Regulation Will Stop Future Madoffs? It Just Ain’t So!
Government Oversight Provides a False Sense of Security
Bernard Madoff is a boon to financial regulation advocates. A well-known Wall Street figure, he confessed to defrauding his clients of $50 billion, an amazing number. It is now established conventional wisdom, blared across the media, that this and other financial disasters would likely not have happened had there been proper government supervision.
With deregulation fingered as the culprit, the new occupants of Congress and the White House are expected to infuse regulatory bureaucracies with greater authority and resources.
Commentators cite the Madoff affair as proof positive against the free market. “The long, bipartisan experiment with financial deregulation has failed utterly,” declared Tim Rutten in the Los Angeles Times. “The Madoff scandal should be a wake-up call,” wrote Arthur Levitt in the Wall Street Journal, calling for more regulation of investment advising.
Levitt headed the Securities and Exchange Commission from 1993 to 2001—a period that covers the early stage of the debacle—and knew Madoff personally. He says he did not suspect wrongdoing.
In this case, as in an earlier fraud case I’ve studied, regulators in effect facilitated the deception. People made mistakes in part because of the assurance provided by government oversight. It is remarkable that a massive government failure of eight or nine years’ duration has turned into an argument for market failure and more government.
Bernard Madoff Investment Securities was a major broker-dealer that executed a large number of trades on the Nasdaq and made markets for certain securities. Madoff, a pioneer in electronic trading, had helped build the Nasdaq electronic market. He was so well respected that regulators would ask his opinion about the trading system.
As a brokerage the firm was heavily regulated by several agencies, with the SEC as the primary overseer. Besides mediating trades, Madoff traded with other people’s capital. He appeared to be unusually successful at this, making around 15 percent annually over a couple of decades with nary a losing year.
There were rumors about those stable profits. How could it be that this one man made money during times when others used the same strategy, traded the same securities, and made losses? An obvious explanation was that Madoff exploited his market-making position, from which he knew when there were significant purchases or sales that could raise or lower the price of a security. Taking advantage of the information, he could buy or sell ahead of the trades his brokerage executed. This would give him a huge edge over other traders and explain the exceptional steadiness of his returns. He could not tell people this was the source of his profits, though, since “front-running,” as it is known, is illegal.
The other explanation was that he was not making the returns he claimed to make—he was engaged in a garden-variety fraud often called a Ponzi scheme. He may have made money initially by front running but stopped doing that because he feared getting caught. Later he fell into the scheme of fabricating returns and paying some investors with other investors’ money. Only Madoff knows what happened.
In any event, his beyond-belief performance was brought to the attention of the SEC and other agencies by at least two people acting independently. One wasa hedge fund manager named Michael Berger, who was himself apprehended for concealing losses from investors in Manhattan Investment Fund.
In an attempt to get leniency from the government, Berger in early 2000 offered the SEC, the FBI, and the U.S. Attorney’s office information about Madoff and other dubious ventures. He told me and other journalists about this. In 2001 and 2002 several articles appeared in the press expressing doubts about various aspects of the Madoff operation.
Authorities had already heard about the matter from Harry Markopoulos, an analyst and trader frustrated because he failed to achieve the robust returns Madoff reported. Markopoulos used quantitative analysis to demonstrate that Madoff could not make the returns he claimed with the derivatives trading strategy he said he used. Starting in 1999 Markopoulos repeatedly discussed the matter with government officials and even submitted a report documenting his case.
The SEC investigated Madoff Securities several times. The examiners found minor violations of a technical sort but no big problem. Madoff paid a fee, fulfilled a requirement to register as an investment adviser, and was allowed to go on his way.
People who invested their own or their clients’ money with Madoff saw the press reports and heard about the SEC examinations. For instance, a Swiss bank that channeled capital to him had concerns, but according to an internal letter the executives “found comfort” that the brokerage was subject to routine audits by the SEC and FINRA, a nongovernment industry regulator.
Regulators discovered no fraud after repeated complaints and inspections. That reassured investors and aided Madoff’s game, which was officially recognized only after he confessed in December 2008—after, possibly, decades of cheating.
