Leg 100 - Business Ethics

Bernard Lawrence "Bernie" Madoff

Bernard Lawrence "Bernie" Madoff

Shameka L. Evans

LEG 100/ Business Law

Stephen Knights Jr.

08/21/2011

Abstract

This report delves into the still mysterious case of Bernard L. Madoff and his long time investment securities activities, which ultimately turned into a massive fraud of unparelled size. Several types of illegal business behavior are identified, as well as three groups of people who became impacted through Madoff's actions. An examination in risk management follows, by describing three internal behaviors, which if implemented, could have helped prevent the unraveling of Madoff's business empire. Then, one looks into three ways that investors could have easily avoided Ponzi schemes like those of Bernie Madoff. And finally, various legal actions in the wake of the Madoff fraud discovery are uncovered, with more litigation looming on the horizon.

BERNARD LAWRENCE "BERNIE" MADOFF

Introduction

Madoff had a reputation for being an enigmatic innovator of investment markets. He was known as a former chairman of NASDAQ, an electronic forum for ‘penny stocks', or over-the-counter stocks too small to be noticed on the New York Stock Exchange. He coined the term ‘split-strike conversion' to describe an investment strategy which supposedly provided an extra edge to one's portfolios. Yet much of what is known about Bernard L. Madoff Investment Securities and its owner's side business remains shrouded in mystery, due to tight-lipped confession of the accused for his crimes. Bernie refused to implicate family members and friends, claiming that perpetrated the biggest investment fraud in history all by himself. Yet since his incarceration, details have been gradually surfacing which suggest that Bernie Madoff may have had many willing accomplices. Perhaps there are more charges that can be filed, although Madoff's numerous offenses may already be enough to keep him prison for the rest of his life.

Describe three types of illegal business behavior alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business.

The first of those charges was for securities fraud. The crime of securities fraud entails false claims of investment security holdings, and misinformation regarding stocks and brokerage advice. Another major charge involved three counts of money laundering, both domestically and through international accounts. Money laundering