC cold products were recently ordered recalled by the FDA.

Reading her column got me to thinking: all this occurred some years ago. Where were the media while it was happening?

Gretchen focuses on the company's legal war against Tim Mulligan, editor of the Eyeshade Report newsletter, which drove him out of business. Her account of Mulligan's encounters with the SEC is startling, even to those of us accustomed to SEC passivity on corporate transgressions and--in this case--blatant issuer retaliation:

In addition to his dismay over the legal battle, Mr. Mulligan said he was perplexed by encounters with S.E.C. officials regarding Matrixx. Amid his legal wrangle, he contacted two S.E.C. enforcement officials offering his research about the company. They dismissed him as “suspicious,” Mr. Mulligan said, and refused to provide e-mail addresses to which he could send his work.

In April 2004, he wrote a letter to William H. Donaldson, then the chairman of the commission, about the hostility that he had met. “In my humble opinion, your agency’s purpose would be better served by being more open to outside information,” he wrote.

Writing a letter to the do-nothing Donaldson was, of course, about as useful to his cause as taking the letter and flushing it down the toilet.

Morgenson concludes:

To be sure, Mr. Mulligan’s encounters with the S.E.C. occurred five years ago. But the officials’ dismissal of him doesn’t appear to have been an anomaly — just think of the warnings that were ignored on Madoff.

Perhaps under its new leadership, S.E.C. officials will be more welcoming to independent financial sleuths. Given how outgunned it is by Wall Street and corporate America, surely the commission can use all the help it can get.

No, it certainly wasn't an anomaly. Readers of this blog have learned, in realtime, how white collar crime fighter Sam Antar has repeatedly blown the whistle on misleading accounting at the corporate crime petri dish Overstock.com, only to be ignored by the SEC.

Articles like Gretchen's are welcome, but they are the exception to the rule. Whistleblower warnings tend to be disregarded by the media--as they were in the case of Madoff whistleblower Harry Markopolos--and Antar's detailed dissection of Overstock accounting has been similarly ignored by the press, which instead prefers to print puff pieces generated by Byrne's new p.r. firm, such as this rubbish today in the Boston Globe.

The media, unfortunately, can sometimes exceed the regulatory agencies in laziness and irresponsibility. Except for a Joe Nocera column a couple of years ago, Matrixx's battle with Mulligan received only sporadic coverage in the press, mainly small articles on hiccups in the legal battle.

There's been some coverage by Nocera and others of Overstock's vicious campaign to intimidate its critics, which recently included dispatching a hireling named Judd Bagley to contact Antar's estranged wife. Byrne has sicced his hoods on reporters who dare to describe his activities in less than flattering terms, and Sam's accounting analysis--such as his finding that a fourth quarter profit was a result of smoke and mirrors--has received virtually no coverage.

Maybe it's the intimidation campaign, or maybe simple laziness. Hell, the Boston Globe reporter who cranked out the puffy Q&A with Byrne today would have had to actually read Sam's blog, or give him a call if she didn't understand the accounting terminology involved.

Accounting watchdogs like Mulligan and Antar have an annoying tendency to be right. So when Overstock finally meets its maker, either by much-delayed SEC action or sheer weight of mounting losses, the usual postmortems can be expected. Where were the media? The answer will be "Just where they when Matrixx was hounding Tim Mulligan and Internet message board posters. Doing nothing."

Chris Byron once called the media the SEC's "seeing eye dog." But all too often the press is as apathetic as our famously lethargic regulators.

Ruth Madoff Becomes Millionaire, Thanks to Uncle Sam

I'm sure that victims of Bernard Madoff are going to react harshly to the latest outrage in a long string of Madoff-related outrages: under a deal with the government, his wife Ruth Madoff walks away with $2.5 million.

The Wall Street Journal for some reason says that Mrs. Madoff gets "just" $2.5 million. "Just"? What about all the Madoff investors who have been completely and totally wiped out? And, unlike Ruth Madoff, there isn't the stench of involvement in the scam wafting over them.

Ruth Madoff should be reduced to the same state as her husband's (some might refer to them as her) victims, and not be allowed to keep a penny of the assets forfeited by the government. Her hubby's victims have been wiped out, and so should she.

Her lawyer says that she "unequivocally did not know of the misconduct and did not participate in it." And I have a bridge over the East River I can sell you.

The amount of fury being directed not just at Madoff, but at the government for its handling of this case, has just ratcheted up a notch.

© 2009 Gary Weiss. All rights reserved.