The Usual Fiasco
This regulatory fiasco is not unique. Berger had a similar pattern, as I show in the Winter 2009 issue of The Independent Review. Berger was able to hoodwink investors, accountants, and auditors for three years partly because an SEC-regulated broker-dealer backed him up.
These government failures are not due to lack of regulatory laws, authority, or personnel, despite an understandable campaign to make it look that way. SEC examiners had every authority to look into any aspect of the Madoffoperation. Markopoulos, the analyst, offered his services to the government to help uncover Madoff’s fraud. IfSEC staff lacked the skills, they could have employed Markopoulos or another consultant.
Some argue that the United States needs a unified, stronger financial regulator to prevent such occurrences. Yet major frauds happen in countries such as France, where the regulator is as powerful as can be. Levitt complains that the SEC does not have enough resources. Yet it appears that plenty of resources were in fact spent on the Madoff matter.
The truth is that government agents are subject to the same cognitive weaknesses and biases as market agents and make the same mistakes. Madoff’s investors took their cue from one another—as did people in other schemes. Government agents joined in the herding behavior and encouraged the delusion by exonerating Madoff of serious accusations.
Reducing the incidence of fraud requires investors to be more skeptical and alert to early signs of trickery. It requires better awareness of the mental biases we all have, which make people easy marks to smart manipulators. But the popular image of government bureaucrats as wise guardians taking care of the rest of us creates a false sense of security—a cognitive hazard that makes investors more vulnerable.
Comment by Wayne Martin on 30 April 2009:
The huge issue missed in this article is that this was a MASSIVE FRAUD that could have been detected by a review of the daily transaction logs between Madoff’s illegal “inside” operation and the transaction logs of his legal “outside” operation. Madoff claimed that he “rolled” investor’s positions to cash every night–so there would have had to have been hundreds of thousands of transactions executed for this Buy/Sell (Frequently) model to work. If media reports (to date) are to be believed, Madoff did not make any trades for years–so all of his reported “returns” would have been seen to be fraudulent immediately.
This scam would have been detected years ago if the “regulators” had the authority to gain access to Madoff’s records, and sufficient computer skills to compare the records.
The basic point that “where there is a will there is a way” is valid .. but this is not the best example upon which to build that thesis.
Comment by R. William Lee, III on 30 April 2009:
I have run my own institutional stockbrokerage firm and am well-versed in the burdensome and intrusive regulatory structure imposed on the financial services business. I’ve subsequently closed my firm (after a successful 20+ year career) due in no small part to being fed up with all the regulatory red tape. It became unworkable to run a small brokerage firm – the regulatory dimension overwhelmed every other aspect.
Like all facets of the economy, I suppose, there are \’good guys\’ and \’bad guys\’. I don\’t do the right thing due to regulations and rules, I do the right thing because that\’s something I value personally. Bad actors – people that do the wrong thing – don\’t seem to be detered by regulations.
The regulatory structure reminds me of airport security: All the people (99.9% of whom present no threat) are subjected to the security protocols because of a potential threat from the 0.1% who have evil intent. Think of the cumulative cost in wasted time and dollars. And yet we must have airport security, because the \’bad guys\’ hide among the vast population of \’good guys\’.
The chief difference between airport security and financial market regulation is that airport security, tahnkfully, is so highly EFFECTIVE. As evidenced by the Madoff case, financial regulatory scheme is so ineffective – subjecting all the people to all the many rules, so technical, intrusive, broad, contradictory, etc. while the bad actors go on unfettered.
Comment by jack loach on 26 May 2009:
Pictet & Cie.- claim they are the “Rolls Royce”of swiss banks.
Swiss Banks or more correctly Swizz banks.
Swizz. —- “ a great disappointment.” or a “ fraud.”
Fraud. —“ an intentional deception or dishonesty.”— “a crime.”
Crime. —“ an act committed or omitted in violation of a law.”
Serious Crimes .
Conspiring to pervert the Course of Justice.
Perverting the Course of Justice.
Contempt of Court.
The Establishment “ Cover up crimes”.
The ‘Doyens’ of the establishment.’ ( Ivan Pictet and Monty Raphael.)
