How Bernie Madoff did it

Madoff is behind bars and isn't talking. But a Fortune Magazine investigation uncovers secrets of his massive swindle.

Since Bernard Madoff was arrested in December and confessed to masterminding a multi-billion Ponzi scheme, countless people have wondered: Who else was involved? Who knew about the fraud? After all, Madoff not only engineered an epic swindle, he insisted to the FBI that he did it all by himself. To date, Madoff has not implicated anybody but himself.

But the contours of the case are changing.

Fortune has learned that Frank DiPascali, the chief lieutenant in Madoff's secretive investment business, is trying to negotiate a plea deal with federal prosecutors. In exchange for a reduced sentence, he would divulge his encyclopedic knowledge of Madoff's scheme. And unlike his boss, DiPascali is willing to name names.

According to a person familiar with the matter, DiPascali has no evidence that other Madoff family members were participants in the fraud. However, he is prepared to testify that he manipulated phony returns on behalf of some key Madoff investors, including Frank Avellino, who used to run a so-called feeder fund, Jeffry Picower, whose foundation had to close as a result of Madoff-related losses, and others.

If, for example, one of these special customers had large gains on other investments, he would tell DiPascali, who would fabricate a loss to reduce the tax bill. If true, that would mean these investors knew their returns were fishy.

Explains the source familiar with the matter: "This is a group of inside investors -- all individuals with very, very high net worths who, hypothetically speaking, received a 20% markup or 25% markup or a 15% loss if they needed it." The investors would tell DiPascali, for example, that their other investments had soared and they needed to find some losses to cut their tax bills. DiPascali would adjust their Madoff results accordingly.

(Gary Woodfield, a lawyer for Avellino, and William Zabel, the attorney for Picower, both declined to comment. Marc Mukasey, DiPascali's laywer, says, "We expect and encourage a thorough investigation.")

Inside the Madoff swindle: Read the full story

These special deals for select Madoff investors have become a key focus for federal prosecutors, according to this source and a second one familiar with the investigation. The second source describes the arrangements as "kickbacks" and "bonuses." A spokesperson for the U.S. Attorney declined to comment.

But a little-noticed line in a public filing by the prosecutors in March supports at least part of these sources' account. The document that formally charged Madoff with his crimes asserted that he "promised certain clients annual returns in varying amounts up to at least approximately 46 percent per year." That was quite a boost when most investors were receiving 10% to 15%. It appears to reflect the benefits that accrued to those who helped bring large sums to Madoff.

The emergence of this potential star witness is the best news to surface publicly for the Madoff family since the case began. DiPascali has every incentive to implicate high-profile names to save his skin -- and nobody is more under scrutiny than the Madoffs, many of whom worked for the firm. (Representatives for all of the family members have asserted their innocence.) It should be noted that DiPascali is not in a position to say what the Madoffs knew -- this should not be construed as an exoneration. But the fact that a high-ranking participant in the investment operation is not implicating them is telling.

The DiPascali revelations are part of a special Fortune investigation into the inner workings of Madoff's firm. It chronicles Madoff's rise -- how he started his firm in 1960 with only $200, rose to become a pioneer of electronic trading, and became notorious for his investment operation -- a strange, secretive world supervised by DiPascali.

DiPascali was a 33-year veteran of Madoff's firm. A high school graduate with a Queens accent, he came to work in an incongruously starched version of a slacker's uniform: pressed jeans, a sweatshirt, and pristine white sneakers or boat shoes. He could often be found outside the building, smoking a cigarette.

Nobody was quite sure what he did or what his title was. "He was like a ninja," says a former trader in the legitimate operation upstairs. "Everyone knew he was a big deal, but he was like a shadow."

He may not have looked or acted like a financier, but when customers like the giant feeder fund Fairfield Greenwich came in to talk, DiPascali was usually the only Madoff employee in the room with Bernie. Madoff told the visitors that DiPascali was "primarily responsible" for the investment operation, according to a Fairfield memo.

And now DiPascali may be primarily responsible for taking the ever-surprising Madoff case in yet another unexpected direction

Ponzi-Proof Your Portfolio

Avoid falling victim to a ponzi scheme, with these 5 easy-to-understand tips to avoid falling victim to the next ponzi scam artist.



- Check out the accountant. Call the firm, demand a client list, ask who audits the money-management firm you're considering. A fraud always involves the bean counter.

