Bernard Madoff Essay

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Accounting Fraud Examination October 12, 2011 Introduction As we look back on the first decade of the 21st Century, we see that Corporate America and the Financial Markets were riddled with corruption and fraud. At the beginning of the decade we saw the likes of Enron and WorldCom become insolvent due to accounting frauds of epic proportions. The one case that stands out amongst all of them is the Bernard Madoff case, which is considered to be the largest fraud case of all time. “Madoff managed to lure billions of dollars away from huge charities, as well as wealthy individuals in both the United States and Europe by getting them to invest in his hedge fund. He did so by claiming extraordinary returns (generally in the low double digits). His scheme eventually reached a staggering $50 billion under "management" (Armstrong, 2008). Mr. Madoff was born on April 29, 1938; he graduated from Far Rockaway High School in 1956. He then enrolled in Hofstra University Law School from which he did not graduate. In 1960 he created Bernard L. Madoff Investment Securities (BMIS) with initial capital of $5000 (Gagnier, 2008). In the years to come his firm became ranked as “one of the top money markets on the NASDAQ” (Gregoriou, et al, 2009). He was described as “a man that had an impeccable reputation on Wall Street. Investing with him was an exclusive privilege, a clear sign that one had made it socially. Bernard Madoff was a legend” (Gregoriou, et al, 2009). His persona and BMIS came crashing down on December 11, 2008, when he was arrested by the FBI on securities fraud charges. The night prior to the 11th, he confessed to his two sons, who were top employees of the firm, and his wife that BMIS was “a big lie” and amounted to nothing but a huge Ponzi scheme. His sons turned him into authorities and he was arrested the next morning (Gagnier, 2008). BMIS and

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