Ivan Pictet.
Managing partner in Pictet & Cie Bank .— Switzerland.
President of the Geneva Financial Centre.
World Bank.committee member.
United Nations. Investment Committee member,
Vice President – Global Humanitarian Forum.
Member of the Henokiens.
Blackstone Group — Board Member.
Past- President – Geneva Private Bankers association.
Past –President – Geneva Chamber of Commerce and Industry.
Monty Raphael.
Quote.” —- Doyen of U.K. Fraud lawyers.
Consultant & Head of Fraud and Regulatory Dept.
Member of Board of Directors of the Fraud Advisory panel.
Member of the Law Society of England & Wales.
International Bar Association Member.
Past President—London Criminal Court Solicitors Association.
Past Chairman —of Anti Corruption Committee.
Founder of Business Crime Committee of the International Bar
Association.
Pictet & Cie Bank & Peters & Peters.
The bank and it’s officials deliberately withheld crucial documents requested under a High Court order.The bank and it’s officials deliberately withheld evidence from the Police , and one of it’s account managers Susan Broadhead gave a false witness statement to the police.
Another one of it’s managers Nicholas Campiche ( Now Head of Pictet – Alternative Investments.)concocted a letter pretending to be a client and closed his account. The senior partner (Ivan Pictet.)sought to have numerous documents destroyed,along with those copies held in their London office of P.A.M. Initially stating that they were forgeries then their lawyers Peters & Peters – Monty Raphael – and the barrister Charles Flint.Q.C.) –later had to admit in Court that the documents were genuine.
(1) It is a criminal offence for a bank to knowingly act for an undischarged criminal bankrupt in so far as it seeks to assist that criminal bankrupt in the fraudulent movement of monies. ( Money Laundering.)
(2) It is a criminal offence for a bank to lie to the police and the bankrupts trustee in bankruptcy in so far as any knowledge of, or dealings with the bank was refuted .
(3) A bank can be guilty of Contempt of Court if it fails to comply fully with the Courts order for discovery .
(4) The banks contempt is further compounded if it fails to address its error after it is specifically drawn to the to its solicitors attention. ( Monty Raphael).
(5) It is a criminal offence under the Financial Services Act to seek to destroy evidence that might be relevant to an investigation .
(6) It is a criminal offence not to relinquish control of funds to the Trustee immediately the fact of the bankruptcy is drawn to the banks attention.
(7) It is a criminal offence to lie or otherwise obfuscate the lawful and proper enquiries of the F.S.A.
On Dec 9th,2008. the complaint was sent to 150 Members of the House Of Lords and 230 Members of Parliament.
*** We thank —David Cameron. M.P. ( Canary Wharf Speech.) Dec. 2008.
(1) Bankers who behave irresponsibly should face professional consequences.
(2) If anyone is found to have behaved criminally they must be prosecuted.
(3) The F.S.A. and the Serious Fraud Office should be following up every lead,
investigating every suspect transaction .
(4) We need to make it 100% clear –those who break the law should face
prosecution.
(5) That we make sure we root out any wrongdoing that may have happened, whoever is
involved ,however high or well connected they may be.
Quote. ( America’s Top Lawyer .)
You can be the richest man in the world with the best lawyers that money can buy but you cannot win against a man who has got nothing left to lose and is telling the truth.
In June.2009 .it will be exactly a year since we started our campaign via the “net” to highlight our fight to get “justice”. In our second year campaign we will reveal further damning evidence . We again thank other “ E- Mailers” for their information in relation to our campaign.
Full Story.
Go to search box on “Google” and insert ( Ivan Pictet / Monty Raphael) or
insert ( Pictet & Cie / Monty Raphael.) – - then try it on “Yahoo”.
Or try (Jack Loach/ Ivan Pictet.)
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Comment by jack loach on 3 March 2011:
Update . March 3rd. 2011
Nov.23 – - -Nov.26 th. 2010.
The following sent to – - – - 312- – Lords – - – - – - House of Lords. ( Inc. Lord Myners.)
The following sent to – - – - 649 – - M.P.’s – - – - – House of Commons.
