CLICK HERE LARGE PRINT EDITION: ALL IN THE FAMILY VI: MADOFF MANIA CONTINUES TO DESTROY « Culture of Life News 2
Mr. Madoff is still hunked down in his Penthouse Prison. Many people would chop off an arm or a leg to be imprisoned in this posh place. He should be penned up in a very small one room apartment in the poorer parts of the Bronx overlooking the Cross Bronx Expressway. It is becoming more obvious that the ‘feeder funds’ were not innocent people but rather, co-conspirators. Of course, unlike three card monty players on 42nd Street or juvenile delinquents spray painting their names on subway cars, these cons are not being rapidly arrested. Typical, they own our politicians and courts.
Fairfield raised money for Mr. Madoff mainly through a fund called Fairfield Sentry, which supposedly had $7 billion in assets by 2007. As it sought new investors for Fairfield Sentry, Fairfield highlighted its close control over the fund and the protections it would provide investors.
In a “due diligence questionnaire” made available to potential investors in Sentry, Fairfield promised that it calculated the value of Sentry’s assets weekly and monthly. It also said Citco Fund Services, an independent hedge fund administrator based in the Netherlands, separately calculated the value of Sentry’s assets each month.
Further, Fairfield promised that both it and Citco double-checked the monthly statements from Mr. Madoff’s firm it received against records of the assets held in the fund. To prevent unauthorized stock trades or the unauthorized removal of cash from Sentry’s accounts, “the movement of cash among the Fund’s accounts requires two signatures,” Sentry said.
Obviously, ‘due diligence’ was more like ‘dopey dilly-dallying’. The con men running the Fairfield Sentry operation knew that people wanted to know if they were careful and not careless. So they lied about their oversight. For this alone, they should be arrested. The SEC does shut down businesses and do arrest people for lying on their prospectus. Giving these guys time to either flee the country or cover up their crimes is wrong. But then, nailing down any of these people is very difficult.
See how clever these cons were! They used a hedge fund in the Netherlands to investigate a fund in Connecticut. As if America has a shortage of people capable of doing this. And what is the use of two signatures to transfer funds if the two guys running the accounts are both con men? This story of le Affaire d’Madoff gets worse and worse as more details come out.
These offshore island pirate coves are a menace not just to the US government’s ability to collect taxes: they are a menace to ALL international banking and finances! How dare the Queen allow them to operate with utter impunity? And how dare the City in London condone, enable and protect these pirate islands? And even more pertinent: why isn’t the US shutting down these obvious criminal bases?
The pirates in Somalia are a menace. But they are like street muggers compared to the mass murderers running the Cayman Islands, just for example. This is an international crisis. And one of the elements which can be captured and stopped are these many islands. They all can be shut down easily. This is why great nations have navies! Allowing them to operate just because they are owned by the Queen of England is pure stupidity.
None of them have either armies or navies. If the British use their navy to protect these pirate islands, then we declare war on England. The English people just sat there with their mouths open, catching flies, while the Queen and her Court allowed these tiny islands to ravage the finances of England. But why do we not slam down on them all? We don’t owe any fealty to the Royal Bitch. Off with her head.
This authorised theft, of course, affects us too. We are robbed twice by these gangsters: once when they avoid the taxes the rest of us have to pay, again when the tax havens’ secret banking arrangements cause the crises which oblige us to rescue the banks. As the Tax Justice Network points out, the banking system collapsed because it became indecipherable. The banks lost confidence in each other when they could no longer tell who owns what or who owes whom, and could no longer trust each other’s financial statements(10). Nothing has done more to promote this distrust than the lucrative secrecy the tax havens offer to their clients.
Organised crime also depends on tax havens. The OECD uses four criteria to determine whether a place is a haven: it imposes no tax, there’s a lack of transparency, it has laws preventing the effective exchange of information with other governments, and the money which changes hands bears no relation to the business done there(11). The last three criteria are all essential prerequisites for large-scale crime. In fact it’s doubtful whether the traditional piracy now flourishing off the Horn of Africa would be possible without the more respectable piracy taking place in the English Channel, the Irish Sea and off the Spanish Main. Anyone who wanted to stamp out drug smuggling, kidnapping, gun-running and fraud would start by shutting down tax havens.
But the crime havens have become so respectable that even the British government is now depriving itself of revenue. It has become the major shareholder in the Royal Bank of Scotland, which has offshore subsidiaries in Jersey, Guernsey, the Isle of Man and Gibralter(12). Have the bank’s new owners, in return for our generosity in bailing it out, demanded that it shuts these operations? No. And that’s not the worst of it. The Inland Revenue, responsible for collecting tax in this country, signed a private finance initiative deal transferring its buildings to a company called Mapeley Steps(13). Mapeley Steps, which is registered in one tax haven (Bermuda) is owned by Mapeley, registered in another (Guernsey). Mapeley has boasted of paying no income or corporation tax in any jurisdiction(14).
