Ethical failures and prevention in the Bernie Madoff fraud case

Ethical Issues in Madoff Case

Ethical Issues in Madoff Fraud Case

The objective of this study is to identify the ethical issues and questions in the Madoff fraud case. This work will identify the people harmed and answer as to whether the scandal resulted from unethical individuals or if there are organizational issues that allowed, encouraged or were responsible for the harms. In addition, this study will answer as to what degree, the case was mostly a failure of individuals or organizational structure and of government. This study examines what might have prevented the Madoff fraud case.

Who Was Affected?

It is reported that Bernie Madoff "worked under the company called Bernard L. Madoff Investment Securities LLC. He would ask people to invest their money, and it actually seemed like the people were making returns. As all of their life savings would go into this business, Madoff would pay people the returns from money he made off new clients' investments. Madoff was not actually making money for these people but creating a huge scandal throughout the industry." ( )

II. What Was Missing?

Missing in the Bernie Madoff fraud case and the subprime mortgage crises is the ethics officers of such companies according to Parsons (2009) in an article published in The New York Times which specifically states "Most major U.S. companies have an ethics officer, but as investors survey the wreckage of a deepening financial crisis that has exposed behavior ranging from risky to downright illegal, one might ask, "What were they doing?" (p.1)

IV. What Could Have Been Done to Prevent the Fraud

Had Madoff's company had a responsible oversight committee and ethical standards officer in place with the power to regulate the company's ethical dealings, then the Madoff fraud could have more than likely been prevented according to some sources. However, Saad (2009) states that even such as business schools while appearing as "responsive to market and environmental realities" are not likely to reduce such fraud being perpetrated as individuals such as Madoff can be classified as psychopaths as they take part in behaviors such as robbing investors of billions of dollars of their money with no regard for the harm that they have inflicted upon the investors. While business school is important for instilling ethical principles it is not a preventive measure as implementation of the principles is greatly dependent upon the characteristics of the individual personality.

Summary and Conclusion

The only sure prevention for fraud such as Madoff committed is the organizational oversight and ethical standards officer who possesses enough power within the organization to examine and require ethical compliance.