Bernie Madoff suspicions reported to SOCA 6 weeks before his downfall

I am very grateful to an AWEB member who has drawn my attention to the publication on the internet of a Suspicious Activity Report (SAR) submitted to SOCA by the London Office of JP Morgan Chase Bank (JPMCB) on 29 October 2008.

The report seems to pretty accurately flag up issues surrounding Bernie Madoff which came to public knowledge only after his arrest on 11 December 2008.

The SAR, which is published by ABC News in the USA, appears to have been found amongst papers prepared for civil litigation concerning the enormous losses suffered by investors.

The SAR - which reads almost as if it were written after the investigation rather than before it - refers to "concerns around Madoff Securities" and refers to "the investment performance achieved by its funds which is so consistently and significantly ahead of its peers year-on-year, even in the prevailing market conditions, as to appear too good to be true - meaning that it probably is".

The Bank's SAR also highlights "The BLM (Bernhard L Madoff Investment Securities LLC) auditors, Friehling and Horowitz, are relatively small and unknown, and possibly more dependent than is appropriate on retention by BLM".

More worryingly the SAR (now in the public domain) refers to "Columbian interests who will not be happy with JPMCB's actions" . . . "and thinly veiled threats to the security of bank staff involved e.g. we know who you are and where you live/work".

On the one hand, commentators will point to the fact that, if these concerns occurred to JPMCB, this disclosure underlines the alarming failure of others in the City and overseas to see the 'red flags'.

On the other, the publication of the 'restricted' SAR - with its reference to threats to bank staff - will alarm other reporters (and potential reporters) under the UK money laundering legislation who may have concerns about their personal safety.  I am not suggesting however that this information leaked from SOCA (the published document may well be the bank's own copy of the SAR which it submitted).

David

Comments

I SUSPECT WITH MY LITTLE EYE

The Black Knight | | Permalink

That there would have been many other such reports made to SOCA, it is unlikely that JPMCB were the only ones.

Hopefully this leak did not come from SOCA, but from the banks own files, but are JPMCB still using paper I wonder ?

perhaps if the " looks to good to be true" statement applies then perhaps also, "if it looks to incredible to true " also applies in these situations.

But at least if the columbians are now involved it should make a good film.

davidwinch's picture

Not paper . . .

davidwinch | | Permalink

The print out appears to be a print of a web page showing the narrative detail from a report submitted to SOCA electronically.

The vast majority of reports submitted to SOCA are not submitted by post / fax but are submitted electronically (but then a large majority of reports submitted to SOCA come from just 20 organisations).

David

mmm. Interesting

The Black Knight | | Permalink

It begs the question then how did a confidential electronic report that should not have been in the file end up amongst civil litigation papers ?

or are all these electronic forms of communication open to hacking as we have seen recently with wicki leaks.

Will any action be taken to discover the source of the leak I wonder ?

davidwinch's picture

Disclosure in the civil litigation

davidwinch | | Permalink

I rather think that, in the course of the US civil litigation, the bank would have been required to disclose to the court and the other side everything relevant to the bank's dealings with the Madoff companies.  That would include the report to SOCA (since it clearly indicates that some people at the bank had 'misgivings' (at least!) about those investments prior to Madoff's arrest).

However these documents were not intended to be made publicly available - yet ABC News got a copy of the suspicious activity report. Ooops!

One does not know (but would love to find out) just what SOCA did with this intelligence . . .

What they should have done was to pass it on to the appropriate authorities in the UK and the USA.  Perhaps they did.

David

cymraeg_draig's picture

Worrying

cymraeg_draig | | Permalink

This sort of "leak" whether as a result of disclosure, or by other means, should serve as a warning to all accountants.  Dont presume that your report will remain confidential - it may not, and if it doesnt what are the possible consequences for you?

 

madoffs auditor

The Black Knight | | Permalink

could Madoffs auditors etc use this as evidence that the reports are not secure and given their safety was at risk as a reason for not reporting or even issueing a clean audit report.

The Columbians presumably cannot kill all of JPMCB's staff or even know which individuals were responsible but what about a small accountancy or legal practice that finds itself compromised, there would seem to be little protection when putting ones family at risk.

Interestingly the word columbian conjours up pictures of drugs which would presumably have been reportable many moons ago under the old old money laundering reporting rules.

davidwinch's picture

Madoff's auditor

davidwinch | | Permalink

As I understand it Madoff's businesses were audited by a tiny firm (little more than a one man band) based in the State of New York.  In the circumstances they are not subject to UK legislation.  I believe that they are not members of any UK professional accountancy body.

It was reported at the time that the firm had filed annual returns with its professional body indicating that it did not undertake audit work - but I do not know if that has been confirmed.

