Bernard l madoff investment securities llc company

Bernard L. Madoff Investment Securities LLC:

Wall Street Trading Firm

Bernard L. Madoff Investment Securities LLC was founded in the 1960s as a

small investment firm on Wall Street. With $5,000 in savings from summer jobs

and at the age of 22, Madoff launched the firm that in the 1980s would later rank

with some of the most prestigious and powerful firms on Wall Street. Madoff

began as a single stock trader before starting a family- operated business that

included his brother, nephew, niece, and his two sons. Each held a position that

was quite valuable within the company.

Madoff had also created “an investment- advisory business that managed

money for high- net- worth individuals, hedge funds and other institutions.” He

made profitable and consistent returns by repaying early investors from the money

received from new investors. Instead of running an actual hedge fund, Madoff held

this investment operation inside his firm on the seventeenth floor of the building

where only two dozen staff members were permitted to enter the secured area.

No employee dared question the security and confidentiality of the “hedge fund”

floor due to the prestige and power that Madoff held. The $65 billion investment

fund was later discovered to be fraudulent, involving one of the largest Ponzi

schemes in history and shattering the lives of thousands of individuals, institutions,

organizations, and stakeholders worldwide.

The Man with All the Power

Bernard Madoff’s charisma and amiable personality were important traits that

helped him gain power in the financial community and become one of the largest

key players on Wall Street. He became a notable authoritative figure by securing

important roles on boards and commissions, helping him bypass securities regulations.

One of the roles included serving as the chairman of the board and

directors of the NASDAQ stock exchange during the early 1990s. Madoff was

knowledgeable and smart enough to understand that the more involved he

became with regulators, the more “you could shape regulations.” He used his

reputation as a respected trader and perceived “honest” businessman to take

advantage of investors and manipulate them fraudulently. Investors were hoodwinked

into believing that it was a privilege to take part in Madoff’s elite investments,

since Madoff never accepted many clients and used exclusively selective

recruiting in order to keep this part of his business a secret.

Madoff was even able to keep his employees quiet, telling them not to speak

to the media regarding any of the business activities. While several understood

something was not right, they ignored suspicions due to Madoff’s perceived

clean record and aura: “He appeared to believe in family, loyalty, and honesty. . . .

Never in your wildest imagination would you think he was a fraudster.”

34 Business Ethics

Dr. Meloy, author of the textbook The Psychopathic Mind, states that “typically

people with psychopathic personalities don’t fear getting caught. . . . They

tend to be very narcissistic with a strong sense of entitlement.” This led many

analysts of criminal behavior to observe similar traits between Madoff and serial

killers like Ted Bundy. Analysts discovered several factors motivating Madoff toward

a Ponzi scheme: “A desire to accumulate vast wealth, a need to dominate

others, and a need to prove that he was smarter than everyone else.” What ever

the motivating factors were, Madoff’s behavior was still criminal and affected a

large pool of stakeholders.

Early Suspicions Arise

Despite the unrealistic returns and questionable nature of Madoff’s business

operations, investors continued to invest money. In 2000, a whistle-blower from a

competing fi rm— Harry Markopolos, CFE, CFA— discovered Madoff’s Ponzi scheme.

Markopolos and his small team developed and presented an eight- page document

that provided evidence and red fl ags of the fraud to the Securities and

Exchange Commission (SEC)’s Boston Regional Office in May 2000. Despite

the SEC’s lack of response, Markopolos resubmitted the documents again in

2001, 2005, 2007 and 2008. His findings were not taken seriously: “My team and