Why does the government keep these havens open? There’s an answer in Geraint Anderson’s book Cityboy – a crude but gripping exposure by a former research analyst at a City bank. “Eighteen years out of power has made these jokers so paranoid about being viewed as old Labour that every time Cityboys and entrepreneurs asked for business-friendly reforms they rolled over and allowed tax and regulatory changes”(15).
The banks didn’t just ‘lose confidence with each other’….they always knew they were all con men and pirates. They are gnomes, after all! No, they got scared of a specific creature: the Derivatives Beast. All of them are scrambling to hide from this creature. They all promised to make swaps and placed bets and insured each other and now, all must pay up. And none can pay up. So they all have to pretend to not know each other.
You see, if they never appear in the same room at the same time, they won’t have to pay each other!!!! HOW SIMPLE IS THIS? Note that all attempts to bring them all together FAIL. When the Fed tried this in September, NO ONE SHOWED UP except for AIG and they showed up to tell the Feds, they were broke and needed a couple hundred billion to hide the Derivatives Beast so the banking system could pretend to be solvent, not broken.
It is amusing that Monbiot wonders why the British government is content to let the Queen’s pirate islands destroy the British government. Well, duh! Who owns who here? Who owns the US Presidents, past, present and future? The same gnomes using these pirate outfits to evade taxes and steal from everyone and each other! As for pirates: they not only kill outsiders, they kill each other. They are not paragons of trust.
New Labour is NOT Labour at all. It is like the Democratic Party in the US: they need the proles to troop to the polls to gain legitimacy but the minute anyone climbs the ladder upwards, they end up being owned by the Real Rulers who are not proles.
History question: how many days did Blair wait before flying to DC to ask Bush, ‘How much are you and your buddies going to pay me?’ He ran to Bush by July that year. Bush gushed, ‘We use the same TOOTHPASTE.’ I figured, at that time, this was code for ‘we both are easily bribed.’ And of course, Blair was invited to become a Carlyle acolyte soon afterwards. Like Clinton, he went on to make money being a funnel for ‘charity’ and ‘giving speeches’. The same path forged by Reagan and the Japanese overlords.
Now, I sat on this news for several days due to other pressing matters. But here is a screenshot of the Madoff letter to the SEC that was supposed to be kept secret:
The letter writer feared for his life? Yo-ho-ho and a bottle of Manischewitz wine. What were these threats? How does the Wall Street Mafia operate?
Of course! They lock you out of deals. No one will do business with anyone blowing the whistle if the criminal in question is part of the tribe. The last sentence of the opening remarks in this letter is a lie. I would say, not one of the Fund of Funds is naive or didn’t understand what they were doing. If they were ‘naive’, they would ask ‘stupid questions’ which would uncover the mysteries of the Madoff con game.
They were GREEDY which is very different from ‘naive’. Greed leads to being stupid, not naive. I once was at a times shares resort sale in Florida. After the wonderful presentation, I yelled, ‘Yes, I want to buy!’ The sales staff was happy! They ran to me with papers. I began to read them. I asked more and more questions, [I was being very malicious here since I had no intention of buying anything] and the staff gave fewer and fewer answers.
When I got to the business about insurance for hurricane damage, they got hysterical. I demanded to see a formal appraisal of the property’s value, the insurance statements and forms and I wanted to know if I could collect for any damage, too, or if they were forced to rebuild after a hurricane, at their own expense.
We were shouting at that point. Then, I demanded to see ALL THE INCORPORATION PAPERS. This caused major hysteria. The top salesman threw $40 to me and yelled, ‘Get out of here! Go away! Don’t come back.’ It was the funnest $40 I ever earned.
The point is, con men HATE QUESTIONS. If you keep digging, they get nasty. But they don’t kill you unless they are Mafia. Heh. So the letter writer above wanted to keep making money so he wouldn’t blow the whistle by going to Broad and Wall Street and waving his letter and yelling at the top of his lungs.
Stung by claims that it missed discovering a massive fraud, the Securities and Exchange Commission is now poring over Bernard Madoff’s books, trying to unpick an alleged Ponzi-like operation that appears to have lost investors tens of billions of dollars.
But it was the SEC’s decision in the 1990s not to take a stand on the controversial issue of “payment for order flow” that helped fuel the rise of Bernard Madoff Investment Securities, the successful broker-dealer operation two floors above Mr Madoff’s private fund operation in Manhattan….
By paying for order flow, Mr Madoff’s firm siphoned roughly 10 per cent of the volume of trading on the New York Stock Exchange away from the specialist firms that dominated the Big Board’s floor, creating what was known as a “third market”. Then, according to competitors and regulators, Mr Madoff’s firm thrived by trading within the bid-ask spreads, which could be sizeable.
