Here’s more on Barnard Madoff’s confession, an excerpt from the story in Bloomberg by David Voreacos and David Glovin.
Madoff Confessed $50 Billion Fraud to Workers Before FBI Arrest
Dec. 12 (Bloomberg) — Bernard Madoff had confessed to employees this week that his investment advisory business was “a giant Ponzi scheme” that cost clients $50 billion before two FBI agents showed up yesterday morning at his Manhattan apartment.
“We’re here to find out if there’s an innocent explanation,” Agent Theodore Cacioppi told Madoff, 70, who is considered a pioneer of modern Wall Street.
“There is no innocent explanation,” Madoff told the agents, saying he personally traded and lost money for institutional clients. He said he “paid investors with money that wasn’t there” and expected to go to jail. With that, agents arrested Madoff, according to an FBI complaint.
The 8:30 a.m. arrest capped the stunningly swift downfall of Madoff and businesses bearing his name that specialized in trading securities, making markets and advising wealthy clients. Many questions remain unanswered, including whether Madoff’s clients actually lost $50 billion. The complaint and a civil lawsuit by regulators describe a man spinning out of control...
Madoff’s firm had about $17.1 billion in assets under management as of Nov. 17, according to NASD records. At least 50 percent of its clients were hedge funds, and others included banks and wealthy individuals, according to the records…
Prosecutors are joining regulators at the Securities and Exchange Commission, which filed a civil lawsuit, in scrambling to unravel the collapse of Bernard L. Madoff Investment Securities LLC. The broker-dealer and investment adviser was housed in a lipstick-shaped building at 885 Third Ave.
A rapid series of events in early December preceded the firm’s demise, according to the arrest complaint and SEC lawsuit.
In the first week of December, Madoff told a worker identified as Senior Employee No. 2 that clients had requested $7 billion in redemptions, he was struggling to find liquidity, and he thought he could do so, according to the FBI and SEC…
On Dec. 9, Madoff told a colleague identified as Senior Employee No. 1 that he wanted to pay bonuses in December, or two months earlier than usual. The next day, Madoff got a visit at his offices from the employees. They said he appeared “under great stress” in prior weeks, according to the documents.
Madoff told his visitors that “he had recently made profits through business operations, and that now was a good time to distribute it,” according to the FBI complaint.
When the workers challenged that explanation, Madoff said he “wasn’t sure he would be able to hold it together” at the office and preferred to meet at his apartment, Senior Employee No. 2 told investigators...
He said he had “absolutely nothing,” that “it’s all just one big lie,” and that it was “basically, a giant Ponzi scheme,” Agent Cacioppi wrote in the complaint. The senior employees understood Madoff to be saying he had paid investors for years out of principal from other investors, the agent wrote.
The business had been insolvent for years, said Madoff, who then made a stunning disclosure — he estimated losses at more than $50 billion. Madoff said he had $200 million to $300 million left, and he planned to pay employees, family, and friends.
Madoff, who had also confessed to a third senior employee, said he planned to surrender to authorities within a week, according to the complaint.
Cacioppi and another agent beat Madoff to the punch.
After saying he had no “innocent explanation,” Madoff confessed “it was all his fault,” Cacioppi wrote…
The case is U.S. v. Madoff, 08-MAG-02735, U.S. District Court for the Southern District of New York (Manhattan).