SWISS BANK PARTNERS IN CRIMES.
Pictet & Cie Bank.
Ivan Pictet.
Charles Pictet.
Nicolas Pictet.
Jacques de Saussure.
Jean – Francois Demole.
Renaud de Planta.
Philippe Bertherat..
Pictet & Cie.- claim they are the “Rolls Royce”of Swiss banks.
Swiss Banks or more correctly Swizz banks.
Swizz. —- “ a great disappointment.” or a “ fraud.”
Fraud. —“ an intentional deception or dishonesty.”— “a crime.”
Crime. —“ an act committed or omitted in violation of a law.”
Serious Crimes .
Conspiring to pervert the Course of Justice.
Perverting the Course of Justice.
Contempt of Court.
Pictet & Cie Bank –Partners –(1996—2011)—guilty.
Peters &Peters – Partners.— (1999—2011)— guilty.
The bank and it’s officials/lawyers deliberately withheld crucial documents requested under a High Court order. The bank and it’s officials/lawyers deliberately withheld evidence from the Police, and one of it’s account managers Susan Broadhead gave a false witness statement to the Police.
Another one of it’s managers Nicholas Campiche ( Now Head of Pictet – Alternative Investments.) concocted a letter pretending to be a client and closed his account. The senior partner (Ivan Pictet.) sought to have numerous documents destroyed,along with those copies held in their London office’s of Pictet Asset Management. Initially stating that they were forgeries then their lawyers Peters & Peters – Monty Raphael –and the barrister Charles Flint.Q.C. later had to admit in Court that the documents were genuine.
British Parliament. Hansard .29th March 2007.
Barry Sheerman .M.P.—quote.
———“ Constituents of mine have lost £2 million through fraud. The fraudster used Pictet & Cie – - a French Bank – - and Pictet Asset Management to back the fraud being perpetrated.””
(1) It is a criminal offence for a bank to knowingly act for an undischarged criminal bankrupt in so far as it seeks to assist that criminal bankrupt in the fraudulent movement of monies. ( Money Laundering.)
(2) It is a criminal offence for a bank to lie to the police and the bankrupts trustee in bankruptcy in so far as any knowledge of, or dealings with the bank was refuted .
(3) A bank can be guilty of Contempt of Court if it fails to comply fully with the Courts order for discovery .
(4) The banks contempt is further compounded if it fails to address its error after it is specifically drawn to the to its solicitors attention. ( Monty Raphael).
(5) It is a criminal offence under the Financial Services Act to seek to destroy evidence that might be relevant to an investigation .
(6) It is a criminal offence not to relinquish control of funds to the Trustee immediately the fact of the bankruptcy is drawn to the banks attention.
(7) It is a criminal offence to lie or otherwise obfuscate the lawful and proper enquiries of the F.S.A.
In the F.S.A. cover up , they concluded that there had been “ Rogue” elements in Pictet & Cie’s , London operations . They had been moved from their London Office so who was there left to prosecute. “ Unbelievable.”
On Dec 9th,2008. the complaint was sent to 150 Members of the House Of Lords and 230 Members of Parliament.
*** We thank –David Cameron. M.P. ( Canary Wharf Speech.) Dec. 15th. 2008.
Now— PRIME MINISTER.
(1) Bankers who behave irresponsibly should face professional consequences.
(2) If anyone is found to have behaved criminally they must be prosecuted.
(3) The F.S.A and the Serious Fraud Office should be following up every lead,
investigating every suspect transaction .
(4) We need to make it 100% clear –those who break the law should face
prosecution.
(5) That we make sure we root out any wrongdoing that may have happened, whoever
is involved, however high or well connected they may be.
Ivan Pictet.
Managing partner in Pictet & Cie Bank . — retiring -?. 2010.
President of the Geneva Financial Centre. —stepping down -2010. ?
World Bank.committee member.—- ?
United Nations. Investment Committee member,
Vice President – Global Humanitarian Forum. — redundant.2010.?
Member of the Henokiens.
Blackstone Group — Board Member.
Past- President – Geneva Private Bankers association.
Past –President – Geneva Chamber of Commerce and Industry.
