Credit Suisse Urged Clients to Dump Madoff Funds

[katty]

more: http://www.bloomberg.com/apps/news?pid=20601087&sid=a7Ei7.DM8DHc&refer=home

Credit Suisse Urged Clients to Dump Madoff Funds (Update1)


By Cynthia Cotts, Katherine Burton and Elena Logutenkova

Jan. 7 (Bloomberg) -- Credit Suisse Group AG, whose clients lost almost $1 billion in Bernard Madoff’s alleged swindle, urged customers more than eight years ago to withdraw cash from his firm because the bank couldn’t determine how he made money, said three people familiar with the matter.

Oswald Gruebel, who headed the private-banking unit of Switzerland’s No. 2 lender at the time, made the recommendation after meeting Madoff in New York in June 2000, the people said, speaking anonymously because the details were private. Credit Suisse customers proceeded to redeem about $250 million from Madoff-run funds, half the total held by the bank’s clients, the people said.

Credit Suisse, based in Zurich, risked alienating clients who were reaping annual returns from Madoff of about 11 percent a year,

[Ichingcarpenter]

1. 2005 Complaint to the SEC: "World Largest Hedge fund is a Fraud"

What follows is the Harry Markopolos complaint to the SEC, circa November 2005, identifying 29 red flags that Madoff was a fraud. This highly detailed complaint was filed regarding the apparent Fraud at Madoff Securities.

It was ignored by the Christopher Cox SEC, which was too busy concocting schemes to dismantle the SEC rather than investigate complaints such as this.

http://www.ritholtz.com/blog/2008/12/detailed-and-ignored-sec-madoff-complaint/

http://news.muckety.com/2009/01/05/after-years-of-complaints-about-madoff-harry-markopolos-is-vindicated/9441


After years of complaints about Madoff, Harry Markopolos is vindicated
By Laurie Bennett
January 5, 2009 at 12:34pm


Harry Markopolos is being called the Deep Throat of the Bernard Madoff scam. He describes himself as “the boy who cried wolf.”

In his case, the wolf was real, and no matter how many times Markopolos cried out, the Securities and Exchange Commission did little.
Not until his sons turned him in was Bernard Madoff arrested on charges of conducting a $50 billion swindle defrauding banks, hedge funds, nonprofits and individual investors worldwide.

In the succeeding weeks, Markopolos, a former investment officer with Rampart Investment, has become known as a financial Cassandra for his repeated warnings about Madoff’s operations.

He began complaining years ago, his insights culminating in May 2005, with what financial writer Michael Lewis and hedge fund manager David Einhorn described in the New York Times Saturday as a “devastatingly persuasive 17-page letter” to the SEC.

Either Madoff was front-running customer orders - essentially taking orders, assigning winners to the Madoff company portfolio and passing losing investmens to the customer.

Or Madoff was conducting what Markopolos labelled “the world’s largest Ponzi scheme.” It appears that scenario two, which Markopolos described as “highly likely” was Madoff’s mode of operation.

Markopolos used mathematics to dissect Madoff’s investment strategy, and concluded that it couldn’t possibly work. He also questioned the secrecy surrounding the Madoff operation.

“Only Madoff family members are privy to the investment strategy,” he noted in his 2005 letter to the SEC. “Name one other prominent multi-billion dollar hedge fund that doesn’t have outside, non-family professionals involved in the investment process. You can’t because there aren’t any.

[burythehatchet]

2. I do not know why Chris Cox is not in custody. Astounding. No one even mentions him.

[katty]

4. it is, for that matter why aren't cheney, rummy, condi and bush

behind bars by now? it's the white collar crime club

[Ichingcarpenter]

8. Check out the interactive map at the site

It is rather detailed on the connections and names names and organizations.

He saw the scheme in 2001

http://news.muckety.com/2009/01/05/after-years-of-complaints-about-madoff-harry-markopolos-is-vindicated/9441

[katty]

3. indeed, the gorilla in the room-and Spitzer is pushed out

cause he's paying for a hooker-what a joke.

[Cessna Invesco Palin]

5. There is a certain genius to the Madoff swindle.

Here you have a guy who's one of the elder statesmen of Wall Street, never a bad mark to his name, a guy who's been a philanthropist, who's on the board of various educational and charitable institutions, who is known in NYC by the sorts of people who move in those circles. More Jack Morgan than Gordon Gekko. He wasn't some young upstart promising outlandish returns. In short, he was the sort of person who'd be trusted almost instinctively by the sorts of people he worked with on a daily basis at charities, educational institutions - conservative investors.

The real brilliance of his scam was that he provided exactly what these sorts of investors were looking for - moderately good, stable returns year-on-year. In fact, he wasn't returning anything that you or I couldn't get from a basic mutual fund in a good year. The only problem was that he was returning it in bad years as well as good. The paradox is that this looked great to institutional investors, who want stable returns. It looked great to exactly the sorts of people he counted as friends, the sorts of people with whom he sat on the boards of various institutions.

I happen to have a relative who knew Madoff personally. Madoff was on the board of the institution where this relative worked. (This institution lost hundreds of millions in the swindle.) He actually flagged up the Madoff investments as being a bad idea for reasons completely unrelated to the swindle - mostly conflict of interest and basic accounting 101 stuff, but was overruled.

He knew Madoff personally, though I don't think he considered him a friend. He was quite depressed by this whole series of events, especially because he'd have saved his institution hundreds of millions if they'd listened to him. I asked him at one point how such a thing could have happened. "Well," he said, "greed does strange things to people. And Madoff knew how to appeal to a certain sort of greed that nobody else bothered with."

It is difficult to underestimate how much this scandal has rocked both the financial and Jewish philanthropic/educational establishment in NYC. He was one of their own. Many of the people he has bankrupted considered him a friend and confidant, and a good business partner. What. A. Prick.

[Mike 03]

6. Thoughtful Comment. I agree, in a sad way this guy was a genius.

Did you see the statements he sent his clients? To them, it looked like they were invested in all the good old classic American companies, from IBM to Microsoft to Wallmart. Who would think they were taking a foolish risk?

(Other than the sad fact that some folks entrusted EVERYTHING to this one guy, which IMO is reckless investing.)

I have been discussing this whole issue with my father for the past couple of weeks and we are grappling with the fact that this man was most likely a sociopath.

[Cessna Invesco Palin]

7. I'm not sure he was a sociopath...

...but there was definitely something wrong with him in addition to greed. Many of the institutions he hurt most were ones that were by all accounts very near and dear to his heart. Some of the people hurt worst by this were people with whom he literally worked almost every day. It would kind of be like if Skinner came out tomorrow and announced that he was a member of Al Qaeda.

As for the people who gave everything to him, yeah that was dumb. On the other hand, if you're the sort of person who's got some money but isn't an investment genius, and you've got a guy who's one of the most respected Wall Street investors of the 20th century saying he'll take care of you... You might just be inclined to trust his judgement over your own. I think a lot of what happened came down to that. He's fucking Bernie Madoff. Of course he's smarter than me. Of course he'll take better care of my money than I will. He took advantage of that.

[Poll_Blind]

9. Thank you both for the window into that situation. n/t

PB