Conspiracy Eyed in Madoff Case

When Bernard Madoff pleaded guilty to running the biggest Ponzi scheme in history, he claimed that he acted alone and no one—no family members, friends, or colleagues—were aware of his fraud, said ProPublica. Madoff is now spending 150 years in prison for orchestrating a massive Ponzi scam estimated to have cost duped investors an incomprehensible $65 billion. Meanwhile, the Securities and Exchange Commission (SEC) has come under intense fire for apparently missing warnings that something was amiss with Madoff’s investment advisory business.

Now, writes ProPublica, it seems that there may be more to the Madoff scandal, such as a group of men may have not only been aware of Madoff’s Ponzi scheme, but that they might have reaped significant benefits. The SEC and Irving Picard, the trustee who has been charged with recovering money for Madoff’s many victims, have made allegations that some of the men in this circle had, said ProPublica, “expectations and influence” greater than what is expected for typical investors. Worse, according to documentation, these players appeared to have helped sustain the scam, even providing cash—upwards of hundreds of millions of dollars—to keep the failing scam operational.

It does not appear as if a conspiracy was in place and there is no complete chain of information; however, Picard has been suing a number of people who appear to be among the greatest beneficiaries of Madoff’s scam, charging that these people either “knew or willfully ignored” their participation in a fraud, said ProPublica.

The men involved did share “backgrounds and interests,” said ProPublica and were located, for the most part, in New York and South Florida, where they were involved in tony Jewish country clubs and synagogues and active in a number of philanthropies, foundation boards, universities, and yeshivas. The circle, which have been named in complaints filed by both the SEC and Picard, include, said ProPublica: “Carl Shapiro 97, a Boston-based philanthropist who made one fortune in ladies dresses and a larger one with Madoff; Robert Jaffe, 66, Shapiro’s son-in-law; Maurice ‘Sonny’ Cohn, 79, a one-time Madoff neighbor-turned-business partner; Stanley Chais, 83, a close friend of Madoff’s for more than 50 years and one of his earliest investors; and Jeffry Picower, a lawyer and accountant, who recently died of a heart attack at 67.”

None of these men have been criminally charged; however Chaise is the subject of a criminal probe, said ProPublica. Last year, the Wall Street Journal wrote—citing anonymous sources—that Manhattan’s U.S. Attorney’s Office was looking into eight investors that included Picower, Chais, and Shapiro. As expected all deny being connected to Madoff and claim they were victimized by his scam, said ProPublica.

In anticipation of the expiration of the statute of limitations, said ProPublica, Picard is expected to file more lawsuits. Also, criminal charges have been filed against former Madoff employees, adding to the speculation that Madoff acted alone, a notion that appears to be rapidly crumbling.

Since news broke of Madoff’s scheme, the SEC has been faulted for failing to detect the historic fraud since 1992 and for not fully going after tips, having inexperienced staff handle reviews, not looking into unbelievable and sustained profits, not pushing when Madoff was clearly caught in lies, and not pursuing trading records that would have pointed them to the scam.