Monty Raphael. ( Peters & Peters.)
Quote.” —- Doyen of U.K. Fraud lawyers.
Head of Fraud and Regulatory Dept. —- stepping down, –2009.? Director of the Fraud Advisory panel.
Member of the Law Society of England & Wales.
International Bar Association Member.
Written Parliamentary Questions received by the table office ..
(1) To ask the secretary of state what steps he is taking to ensure that Swiss Banks such as Pictet & Cie do not evade criminal prosecution under EU law even when the illegal act is committed by a London based subsidiary.
(2)To ask the secretary of state what steps he is taking to protect the rights of UK citizens who seek redress following criminal activities by Swiss banks with subsidiary offices located in London.
On Dec 9th,2008. the complaint was sent to 150 Members of the House Of Lords and 230 Members of Parliament.
On Aug 19th.2009.another complainants file regarding the “cover up” was forwarded to the same 380 members.
We started our campaign in June 2008 — via the “net” to highlight our fight to get “justice”. In our second year campaign we hoped to reveal further damning evidence . Due to there being an on going Police investigation into our complaint we are at this moment unable to place dozens of documents on to the “net”. Again we thank other “ E- Mailers” for their information in relation to our campaign.
Quote. ( America’s Top Lawyer .)
You can be the richest man in the world with the best lawyers that money can buy but you cannot win against a man who has got nothing left to lose and is telling the truth.
Truth Hurts.
Ivan Pictet. Announces stepping down from Pictet & Cie. 5th Feb 2010.
Stepping Down—President of Geneva Financial centre.—2010.
Monty Raphael. Steps down as head . May. 2009.
*** We note that there has been a sharp increase in Peters & Peters partners leaving to go to other practices. Moving does not alleviate them of any responsibility from any illegalities that may have occurred at Peters & Peters during their partnership tenure. From 1999 onwards.
*** Were currently waiting to see if the Police and other Law Enforcement Bodies attempt to cover this case up like their F.S.A. counterparts. If they do –“ then watch this space.”
We were informed that due to pressure from our M.P. that the Ministry of Justice have asked Lord Myners to investigate our claims that the F.S.A. covered up the illegal activities of Pictet Asset Management. London.
It has been noted that the book launch for PICTET was held at Lord Myners Belgravia home.We might as well have asked Ivan Pictet to investigate our complaint.-or someone from FRIENDS RE-UNITED.
Lady Myners on Prix PICTET advisory board.
The consensus of opinion is the Pictet & Cie should be prosecuted , and that their U.K. banking licence should be taken away.
Their Solicitors at Peters & Peters .London “ struck off and prosecuted..”
*** Started campaign — June 6th.2008.
2 .5 years —- approx 3 .5 million e-mails – - – but still no writs, injunctions or threats of litigation – – - WHY – - – because it is all true.
*** . The bigger they are — the harder they fall.!!!
In America —- they would have all been in prison for the last seven years.
Nov.23rd –Nov.26th. 2010 .
The above sent to —— 312 – - Lords – - – House of Lords.( Inc. Lord Myners.)
The above sent to — –649 – - M.P.’s – - – House of Commons._
Full Story.
Go to search box on “Google” and insert ( Peters & Peters/ Pictet & Cie.)
or go to ” Google ” and insert any of the following combinations.
Insert– ( Jacques de Saussure/ Monty Raphael.)
Insert– ( Ivan Pictet / Monty Raphael.)
Insert– ( Pictet & Cie /Monty Raphael.)
Insert– ( Charles Flint. Q.C./ Monty Raphael.)
Insert– ( Nicholas Campiche / Susan Broadhead.)
Insert– ( F.S.A. / Monty Raphael.)
Insert –( F.S.A. / Pictet & Cie.)
Insert –( Hansard /Pictet & Cie..)
Comment by jack loach on 25 April 2011:
*** Were currently waiting to see if the West Yorkshire Police :-
(1) Chief Constable. — Sir Norman Bettison.
(2) Forces Solicitor . — Mike Percival .
(3) Head Of Economic Crime Unit. — Det . Chief Inspector Steven Taylor.
continue to attempt to cover this case up like their F.S.A. counterparts. If they do –“ then watch this space.”
