Wall Street Money Manager Placed Under House Arrest in $50 Billion Fraud Case | Voice of America - English
The Wall Street money manager accused of a $50 billion fraud was placed under house arrest Wednesday in New York. A court required Bernard Madoff to wear an ankle bracelet that allows police to track his location in a case that is reverberating globally. Major banks and individuals worldwide are saying that they, too, have been bilked in what some are calling the greatest financial fraud case in history.
Prosecutors say the financial scam took place over decades. The victims include major international banks, pension funds, charities, and wealthy individuals, including celebrities. One is Mort Zuckerman, owner of the New York Daily News newspaper and U.S. News and World Report magazine. He had his $30 millionr charitable trust invested with Madoff. "Gone. Disappeared into the air. Vanished," said Zuckerman The Wall Street Journal reports film director Stephen Spielberg put 70 percent of his Wunderkinder Foundation charity's funds in the broker's hands. That, too, is apparently gone. Investigators say the 70-year-old Madoff was running a classic Ponzi scam that authorities did not uncover until his own sons turned him in. Madoff's scheme went on until the economic downturn caused some of his investors to demand a total of some $7 billion back. That broke the Ponzi chain. Madoff made moderate but consistent profits for his clients, so many did not question how he accomplished that. "He had a secret formula, and nobody could look and see what the secret formula was. It was kind of like 'The Wizard of Oz,'" said attorney Jack Blum. Madoff's firm maintained appearances by sending detailed but fictitious account statements to clients. Madoff was well known on Wall Street, especially as the former chairman of the NASDAQ stock exchange. That drew in multinational banks such as the Royal Bank of Scotland and HSBC, Britain's largest, which lost $1 billion. One, Spain's Santander, says it may have lost $3 billion. Nomura Holdings of Japan also listed substantial losses. Madoff also had contact with wealthy investors through his membership in the Palm Beach Country Club in south Florida. Many are retirees. Seventy-six year-old Arnold Sinkin sold carpets for 54 years. He and his wife entrusted their life savings, $1 million, with the broker. "We lost. Everything that we planned for our whole life is gone," he said. Considering the estimated $50 billion size of Madoff's Ponzi scheme, some on Wall Street say it should have been uncovered a long time ago. The chairman of the U.S. Securities and Exchange Commission has said he is "gravely concerned" about his agency's multiple failures to pursue specific allegations of wrongdoing, some dating back to 1999. Senator Charles Grassley says it is unfathomable that the SEC did not follow up on those warnings. "They [the SEC] failed. This person [Madoff] was registered as a [securities] broker-dealer. They should have known what he was doing," he said. But some in the financial industry say they sensed something was wrong with Madoff. One was Jim Vos, with the investment advisory firm Aksia LLC. He says he strongly warned his clients not to trust that broker. "You want to stay a mile away from this thing [Madoff's firm]. There is no smoking gun [said before Madoff's arrest]. We have no proof. But there are enough 'red flags,'" he said. Financial experts say those who were defrauded may wind up with only pennies for their lost investment dollars. And investigators still do not know the full amount and global extent of the scam.