Saturday, September 21, 2019
Madofââ¬â¢s Scandal Essay Example for Free
Madofââ¬â¢s Scandal Essay In the first two weeks of December 2008, the stressed that 70-year old businessman, Bernard Madoff is suffering becomes apparent to his employees, most particularly to his two sons. It concerns a $7 billion redemption request that Madoff had been ââ¬Ëstruggling to obtain the liquidity necessary to meet his obligationââ¬â¢. This made them approach him directly what the problem is all about. The answer is unexpected. Prior to this incident, Madoff is well known throughout the world of economics and investment as a genius and a trustworthy owner of Madoff Investment Securities LLC. The firm is generally a broker-dealer and investment advisor concerned with the management of investorsââ¬â¢ assets, giving advice to investment management and is associated with some nonprofit organizations (Helyar et al. , 2009). At the age of 22, Bernard Lawrence Madoff managed to build his firm from his $5,000 savings. Since its first few years in the business, Madoffââ¬â¢s Securities reputation was tantamount to success. Madoff also served as chairman of the board of directors of the NASDQ Stock Market (Byrne et al. , 2005). Madoff confessed, according to Theodore Cacioppi (BackgroundNow. com 2008), that ââ¬ËThere is no innocent explanationââ¬â¢ pertaining to the fraud that he committed. Cacioppiââ¬â¢s testimony also revealed that Madoff stated to his ââ¬Ësenior employeesââ¬â¢ that he is already ââ¬Ëfinishedââ¬â¢ and the firm is actually ââ¬Ëone giant Ponzi schemeââ¬â¢. The Hennessee Group, represented by Charles Gradante, had also been suspicious of the Madoffââ¬â¢s success when their reports showed that Madoffââ¬â¢s only had 5 months down in a span of 13 years despite several market fluctuations and economic changes. Helyar and colleagues (2009) reported that Madoffââ¬â¢s strategy of split-strike conversion turns out to be front-running. This strategy involves ââ¬Å"brokersââ¬â¢ for their own accountâ⬠. This is known to be illegal yet Mardoffââ¬â¢s investors didnââ¬â¢t care. Helyar and colleagues believes that investors are concerned about the money they get. In my opinion, Madoffââ¬â¢s scandal opens the publicââ¬â¢s eyes to the fact that cheating is indeed prevalent in the American Society. Even successful people cheat and are cheated. The effect cripples the economy and results to distrust. New policies are being and will be initiated to avoid and detect possible frauds. When I heard about the scandal, the first thing that came to my mind was the quote ââ¬Ëwhen everything is going your way, youââ¬â¢re probably in the wrong laneââ¬â¢. Taken literally this indicates driving at the other side of the road. Nonetheless, another interpretation reveals that ââ¬Ëeverything coming your wayââ¬â¢ resembles things are being ââ¬Ëtoo good to be trueââ¬â¢ or turning out as you expected. In the case of Madoffââ¬â¢s investors, they looked at the facts; they listen to what former investors say and followed that path expecting the same returns. Despite the fact that Madoffââ¬â¢s offer and profiles seem ââ¬Ëtoo good to be trueââ¬â¢. They grabbed the chance and hope for the best. At the end, it is the ââ¬Ëwrong laneââ¬â¢ after all. Madoff fraud strategy is well-known as ââ¬ËPonzi schemeââ¬â¢. This type of fraud had been in the business industry for several decades yet people still fell for it. The good promises are simply too great to refuse. These same things eluded logical thinking and provoke greed. The scandal affects the investors and their reputation. It also raised doubts regarding implementation of laws and economic policies. It posed new challenges for proper investment management and questions the liability of security firms. Moreover, it is not simply an issue of crime or fraud; rather it undermines societal values and trends. References BackgroundNow. com. (2008). Bernard L. Madoff Charged In Multi-Billion Dollar Ponzi Scheme. Retrieved on February 17, 2009 from http://books. google. com/books? id=m2_yfK582ukC Helyar, J. , Burton, K. , and Silver, V. (2009). Roots of a $50 billion Ponzi Scheme. Retrieved on February 17, 2009, from http://www. businessmirror. com. ph/index. php? option=com_contentview=articleid=5577:roots-of-a-50-billion-ponzi-scheme-catid=46:bloomberg-specialsItemid=70 McShane, L. (2008). Bernard Bernie Madoff: From Queens lifeguard to soaking fraud. Retrieved on February 17, 2009, from http://www. nydailynews. com/news/ny_crime/2008/12/13/2008-12-13_bernard_bernie_madoff_from_queens_lifegu. html Schwartz, R. A. , Byrne, J. A. , and Colaninno, A. (2005). Coping with Institutional Order Flow. Springer. US Security and Exchange Commission. (2001). ââ¬Å"Ponziâ⬠Schemes. Retrieved on February 17, 2009, from http://www. sec. gov/answers/ponzi. htm
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