Fraud: Madoff vs. Enron Bernie

Fraud: Madoff vs. Enron

Bernie Madoff scandal has been a much bigger scam than Enron both in its impact on the world and in the scope of its effect on individual lives. Hundreds of thousands of honest investors had trusted Madoff with their hard-earned cash and their lifelong savings. When Madoff's Ponzi scheme was revealed, these people practically lost everything they had. Some even had to go back to work after they had been retired for years and were looking forward to a comfortable life. But unfortunately for them, no such relief was available to them since they had invested their money with a person who was not investing it further in stocks and ventures as it was believed, but instead was using their money to pay returns to other investors. With Enron, the problem arose not with their actual business method but with their auditing practices. They company would pay its auditors Arthur Anderson to have their financial records altered. This way they could show that company was making profits when in reality it was not. People would invest in Enron stocks believing they were making a wise choice based on the financial records. But since these records had actually been fake representation of the reality, eventually everyone who had invested anything in Enron stocks ended up suffering major losses. With Madoff, auditors must been involved but the main problem occurred due to the basic business model. Madoff had not been investing the money he was trusted with but he was using it to pay returns to other investors. Millions of people and thousands of hedge funds around the globe were affected when Madoff's Ponzi scheme was disclosed. It is hard to fathom that such a massive scam could run for decades with so much success and the only person responsible was Madoff himself. Some other people must have had some inkling of what was going on especially the auditors. Christopher Miller, chief executive of London hedge fund ratings agency Allenbridge Hedgeinfo, agrees that Madoff was not alone in running this Ponzi scheme: "Some very big investor names are involved in this. The scheme could only work if enough investors were subscribing for him to pay money out. Some of the world's biggest hedge funds have been hit by this. There will be a monumental impact for the hedge fund industry, it could be larger then Enron." (Carrey, 2008) The case has however proved that business scams did not end with Enron. People who thought auditing practices would improve and regulations would get stricter received a rude shock when Bernie Madoff ran off with their hard earned money.