After 33 years of marriage, Steven Simkin and Laura Blank divorced in 2006. They agreed to split their considerable wealth equally. She got the apartment on the Upper East Side; he got the house in Scarsdale, N.Y.
Afterward, they spoke infrequently, mostly concerning their two grown sons.
More than two years later, Ms. Blank received a voicemail message that stunned her: Mr. Simkin wanted to revise their settlement. She refused, and he sued.
While divorce agreements are generally ironclad and rarely rescinded, this challenge has now reached New York’s highest court. Deeply divided appellate justices requested what is considered an unusual review of settled law involving contracts.
What made Mr. Simkin’s call for a do-over even remotely possible has its roots in Bernard L. Madoff’s Ponzi scheme. When the couple split their assets evenly, the largest chunk of money was invested with Mr. Madoff. Mr. Simkin kept much of his funds in the Madoff account, which was held in his name.
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The trustee liquidating Bernard Madoff’s defunct investment-advisory business reported he has recovered $1.5 billion for former customers and is pursuing $14.8 billion more from feeder funds, Madoff’s family and friends and related parties.
Irving Picard told a U.S. bankruptcy judge in an 83-page report yesterday that he has made “significant headway into the investigation of Madoff’s fraud.” Picard previously said he had recovered $1.08 billion as of June 30.
Picard said in the report, which details his actions through March 31, that he has filed 14 so-called avoidance actions seeking allegedly improper profits from Madoff’s $65 billion fraud, the biggest in history. It is the third such report filed by Picard in the case.
“The Trustee anticipates filing extensive additional litigation based on investigation conducted by the trustee’s counsel and consultants,” Picard said in the report.
The liquidation is being overseen by the Securities Investor Protection Corp., or SIPC, a government-chartered agency that charges fees to brokerages. As of Feb. 28, SIPC had paid $602.4 million in customer claims and $141.8 million in administrative expenses.
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The Securities and Exchange Commission announced Monday it had begun an inquiry into two dozen financial companies to determine whether they followed accounting practices similar to those recently disclosed in an investigation of Lehman Brothers.
Where on earth has the SEC been?
It’s now clear Lehman Brothers’ balance sheet was bogus before the bank collapsed in 2008, catapulting the Street and the world into the worst financial crisis since 1929. The Lehman bankruptcy examiner’s recent report details what just about everyone on the Street has known since the firm imploded – that Lehman defrauded its investors. Even Hank Paulson, in his recent memoir, referred to Lehman’s balance sheet as bogus.
In order to look like it could borrow $30 for every dollar of its own money, Lehman shifted liabilities off its books at the end of each quarter. Its CPA, Ernst and Young, approved of this fraud against the advice of its own whistle blower, whom Ernst and Young fired.
Lehman’s practices couldn’t have been all that different from those of every other big bank on the Street. After all, they were all competing for the same business, and using many of the same techniques. Lehman was just the first to go under, causing a financial run that led George W. to warn “this sucker could go down” unless the federal government came up with hundreds of billions to bail out the others.
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When Bernie Madoff’s massive fraud hit the headlines it was often said that it could ever only happen in New York. Well, on a per capita basis, New Zealand – a magical place, known as The Land of the Long White Cloud – is providing stiff competition. It might be as far away from the Big Apple as you can get, but therein lies the lesson: you need to be alert to fraud anywhere. In almost any business, especially banking, you must have sophisticated systems in place that offer protection. Financial analysis, transactional analysis and computer forensics are but a few of those involved.
The guilty New Zealander is investment banker Stephen Versalko, 51, who has just been sentenced to six years in prison for stealing $NZ18 million from his employer, ASB Bank. OK, that hardly ranks alongside Madoff’s billions and his 150 years in the slammer, but in a small community like New Zealand shame carries a lot of weight. Versalko’s prospects of ever running a business again are about as bright as Bernie’s. Details of the case revealed in court show how many warning lights were flashing. Two prostitutes received over $3 million from Versalko, while much of the rest went on wine, property and making interest payments to clients to keep the scam running.
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A broker convicted in an earlier crackdown on Sterling Foster & Co., a defunct New York boiler- room firm that manipulated stock prices, was sentenced to 15 years and eight months in prison for defrauding investors out of more than $66 million in a new investment scheme.
Michael Richard MacCaull, of Northport, New York, pleaded guilty July 8, 2008, to conspiracy to commit mail and wire fraud in a scheme that the U.S. says operated between January 2001 and January 2008. MacCaull was a principal in the firm of Razor FX, a spot foreign currency exchange based in Great Neck, New York, which defrauded investors by fraudulently representing that he was investing their money in the spot foreign exchange market and merely retained the most of the funds.
His lawyer, Elliot Fuld, asked the court for a reduced sentence, citing his guilty plea. MacCaull was previously sentenced to 15 months in federal prison after being convicted in 2003 of securities fraud in the Sterling Foster case.
