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Did Madoff Buy Any Stock?

POSTED: 12:03 PM ET, 02/20/2009 by Derek Kravitz

Disgraced money manager Bernard L. Madoff might not have used any of his clients' billions of dollars to buy any securities for 13 years, according to the man tasked with finding the former Nasdaq chairman's remaining funds.

Irving Picard, the court-appointed trustee charged with selling off Madoff's assets to raise funds that could be distributed to his victims, met with investors, in tow with their attorneys, at a 300-seat auditorium of the historic U.S. Customs House in lower Manhattan, which now houses the federal bankruptcy court.

"Welcome to the first meeting of Bernard creditors," he said to start the meeting, which was listened in to by other investors and observers by phone. Then, a few moments later, the bombshell:

"For some substantial period, perhaps as much as 13 years, no securities were purchased in client accounts," Picard said.

So what does that mean for duped investors in Madoff's suspected $50 billion Ponzi scheme?

Picard said he has been able to recover roughly $650 million so far from Madoff's holdings, including funds in foreign and domestic accounts. Investors can also apply to collect up to $500,000 from the federal Securities Investor Protection Corp., which controls a type of reimbursement fund.

But of the $23 billion in losses reported by investors so far in mid-December, more than half came from those who invested in Madoff through feeder funds, Time magazine noted. Those types of investors aren't typically eligible for the federal securities insurance program.

(Picard said today that 2,350 claims have been processed so far and they expect the number of claims to double, The Associated Press reports. If the claims doubled and each investor got an equal share of the $650 million collected so far, it would work out to $138,300 per claimant.)

There are some other legaly avenues for aggrieved investors: They could file lawsuits against Madoff, his firm or the bevy of firms who "sold access to Madoff's asset-management business."

And some experts say there's still hope more money may be found. ABC News announced plans to air a program tonight about a possible $10 billion in secret Madoff holdings in Switzerland and Africa.

By Derek Kravitz |  February 20, 2009; 12:03 PM ET
Previous: IRS Wants More UBS Names, Burris's 'Courtesy Call', Stanford Probe Widens | Next: Merrill Lynch Bonus Probe Widens

Comments

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As the market has given back more than 10 years' worth of gains in the last few months, not buying any securities for the last 10 years could have been a huge favor to these people.

If he hadn't squandered the money on himself, we might be hailing him as a genius.

Posted by: Meridian1 | February 20, 2009 2:02 PM

On January 17, five weeks ago, at
http://trustedadvisor.com/trustmatters/483/Madoff--Investment-Fund--or-Virtual-Reality-Game

I wrote:

It’s beginning to look like Bernie Madoff’s business model had less in common with a hedge fund or investment management firm than it did with an online virtual reality game. Sort of a Sim City for investors. The money sent in was real: everything thereafter was from Oz.

I'm no prophet, but I got that right. He was running an operation that was breathtakingly fraudulent. This was no exotic scheme--no currency limit violations, no exotic instruments--this was a thuggish ripoff.

What's the scariest is not that the SEC didn't catch a sophisticated scam, but that it didn't catch a blatant, smash-to the mouth ripoff.

We don't need more Harvard lawyers at the SEC; we need some basic Audit 101 practices. Simple stuff like follow the customer statement back up the chain to where the stock was bought.

Madoff's genius was to know where the gray areas lay, the cracks where every bureaucracy could cleverly say "not my job" and pretend innocence.

Bring in the IRS, the GAO and a regional accounting company. We don't need more legislation, we need basic audit process mechanics improvement, and people who know when there's smoke to scream "fire!"

Posted by: cgreen3 | February 20, 2009 5:50 PM

cgreen3, it's easy to miss something if you don't want to see it. Under ideologue Republican SEC Chair Chris Cox government was made to stand aside while the free market worked its magic. Fifty billion dollars later the complete bankruptcy of the see-no-evil approach is undeniable. Too bad we can't hold Chairman Cox personally liable.

Posted by: hairguy01 | February 20, 2009 7:18 PM

Write to Congress expressing anger in regards to the SEC's handling of the Madoff Fraud:

Below are instructions in regards to a website that has been developed to generate letters to Congress; the site is user-friendly with sending letters to Congress; how to access ANY Senator & House Representative, including those that only use "webmail". Within the website, you have the option to be listed as a Madoff VICTIM, a RELATIVE of a Madoff Victim or a FRIEND of a Madoff Victim:

1) Go to: http://www.bernard-madoff-fraud-resources.com/
write_to_you_rep_madoff_fraud.php
2) You will find a drop-down menu at the above site for your respective State. All Senators and Congressional Representatives' email addresses that have been garnered are listed.
3) If your State’s Congressional reps are listed great; if not or if
for example only 1 Senator or no House Reps are listed then do the
following:
4) COPY the website's letter and then go to the following 2 sites to PASTE:
US SENATE http://www.senate.gov/general/contact_information/senators_cfm.cfm
US HOUSE https://writerep.house.gov/writerep/welcome.shtml
5) each of the above sites will lead you to your respective Senators & Congressional Reps; PASTE the letter into the respective Senator & House Reps "webmail" form; then SEND
6) Note that it's important to only send to Senators and Representative from your state; otherwise the Senator and Rep will view the letter as SPAM

Posted by: hcmerson | February 20, 2009 7:27 PM

Of course there are billions hidden away somewhere. The guy had 20 years to plan it out. He knew all along it was a fraud and he might be found out someday (and he'd have to put aside something in the event it all came crashing down on him).

Posted by: grant5 | February 20, 2009 10:20 PM

I can think of 2,350 people, liberals included, that would authorize "waterboarding Bernie" to find the obviously hidden bi$$ions.

Posted by: clandestinetomcat | February 20, 2009 10:34 PM

Unbelievable about this guy, for another great Madoff article click here - http://www.examiner.com/x-4269-DC-Foreign-Affairs-Examiner

Posted by: Bonk1 | February 23, 2009 9:28 PM

A lot of people think Madoff must have had help pulling this off for so long: http://www.newsinferno.com/archives/4806

Posted by: lvillanueva | February 24, 2009 11:54 AM

Interesting development for one Madoff investor: http://www.newsinferno.com/archives/4815#more-4815

Posted by: lvillanueva | February 25, 2009 11:12 AM

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