Madoff and Short Statements

Part I – The Bernie Madoff Case

Brief history, story, and the aftermath. In financial history, Bernie Madoff is infamous for his Ponzi scheme that swindled billions of dollars from American and international investors. Since starting his business in 1960, Madoff has been the leading figure in his investment until his arrest in 2008. This convict made his living and built his success by swindling investors by using his competitive advantage in the software aspect. That is, Madoff and his firm were instrumental in the development of a technological trading system for the NASDAQ (Bandler and Varchaver). Indeed, an early interview with Madoff showed that he was very prominent in providing innovations for his industry with his vision of an “opportunity to bring automation in the over-the-counter marketplace and create some visibility and transparency in the marketplace” (Bandler and Varchaver). His investment firm created numerous jobs and earned billions of dollars for the firm and some of his investors. However, it was his outing by the SEC and others that made this man an iconic figure in white-collar criminal history.

Once his firm had earned billions of dollars, an SEC investigation found the beginning of what would be one of the major financial scandals in history. While at the end of it all, Madoff “confessed to masterminding the largest Ponzi scheme in history,” he managed to hide it fairly well (Fishman). Indeed, many people that worked for the firm or were initial or earlier investors praised the family-run business for its efficiency and high margin returns. Many sources say that he truly earned the trust of everyone: 

People believed in Bernie. Nasdaq made him its chairman; the SEC appointed him to industry panels; Congress invited him to testify. New York Senator Charles Schumer stopped by the office in the run-up to the Iraq war and gave a rousing talk on the trading floor. (Bandler and Varchaver). Afterward, everyone questioned him and came to the conclusion that he was the thief and mastermind behind it all. Madoff is currently serving a lifelong prison sentence. 

Impact on people and society. Surely, Madoff made a tremendous impact on people and society in general because of the scope of his scandal. Much lost faith in the financial industry based on what Madoff did. For those that were close to him and investors, public grievances were written: “In a letter written the same day the story broke, Ezra told investors that he, too, was a victim. ‘ have also suffered major losses,’ he wrote, signing it ‘very truly yours’” (Fishman). Surely, millions of people lost money over a period of almost half a century. This caused financial issues for many and institutions as well. However, the scandal also impacted people’s perception of Wall Street and the financial industry. Mainly, much lost faith in the ethical and regulatory facets of SEC and Wall Street institutions in general. 

Government’s role. The federal government’s role was to investigate and minimize fraud, although they did not do a great job in the case of Madoff. Some sources on this aspect have been somewhat mixed. For example, while one source claims that the SEC was always present in his office, others said that Madoff handled this with ease (Bandler and Varchaver). Surely, more federal regulations and inspections would have done more to minimize this threat. However, Madoff merely claimed that while the SEC was present quite often, “talked tough but didn't look at anything” (Gendar). Madoff essentially claimed negligence on the part of the SEC, the regulatory arm of Wall Street. Surely, this points to some gaping holes in the regulatory system for securities and investments. 

Part II – Short Statements

1. An example of passing off goods and services as another would be what Chinese companies are doing with Apple Products. Many companies are passing imitation products as those of Apple. This is incredibly unfair in business practices.

2. Misrepresenting the source or certification of goods and services would be like selling jerseys while falsely claiming that they were signed by professional athletes. This discredits the authenticity of the product and is illegal. 

3. Misrepresenting the affiliation or association of another would be a company such as a consulting company falsely stating that their services are closely endorsed by IBM or another consulting firm that has credibility without their consent.

4. An example of the improper designation of the country of origin would apply to grocery stores that sell seafood as originally from other foreign nations in order to bolster the price. If the fish were really farm-raised or local, then they would cost less.

5. An example of goods that do not have accurate benefits or uses would be drugs that claim to improve certain bodily functions or health-related troubles. For example, GNC selling pills that improve blood flow without that actual benefit would be subject to this crime. 

6. An example of this would be if someone sold a book on eBay and claimed its condition to be new. If this information is used by the buyer to make the decision, then the seller has broken that provision. 

7. An example of this is a flea market that claims to sell authentic Gucci bags for discount prices. Unless that product was manufactured by Gucci, the seller would be committing a crime in terms of its representation of the product. 

8. An example of this would be an AT&T sales representative saying that the customer should not get Verizon because they have bad service and don’t offer adequate customer support. 

9. A company that offers a set price for an item through advertisements, like a restaurant, cannot go back to its advertisement, especially in a coupon form. 

10. An example of this would be Apple promising to offer “iPhones for everyone” while only producing a limited supply in order to drive hype and demand for the product. 

11. An example would be an Ikea advertisement showing a fully built crib without the disclaimer that it had to be assembled. The buyer would need disclosure that it had to be assembled. 

12. An example would be a company like Macy's that offers nightstands or such in its store with a price label without claiming that it is unassembled. 

13. An example of false price reductions or misleading statements would be products by Wal-Mart that are marked as high discounts even though they were never priced that high to begin with. 

14. An example of representing transactions that involve illegal rights would be that of financial institutions that promise money or returns to investors through special information provisions that are illegal by the SEC. 

15. An example of illegal and unwarranted repair services would be an auto body shop that tells its customers that they need extensive repairs or new parts even if they don’t.

16. An example of the misrepresented subject of a product would be a seller on eBay supplying a buyer with a false shipping code for FedEx when they knew it was not shipped yet. 

17. An example would be a Southwest Airlines person that promises free flights in exchange for financial information. Unless the person discloses that they are really trying to sell Credit Cards for Southwest Airlines. 

18. An example would be a bank customer service person that is claiming to be the highest level manager in a call center in order to avoid giving a refund would be an example of this. 

19. An example of this would be a bank like Bank of American saying that all account holders are subjected to arbitration by the bank and forfeit the rights of a third party to intervene and go to court for them. 

22. This is similar to how political parties have to announce themselves for their own personal solicitations to citizens. If they do not give details of the call and its intentions then it is wrong.

Works Cited

Bandler, James, and Nicholas Varchaver. "How Bernie did it." CNN Money, 30 Apr. 2009. CNN Money. https://money.cnn.com/2009/04/24/news/newsmakers/madoff.fortune/index.htm

Fishman, Steve. "What Made Bernie Madoff Perpetrate the Greatest Fraud in History?” New York Magazine, 22 Feb. 2009, http://nymag.com/news/businessfinance/54703/.

Gendar, Alison. "Bernie Madoff Baffled by SEC Blunders; Compares Agency's Bumbling Actions to Lt. Colombo." New York Daily News, 31 Oct. 2009, https://www.nydailynews.com/news/crime/bernie-madoff-baffled-sec-blunders-compares-agency-bumbling-actions-lt-colombo-article-1.382446