We were informed that due to pressure from our M.P. that the Ministry of Justice have asked Lord Myners to investigate our claims that the F.S.A. covered up the illegal activities of Pictet Asset Management. London.
It has been noted that the book launch for PICTET was held at Lord Myners Belgravia home.We might as well have asked Ivan Pictet to investigate our complaint.-or someone from FRIENDS RE-UNITED.
Lady Myners on Prix PICTET advisory board.
The consensus of opinion is the Pictet & Cie should be prosecuted , and that their U.K. banking licence should be taken away.
Their Solicitors at Peters & Peters .London “ struck off and prosecuted..”
In America —- they would have all been in prison for the last seven years.
Comment by Jack loach on 1 September 2011:
WEST YORKSHIRE POLICE ..
We note that Det Chief Inspector Steven Taylor has been removed as Head of the Economic Crime Unit and demoted to Det. Inspector. ( One down two to go.)
A file of some 339 pages including scores of documentation has been forwarded to the following — Aug 4-6th .2011.
640 — Members of Parliament.
460 — Members of the House of Lords.
Ministry of Justice.
F.S.A. – Financial Services Authority.
Serious Fraud Office,
Peters & Peters .London. — Solicitors.
Pictet & Cie Bank — London & Geneva.
West Yorkshire Police Authority.
I.P.C.C.— Independent Police Complaints Commission.
C.C.R.C. — Criminal Cases Review Commission.
Swiss Ambassador London.
Comment by jack loach on 3 April 2012:
The Criminal Super Class.
Bankers.
Lawyers.
Police.
Over approximately five years of hitting the internet with a case that involves criminality by a major Swiss Bank , Britain’s most prominent fraud lawyer and a regional police force headed by one of Britains top policeman. ( Surely justice should prevail.)
In fact the complete opposite even though the offences committed are very serious.
Conspiring to Pervert the Course of Justice.
Perverting the Course of Justice.
Contempt of Court.—————— plus a dozen or so smaller offences.
In the five years some 6-7million e-mails have been forwarded to all Members of Parliaments in Britain and Switzerland, every barrister and chambers in Europe .
Every law inforcement body in both countries , and America. Even raised in Parliament twice.
The banking fraternity ( somewhat Freemason-ish) decide fully aware of this case decide to give the Private Banker of the Year Award to Ivan Pictet — Pictet & Cie Bank. ( Him being the person most responsible for the crimes committed by him and his bank partners. )
The legal fraternity ( very Freemason -ish ) decide that Monty Raphael of Peters & Peters . London become an honourable Queens Counsellor and to rub the salt in six months later made a Master of the Bench. He also was guilty of all the above offences but so what. At this rate he might become King by the end of the year.
The police ( West Yorkshire Police.) headed by Sir Norman Bettison has not improved as a force on fighting crime. They are now worse than the days of the Yorkshire Ripper , when they had him in custody nine times and let him go. If it hadn’t been for the South Yorkshire Police force catching the Ripper he would have still been at large to day .
Then they wonder why the man in the street becomes angry and decides to riot.
All we can do is to continue pressing for justice and up the pressure on the internet
for the next five years and beyond.
Comment by jack loach on 13 May 2012:
Pictet & Cie. Bank – list of crimes.
1996 —- Breach in London.
2003 — FSA — States rogues operating in Pictet’s –London
Office . Ivan Pictet said documents were forgeries but
were lated proved to be genuine. Had documents held
in London office destroyed.
2007 — Japan. —- The Securities and Exchange Surveillance
issued a recommendation that the Prime Minister and
The Commissioner of the FSA to take disciplinary
action against Pictet Asset Management. Japan Ltd.
2008 — Dec. —Pictet Bank state — “ we have never chosen
any funds linked to Madoff.”
2011 — Madoff Trustees sue Pictet & Cie. For $156 Million.
2011— Bank at centre of Bribery and money laundering case.
Being sued for $350 million. ( In U.S.A.)
2012.— Geneva Bank Pictet used in Offshore Tax Scheme.
U.S. Authority states.