David

weaversmiths's picture

Worrying? Not to me.

weaversmiths | | Permalink

I made a SOCA Report and it was ignored.  I complained and was advised that SOCA are only interested in amounts over A £million.  The answer - dont bother.  It was a total waste of my time, time I was not paid for. I wasn't the accountant acting, merely the bookkeeper.  If I make a report to a Government Department I want confirmation that it will/has been taken up and that if the person I reported turns nasty I will be offered some protection. (Cloud Cuckoo Land, I know).    This "may or may not" attitude is a total insult.  The fact that I have to pay £120 out of my meagre turnover is a further insult.

End of rant.

TheAncientOne

davidwinch's picture

SOCA not interested?

davidwinch | | Permalink

The Ancient One

I don't know who said to you that SOCA were not interested in reports of more modest amounts.

I do know that the SFO (a different organisation entirely) are only interested in investigating major frauds (there is no 'official figure' as far as I am aware, but anything less than a couple of million isn't likely to generate even a flicker of interest from them).

But SOCA is both a 'policing' style body which investigates crimes and pursues suspected criminals and an intelligence gathering and dissemination body.  The intelligence covers the whole gamut of criminal activity - major and minor.

One of the key types of crime reported to SOCA is benefit fraud by individuals.  In total they receive approximately 240,000 reports per annum - mostly from banks and building societies - and they add them to their database which makes them available to the police, HMRC, DWP etc.

But, beyond an automated acknowledge generated by the computer when a report is filed over the internet, SOCA do not give feedback on individual reports.

It is not the case that every report is followed up (either by SOCA or the police) but HMRC and DWP in particular are pretty keen to make use of information reported which is relevant to taxes or benefits.

That having been said, in the realms of fraud which does not fall within the sphere of tax or benefits, local police forces are woefully short of the sort of skilled manpower needed to investigate possible criminal conduct and (to put it as charitably as I can) they have to ruthlessly prioritise when selecting cases for investigation.

I have experience of information submitted which put a fairly significant fraud 'on a plate' for the police but which resulted in no sign of action on their part.

David

glenbogle's picture

SOCA Inactivity

glenbogle | | Permalink

In the past year or 18 monthsI have made about 5 SOCA reports. Result O

Even got so far as CID involvement in one case but the police were too busy to handle it so suggested that the Bank would be interested. The Bank concerned  sidelined it . Result nothing doing.

 Are you sure there's anybody out there?

If so I know of someone who is a member of a very proper body who recently is alleged to haveprovided very interesting confirmation to get someone a remortgage. Then asked the I F A if he could help them pinch my clients.

Should I S OCA him too?

 

cymraeg_draig's picture

police standards

cymraeg_draig | | Permalink

I have experience of information submitted which put a fairly significant fraud 'on a plate' for the police but which resulted in no sign of action on their part.

David

 

Posted by davidwinch on Wed, 08/12/2010 - 18:18

 

Lets be honest David, most police forces couldnt catch a cold. The standard of policing has plumeted in my lifetime, as indeed have the standards of integrity and honesty in the police. 

The first think I look at in a defence  file is the police statements - because they are often a source of inconsistencies with which to destroy the prosecution case.

 

Actually...

Trevor Scott | | Permalink

...for years a few professional people gave public warnings about Madoff. Here is a link, first warnings in 1999!

http://www.cnbc.com/id/28310980/for/cnbc/

Whether it is Madoff, Enron (public warnings about them for years!), Stanford or the EU (remember a certain Dutch Auditor), it strikes me that there is a need for professional people to be able to safely report their evidenced concerns. Though to ensure it works and maintains integrity, there should perhaps be a law which requires certain government Officers to be proactive and chase up these reports.

It says a lot about the ability or integrity of their regulatory bodies. Not like Britain, our MP's have the integrity necessary to stamp out illegality and neither wouldn't stand for government intervention to stop something like a fraud investigation!  

davidwinch's picture

Madoff's son commits suicide

davidwinch | | Permalink

The BBC has reported that one of Bernie Madoff's sons has committed suicide.

Sad to think that he felt he had to take that 'way out'.

David

carnmores's picture

intimating guilt

carnmores | | Permalink

or shame or both?

cymraeg_draig's picture

Quite common

cymraeg_draig | | Permalink

Sad to think that he felt he had to take that 'way out'.

David

 

Posted by davidwinch on Mon, 13/12/2010 - 17:36

 

It happens more often than you might think.

I know of two in the last couple of years who have faced malicious false rape allegation, been acquitted, and still have been driven to suicide by the "no smoke without fire" idiots who continued to make their lives hell.

 

davidwinch's picture

Report in The Guardian newspaper

davidwinch | | Permalink

The Guardian newspaper has today carried a report about this - but you heard it here 2 months ago!

David

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