Broken Business

STEP 2 – UNDERTAKE AN INDEPENDENT INVESTIGATION

Follow your leads, instincts, and integrity to do your job fairly and fully – free from improper influence and bias. And let the ‘chips fall where they may’.

—Former FBI Director and US federal judge Louis J. Freeh, as quoted in Fraud Magazine, April 2014

On 29 June 2009, Bernie Madoff, the prominent New York financier and philanthropist, was sentenced to 150 years in prison for running a massive Ponzi scheme that defrauded thousands of investors out of billions of dollars. The criminal complaint against Madoff charged him with 11 federal crimes and alleged that his clients had lost nearly $65 billion in total. It remains the largest investment scam in history.¹

The Madoff story is an extraordinary one for many reasons: the magnitude of his scam, the degree of harm it caused, the fact that he had been such a renowned figure prior to his downfall. But perhaps the most extraordinary element of the story is how long it took for the fraud to be brought to light. Madoff's name first appeared in a fraud investigation as far back as 1992 when two people complained to the US Securities and Exchange Commission (SEC) about investments they had made. At the time, Madoff returned the money and the SEC closed the case.

In all, the SEC conducted six investigations of Madoff, all of which had, for one reason or another, led to no charges. A financial analyst, Harry Markopolos, who tried for 10 years to convince authorities, the industry, ...