Basic checks could have uncovered Madoff's scheme
13 Aug 2009, Mario Christodoulou, AccountancyAge
http://www.accountancyage.com/aa/news/1783071/basic-checks-uncovered-madoffs-scheme
Sloppy fact checking by auditors and regulators allowed convicted fraudster Bernard Madoff to orchestrate his billion dollar Ponzi scheme undetected, a former financial adviser has revealed.
Frank DiPascali, described by the US Securities and Exchanges Commission as Madoff's lieutenant, is helping prosecutors piece together exactly how the jailed swindler kept his scheme under wraps for years, the Financial Times reports.
DiPascali described how, while working for madoff, he would mislead US investors, by claiming trades were backed by European banks, and deceive European investors by claiming the trades were backed by US banks.
James Cox, Duke University law professor, said regulators failed to delve deep enough into Madoff's claims.
`They never took any steps to drill down and see whether it was a Ponzi scheme,' he said.
`The SEC inspection unit really needs to be retooled.'
Read the full story: Blunders sustained Madoff fraud
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Visitor comments
Madoff's Scheme
This whole scandal just goes to show how ineffective the whole Regulatory network is, from Auditors through to the SEC. In effect the cost of regulation is just a waste of money. This is not the first time this has occurred, nor the first country that has been affected. I would suggest that financial services companies be subject to random periodic scrutiny and that miscreants be punished by very long jail sentences and have their personal wealth confiscated.
Posted by: Julian Mann , 13 Aug 2009 | 00:00