- Ask the money manager to explain in laymans terms how he (or she) invests. Dont be shy about asking questions. If he (or she) cant explain it, it may be because he (or she) doesn't have a decent (or legal) strategy.

- Do not assume that someone else has done the due diligence. This is huge. Just because there are important or smart people involved, it doesn't mean they have checked the company out.

- Check out FINRA BrokerCheck, a free online tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers.

- Never, ever, put all your eggs in one basket. Even the SEC, apparently, can be fooled.

What is a ponzi scheme? The Ponzi Scheme Explained

I was on Youtube again, and I found this great AP video that explains what a ponzi scheme is, in very easy to understand terms.

Meeting undid the 'Chinese Warren Buffett'

When Toronto fund manager Weizhen Tang could not show investors how he achieved reported results, they went to regulators

For years, Weizhen Tang was considered an investment guru in much of the Chinese community in North America. He called himself a "Chinese Warren Buffett" telling investors and those who would listen that he could generate a 1-per-cent weekly return.

But Mr. Tang's reputation was dealt a stunning setback during the week of Jan. 26, 2009, according to documents filed in court this week where he's facing allegations of fraud.

That was when he held a public demonstration of his investment strategy in his Toronto office and couldn't match the reported results of his funds.

"Unfortunately the public demo failed," Mr. Tang wrote in an e-mail to investors a few days after the event. "I apologize. I don't want to find any excuses. I need more hard work."

He added that there wasn't enough cash to meet the redemption demands that had come in since the meeting and he told investors to wait six months.

Not a good enough an answer, Mr. Tang's investors struck back. In the weeks to follow, they organized themselves into a committee, filed a lawsuit, launched their own investigation and went to regulators in Canada and the United States, court filings show.

The Ontario Securities Commission shut down Mr. Tang's Canadian operation, Oversea Chinese Fund, on March 17 and started an investigation into allegations of fraud. This week the U.S. Securities and Exchange Commission filed fraud charges against Mr. Tang in Dallas, alleging his fund was a Ponzi scheme. The SEC also froze the assets in his U.S. fund, WinWin Capital Management.

Mr. Tang has acknowledged in e-mails to investors that he lost money investing, but he has insisted he didn't take any money for himself. His lawyer has said Mr. Tang is co-operating with regulators.

None of the allegations by investors have been proved in court as of yet, therefore, it should be borne in mind that all persons are innocent until proven guilty.

Documents filed in court detail Mr. Tang's rise to prominence and show his many attempts to encourage investors to stick with him despite the allegations.

Mr. Tang, 50, came to Canada from China in the early 1990s, according to his website. He earned a graduate degree in biotechnology from the University of Waterloo and worked at various research facilities before turning to investing in 1995.

At first he handled investments for friends and relatives, the website stated. In 2001, he created Oversea Chinese and expanded to the Dallas area in 2006 with the help of Jiehua Yu, a friend from the University of Waterloo, according to court filings. Ms. Yu had earned a graduate degree from Waterloo as well and worked with a Guelph, Ont.-based company before moving to the United States. According to court filings, she created WinWin Capital, co-owned by Mr. Tang.

By 2009, Oversea Chinese and WinWin had attracted more than 200 investors who invested roughly $75-million (U.S.) in total, according to court filings. The minimum investment was $150,000 (Canadian) in Oversea Chinese and $250,000 (U.S.) in WinWin. Mr. Tang did not charge a fee on the first 6 per cent of profit, but he took a 25-per-cent cut of any additional profit, according to court filings.

Mr. Tang concentrated on recent immigrants from China and he became a fixture in the community. He joined numerous organizations and donated money to various causes, including offering financial support for a group of pro-China demonstrators at a rally held in Ottawa last year.

According to e-mails filed in court, he had great hopes of "raising massive funds" by tapping into China's new entrepreneurial spirit. He planned to use his own investment skill and "widespread propaganda" to create a giant fund, according to one e-mail, which mentioned a figure of $700-million.

But after the failed demonstration at his office, many investors turned on him. On Feb. 27, about 200 confronted him in Toronto.

In an e-mail sent a few days later, Mr. Tang called the meeting "shocking, sad and painful" and outlined a plan to recoup the losses. He said in a later e-mail that he had received $1-million from a friend, turned it into $2-million in 12 days and used it to repay investors.