10% of the volume of the stocks went through this crooks hands! HAHAHA. That, alone, screamed for investigations. He milked the system and instead of examining it and fixing these things, as always, the regulators let things run out of control. The entire concept of the floating currency regime is all about not fixing any flaws in the systems. Instead, great fortunes were made and lost, exploiting the weaknesses.
Many graduates from major universities made their livings by finding ever-more sophisticated ways to tap into errors, flaws and system woes so they could capture money that none of the pirates, gnomes or hell hounds deserved in the first place. Madoff, by cornering a good percentage of the system for moving deals of other people buying and selling stocks, allowed him to piggy back a scam on top of this system.
It should be laughably easy to set up a system that is secure and doesn’t allow anyone to make money via moving stocks around for others. The DTCC should do that but WILL NOT. The people running it want a crummy system so they can milk this particular investor cow herd.
In 1990, the NASD empanelled a group of experts to study the subject. The committee was headed by former SEC chairman David Ruder, and included Mr Madoff. The so-called “Ruder committee” delivered a report in July 1991 dubbed, “Inducements for Order Flow”.
The report found no legal basis for restricting the practice of payment for order flow, but recommended that the NASD require its members to disclose in advance the “factors that influence their order-routing and execution decisions”.
The rudderless Ruder Committee was supposed to fix these things. Well, what a shock: they didn’t. Of course. None of these entities fix anything because they don’t want a sane, smooth system. Where’s the loot in that? Instead of disbanding and telling everyone, ‘We can’t fix squat because we make too much money with the present mess,’ meant that others who are NOT complicit in crimes would write sane rules. Of course, this didn’t happen. Instead, Ruder and his gang let things get worse.
He and his ilk should be arrested. All the parties who designed, protected and allowed an army of criminals to exploit easily fixed technological or process handling systems, they are as much a criminal as the criminals using these flaws to defraud people. Money is made magically. But it is passed hand to hand via human agency. And it gains its power this way.
And controlling the CREATION of money is important! Money loses value if it can be made to appear magically, too much. And if there is a system to transfer wealth from one pocket to another via games with moving stocks from point A to point B or trading currencies that vacillate constantly in value due to the dollar being utterly unstable…these things are NOT making ‘wealth’ but are destroying currencies! This is why the vast FX market is NOT a good thing but is utterly evil. And the moving of stocks should not make anyone rich. A computer can do this nearly for free.
According to Mr Fagenson and other specialists on the NYSE, Mr Madoff paid a penny per share to brokers who routed their transactions through his firm. By exploiting gaps in the bid-ask spreads of, say, eighths of a dollar, Mr Madoff’s firm would make more than 12 cents per share on trades, and give up only 1 cent per share for the order flow. For a firm that represented about 10 per cent of volume on the NYSE during the 1990s, the business model generated big profits.
All that changed in 2000, when the markets shifted from spreads of eighths and sixteenths to decimals. “One thing we can surmise is that when the minimum spread went from a sixteenth to a penny, there was a margin erosion of over 90 per cent,” said Mr Fagenson.
Just changing the number system caused illicit profits to vanish. Duh. These same guys like to preach to us about ‘efficiency’ but they hate this concept. When it is forced on them, they have to find other systems to wreck and then, exploit. While researching this article, I thought of the book, ‘The Bonfire of the Vanities’ by Tom Wolfe.
Further north, on Tremont Avenue, Moe Stein, the owner of Frank’s Sports Shop, said he now has to disappoint the few adventurous tourists who come looking for rubble-strewn lots. But the Bronx still suffers, he said, from the terrifying image left by the 1981 Paul Newman film “Fort Apache, the Bronx” and the widely panned 1990 movie made from “Bonfire,” with Tom Hanks as Sherman.
The bond traders and investment bankers who populate “Bonfire” are passé now, Mr. Wolfe said, replaced by brash new hedge fund managers who meet clients barefoot, or in jeans with $6,000 belt buckles, as if to say, “You don’t have to like me at all, I’m merely a genius who makes you money.”
But one thing hasn’t changed, Mr. Wolfe said: the allure of New York. It’s what distracted Sherman as he gazed at the glittering skyline from the Triborough Bridge — thinking, “There it was, the Rome, the Paris, the London of the twentieth century” — and missed his turn to Manhattan.
All of 2007, I was screaming about the impending financial collapse. I knew well before then, well before 2005, even, that the system was doomed. I knew that the financiers who were the fancy boys were fakes. I knew that the Bonfire of the Vanities of the 1980’s was going to be dwarfed by the Götterdämmerung wreck of the 2007 Great Depression. The bond traders and investment bankers were not ‘passe’ at all but were still at the center of the evolving collapse that was rapidly engulfing the entire financial systems of the entire planet. This goes to show how out of touch with reality, the NYT writers really are. Heh.
They are paid big bucks to be big stupids. They can’t help it: no one is going to pay much money to be told the truth. Especially since conning people is so lucrative. At no time do the cons want us to ask too many questions.
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