Bernie Madoff should not walk the plank alone – Part 1 Freddy Kabini

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Was Mr Madoff really running a firm selling freshly baked ponzi pies as he claims or is this just a pipe dream? Freddy Kabini investigates

Warren Buffett, the American billionaire, once said: You learn whos been swimming naked when the tide goes out! Since the credit crunch hit, we have seen the fulfilment of those famous words in many ways but the exposure of Bernard L Madoff two weeks ago has taken everyone by surprise. How many Bernie Madoffs are still out there waiting to be exposed or to expose themselves. Can we expect one in the UK anytime soon? Oh, we have had Nick Leeson already?

The key question is: Was Bernie L Madoff really running a firm selling freshly baked ponzi pies as he claims or is this just a pipe dream? Is there any evidence to support this?

According t...

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23rd Dec 2008 12:03



I don't see anyone being arrested for mere negligence in a financial matter.

Negligently driving your car with your eyes closed and running over a few people would be an offence.

Negligently picking investments with your eyes closed and advising others to buy them is not!


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By kabini
25th Dec 2008 01:01

Thank you for your intervention John
I have had to employ two secuity guards since Dave Paveley and Ayesha Bham posted their menacing comments.

I have let my security guards (a pit bull terrier and a rottweiler) go as I think my life is safe now! I gave them two bones in full settlement of their wages for services rendered but they didn't seem to mind that their pay was below the national minimum wage. It's very risky posting under your real name on this site.

Finally I wish to say thank you to David Winch, Tom Egerton and Patrick for their useful comments.

Merry Xmas!

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23rd Dec 2008 14:05

And your question is?

I'm not sure that the 'Any Answers' section of this website is the appropriate place to start blogging your articles.

There is a blogs section here. Perhaps you would be kind enough to relocate.

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By Anonymous
23rd Dec 2008 13:58

Not so Tom
As I underfstand it those investors who were paid out will not be laughing for very long because under US law they money that they were paid out was probably the proceeds of crime and the liquidators will be looking to recover it from them.

Not only that but those investors will probably have paid tax on the income and gains that they thought the investments produced and they may now have to see if they can get it back.

Being a liquidator would seem to be better source of untold wealth than investing with Madoff.

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23rd Dec 2008 13:26

Demise of the Accountancy Profession?
I wouldn't like to be the auditor that signed off Bernie's accounts over all those years. The Ponzi scheme is in some ways a red herring in this saga inasmuch as Bernie's downfall was due to insolvency - in accountancy terms, liabilities exceeding assets with no hope of a recovery.

As I understand it the Ponzi scheme uses recent investors' money to pay earlier investors' interest payments and return of capital. As a cash flow tool this is not uncommon. I suspect many insurance companies pay claims out of current premiums received. This is perfectly legal provided total assets exceed total liabilities.

Every time Bernie paid interest or dividends in excess of the actual rate of return on his investments he was creating a loss. Those investors that benefitted from these high returns and managed to recoup their capital are laughing all the way to the bank at the expense of the greedy bankers and hedge fund managers who were left holding the parcel at the end.

I have no sympathy with bankers or hedge fund managers whose bonuses were based upon what in hindsight were overstated profits. Now that large losses will accrue, I doubt that any of these bonuses will be repaid.

As far as the law relating to negligence is concerned, I agree with David that it is not a criminal offence in general unless it results in something that is, for example manslaughter due to gross negligence.

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23rd Dec 2008 23:08

any answers
your comments/"articles" are done by yourself through any answers because they do not appear in the blogs or features part of the website. can you not post via the blogs section???

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24th Dec 2008 15:59

I hope this makes it better
Sorry for confounding members and introducing a tangent to Freddy's argument. We'll get our tech team on to the category-jumping glitch when they get back from Christmas.

In the mean time, I've ducked behind the curtain to reinstate the blog to its rightful place.

John Stokdyk
Technology editor

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By kabini
23rd Dec 2008 14:39

Problem with the site
There is a problem with the site.

This article was originally published in the Blogs & Diaries section but due to a bug in this section of the site, it moved automatically to the Any Answers section when the“Edit the blog” button was pressed to edit it. The “Edit the blog” button is a new feature that was added to the Blogs & Diaries section last week (14/12/08). The site does not have the functionality to allow users to move articles between sections

Sift has been informed of this problem.

Please bear with us while the fault is being investigated. There is no need to post any further comments on this matter.

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