The Case of Bernard Madoff

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Business Ethics

Final Report

The Fraud of the Century:
The Case of Bernard Madoff

Group No. 5: International Students

麥立妲 98370389
魏維德 98370390
巴玉連 98370452

December 2011

Introduction

We chose Bernard Madoff’s case because we thought that we could relate his case to many unethical behaviors. The analysis can be made on decision making and lack of ethical training which we think is an important topic to focus on this course.

On Dec. 11, 2008, Bernard Lawrence Madoff confessed that his vaunted investment business was all "one big lie," a Ponzi scheme colossal in volume and scope that cost investors $65 billion. Overnight, Madoff became the new poster child for Wall Street gall, greed and corruption.

Business ethics are the guidelines a company uses when interacting with entities inside and outside the company. It is a conscious effort to treat people and companies with respect and establish a positive working environment. The effects of ethical practices in business can benefit a company financially and they can also help a company gain the elements it needs to grow.

Table of Contents
The Madoff Affair……………………………………………………………………………………………………4 Early Life and Career…………………………………………………………………………………………………4 Corporate Governance………………………………………………………………………………………..………5 Social Responsibility………………………………………….…………………………………………………….…6 Philanthropic level…………………………………………………………………………………………...6 Ethical level………………………………………………………………………………….…………….....6 Legal level……………………………………………………………………………………………………6 Economic level………………………………………………………………………………………………6 Ponzi scheme……………………………………………………………………………………………………..……7 Arrest and charges………………………………………………………………………………………….…………7 Victims………………………………………………………………………………………………….………….……8 Ethical Analysis………………………………………………………………………………………….……………9 Importance of ethics doing business………………………………………………………….…………9 Unethical practices…………………………………………………………………………………..………10 Reputation………………………………………………………………………………………….………11 Ethics education and training…………………………………………………………………………..…12 Madoff’s Scandal……………………………………………………………………………………………………

12
Legal Process………………………………………………………………………………………………………..…14

Madoff’s Case and leadership……………………………………………………………………………………..…15

The Fraud of the Century:
The Case of Bernard Madoff

The Madoff Affair

Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S. history.

Early Life and Career
1960 – Madoff started his business with $5,000 saved from odd jobs, including lifeguarding and sprinkler installations. He worked out of Ruth's father's accounting firm in midtown Manhattan.

His plan was to make money as a market maker, matching buyers and sellers who want to trade smaller stocks that aren't listed on the big exchanges.

1962 – Started to manage his client’s money.
* Madoff didn’t like the idea of working with small accounts. * Bernard Madoff developed investment advisory business.

It's not known exactly when Madoff started to managed his client’s money, but according to SEC documents, by 1962 he's managing investments channeled through his father-in-law, accountant Saul Alpern, and one of Alpern's partners, Frank Avellino. The first investors are friends and associates, recruited in places like Queens, Long Island and the Catskills.

1983 Madoff Elected to NASD Advisory Council
* He serves on the council for four years.
Several sources later tell Trader's Magazine that Madoff actively pursued a presence on the regulatory body. One former NASD committee member and former head of trading at a New York firm recalls: "Bernie's strategy was to get actively involved in all aspects of the industry. He had a much bigger presence than the size of his...
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