Bernard Madoff's Ponzi scheme and regulatory failures

¶ … Madoff Ponzi Scheme "How One Big Lie Can Destroy Thousands of Lives"

Viewpoint of the Author

Stanwick and Stanwick (2014) present the facts of Madoff's Ponzi scheme in an objective fashion, relaying the details in a chronological order, detailing what happened, and the way in which the scheme was able to continue for many years due to the failure of processes and procedures which should have identified the fraud at an earlier stage. The authors viewpoint is indicated by the title, taking an approach which demonstrates the amount of harm that was done, and the way in which one individual was able to impact on the lives of many others, not only through the fraud costing them a large amount of money, but in the way his actions impacted on the actions of others, ethical breaches took place, and many other individuals chose to either participate in fraud, or simply to remain silent.

The tone of the article appears to indicate that the authors believed the Ponzi scheme should have been identified earlier, with a number of individuals raising concerns. Notably, a strong case was built by Markopoulos, who raised concerns with the SEC on numerous occasions (Stanwick and Stanwick, 2014). However, as Madoff had been able to gain a high level of trust, however, the process of investigation appears to have failed, with the element of the investigation; the tracking of transactions to ensure they were genuine, being omitted by the SEC, due to the cost involved, and discouragement from senior members of the SEC believing it was not necessary. Furthermore, it is apparent that a number of individuals within the organisation, who subsequently pleaded guilty to their role in the Ford, have sufficient knowledge and could have blown the whistle sooner. The whistle was blown by Madoff's sons when they discovered the fraud, and they are paying a very high personal price, including one son who committed suicide, where bankrupt judges have indicated his former spouse may still be pursued by trustees seeking to recover money for Madoff's victims. The article indicates how so many people have been hurt, many of which were completely innocent, and others were poured into the fraud.

Question 1

Trust and greed are two elements that are inherently present within the business environment. Greed is a desire to obtain or consume more, usually more than is needed or deserved. For example, an individual may be greedy in a restaurant, and order more than they can eat, which may result in overeating. Likewise, individuals with in the business environment may be greedy for returns. Greed may be seen in individuals who make investments, who want to gain excessive returns, it may also be seen for individuals working in many areas, who want to gain financially as a result of their investments. Greed is often linked to fraud, as it is a motivator that stimulates actions where individuals gain more than they have earned or deserve through unethical actions.