“I am truly ashamed,” MacCaull told U.S. District Court Judge Dora Irizarry in Brooklyn, New York. “Razor FX started with the sole intention of being a legitimate foreign exchange,” he said, saying the fraud began after the firm sustained losses after the Sept. 11, 2001, terrorist attacks and he and his partner attempted to recoup the funds.
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The U.S. was sued by a charity and two individual investors for alleged negligence by the Securities and Exchange Commission in failing to uncover Bernard Madoff’s fraud scheme.
The Michael and Ruth Slade Foundation and Alan and Blayne Goldman filed separate complaints today in New York federal court. In December, the SEC asked for the dismissal of a similar case that was brought the previous month by an individual investor.
Through its negligence, “the SEC caused Madoff’s scheme to continue, perpetrate and expand, eventually resulting in billions in losses by investors, and directly caused plaintiff to lose $2.5 million,” the Slade Foundation wrote in its complaint. The Goldmans said they lost $2.4 million.
Madoff, 71, is serving a 150-year prison sentence for conducting the biggest Ponzi scheme in history.
John Heine, a spokesman for the SEC, declined to comment on the suits. Both were filed by Herrick, Feinstein LLP in New York.
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Note to investors: If someone claims to be a prophet and promises to win you money by predicting changes in the stock market, don’t walk away. Run.
But unfortunately over 100 investors did not run away when Sean David Morton — who dubbed himself “America’s Prophet” — asked for their money. In all, investors gave Morton more than $6 million in the hopes that he would use his alleged psychic abilities to win big money in the market.
Just last week Morton was charged with investor fraud by the Securities and Exchange Commission. He has not responded to the complaint yet. E-mails and calls to his company’s office were not returned.
“Sean David Morton lured scores of investors with his lies and then stole their hard-earned money,” Sanjay Wadhwa, assistant director of the SEC’s New York Regional Office, told ABC News. “Our enforcement action ensures that his money manager days are over.”
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BOSTON (Reuters) – Financial regulators have not fully learned their lessons despite missing the massive fraud engineered by Bernard Madoff, said the man who tried for years to raise the alarm about Madoff’s scheme.
The warning from Harry Markopolos carries the weight of the fame he gained a year ago, including an appearance before Congress to blast the Securities and Exchange Commission for ignoring his tips that something was amiss with Madoff’s investment management business and its years of amazingly consistent profits.
Madoff eventually pleaded guilty to what the government called a $65 billion Ponzi scheme, the largest in history.
SEC leadership appointed by the Obama administration, including the agency’s chair, Mary Schapiro, vowed reforms.
Yet even now, “The SEC is nowhere near aggressive enough,” Markopolos, 53, told Reuters. “It still has the mind-set where it will only enforce securities law instead of enforcing ethics.”
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A Chinese businesswoman was sentenced to death Friday for cheating investors out of $56 million
Federal prosecutions for serious financial crime plummeted as the nation headed toward one of the worst economic meltdowns in U.S. history, a USA TODAY examination of Justice Department records shows.
That drop in enforcement touched everything from stock-trading schemes and corporate wrongdoing to fraud aimed at individual consumers, according to the records. From the fiscal years 2003 to 2009, the number of federal corporate fraud cases plunged 55%; securities fraud charges dropped 17%; and bankruptcy fraud cases fell by 44%.
Justice Department officials, under pressure from lawmakers, have promised to reverse that trend, and have launched thousands of new criminal probes targeting financial crimes. But while the number of new cases filed in federal courts has increased slightly in recent months, it remains a fraction of what it was a few years ago.
“There’s no doubt that if we got started two years ago, we would have gotten a lot more of these guys. Because we didn’t, there are people who are going to get away with it,” said Sen. Ted Kaufman, D-Del. “We should never have left ourselves naked when it comes to financial fraud.”
Associate Attorney General Tom Perrelli said federal investigators are moving as quickly as they can to prosecute crimes linked to the financial crisis. “The administration is very much focused on the prevention and deterrence side of this,” he said.
Federal prosecutors charged 91 people in corporate fraud cases in the fiscal year that ended Sept. 30, Justice Department figures show. In 2003
The FBI agents who arrived at Bernard Madoff’s luxury penthouse apartment on the morning of Dec. 11, 2008, found a broken man in a bathrobe who knew his time was up.
The one-time titan of finance confessed he had “paid investors with money that wasn’t there.” A year after Madoff’s scheme collapsed
A second reliable rule is that returns in excess of the return offered by the Government can be achieved only by taking risk.
A third, which is rarely mentioned in the investment books, is that risk is most obvious when an investment is volatile and is least obvious when a risky investment has not yet shown any volatility.
The fourth follows from this: investors should be particularly questioning when an adviser recommends a low-volatility investment that offers superior returns. However, the returns offered by Madoff would not have seemed implausibly generous to many investors
A fifth is not to invest in something you do not understand simply because a group of your peers is doing so. A desire to conform can explain many decisions that we would otherwise not take.
A sixth rule to observe is that, whatever your adviser says, you should make sure that your investments are well diversified. But again diversification is most difficult to assess when risky investments are not obviously volatile.
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