"Please believe my trading ability," he wrote. "Please give me time." He acknowledged later to one investor that he had lost $15-million in 2006 and 2007, according to court filings.

Just days before the OSC's move, WinWin sent investors an e-mail outlining a plan to stay in operation.

"It is inappropriate and unsafe to continue using the original Oversea Chinese Fund Trading account because the account can be frozen if government investigation is started," said the e-mail dated March 14, 2009. "A new business entity, trust account and a new trading account should be formed in order to carry out this pay-back plan properly."

Even after the OSC shut down Oversea Chinese, Mr. Tang continued to beg investors to stick with him. "Even if I have to go to jail," he wrote in one e-mail, "I still hope that I can go after I have repaid all of you."

Investors like Daniel Xu, a business professor at the University of Western Ontario, are hoping to get some of their money back. "I think I lost a lot of money," Mr. Xu said in a recent media interview. "It's terrible."

The OSC is asking investors with any information to call 416-593-8314.

OSC extends trading ban against Weizhen Tang

Bank accounts of `the Chinese Warren Buffett' frozen until September

A cease-trade order filed against a prominent Toronto businessman who bills himself as "the Chinese Warren Buffett" will stay in place until September.

The order, which also freezes bank accounts belonging to Weizhen Tang, his companies and his Oversea China Fund, was extended until Sept. 10 during a brief hearing at the Ontario Securities Commission yesterday.

The hearing comes one week after the OSC first raised allegations that Tang may have been operating a Ponzi scheme involving some $60 million (U.S.).

Tang did not attend yesterday's proceedings, which drew many reporters but just a handful of investors.

"It is by no means a simple investigation," OSC lawyer Hugh Craig told commissioner Lawrence Ritchie in asking for the extension on the original cease-trade order.

Tang's lawyer, Hugh Lissaman, said his client did not oppose the move. "My client has always indicated he is prepared to co-operate with the OSC," he said.

Asked about the Ponzi scheme allegations, Lissaman told reporters after the hearing, "All I can tell is, at this time, they are allegations put forward in a document filed with the court. There have been no formal charges laid against my client."

The Ontario Securities Commission issued the freeze orders against Tang and his companies, Weizhen Tang Corp., and Weizhen Tang and Associates Inc., last week.

The OSC believes there are at least 200 investors who put about $68 million in Tang's Oversea China Fund. To date, about $35 million has been paid out, according to documents the commission filed in provincial court last week.

Tang reportedly told investors that "new investor money is being paid out to old investors," and that "there was no money left at this time in Oversea," according to the documents.

He also told OSC investigators that the fund lost $15 million in 2007, but he did not disclose that loss to investors.

Tang promised investors a weekly return of 1 per cent.

Some investors remain loyal to the businessman. A letter opposing the cease-trade order, signed by more than 100 Toronto clients, was delivered to the OSC yesterday.

"As long as Tang's trading is under supervision and follows the law, he should not be banned from trading. This will cause further damage to the investors and defy public interests," says the letter, published in Chinese on a popular breaking-news website.

"The majority of the investors, being overseas Chinese and minorities in Canada, when dealing with non-violent dispute, should resolve the issues internally."

Other investors have approached Toronto police, though no charges have been laid.

A retired doctor from Chengdu, who gave his name as Mr. Niu, was among five Tang clients at yesterday's hearing. The Toronto man said he invested $100,000 with Tang in 2002 and hasn't withdrawn a penny since. "I have lost all my savings. I just feel so stupid. I can't blame anyone but myself. I just hope he could continue to work and get our money back," he said.

A Ponzi scheme involves paying "profits" to early investors by using money from new investors.

The OSC is asking investors with any information to call 416-593-8314.

Canadian Fund Manager Ran $60 Million Ponzi Scheme: OSC

Weizhen Tang, A Toronto fund manager oversaw a Ponzi scheme that defrauded investors in Canada, the U.S. and China of about $60 million, the Ontario Securities Commission alleged.

At first, the investment statements always came on time with the 1 per cent return as promised.
But early this year, when some of Weizhen Tang's investors had trouble getting their money back, they demanded an explanation, and Ontario regulators started investigating allegations of a Ponzi scheme.

Tang, who bills himself as "the Chinese Warren Buffett" and "the king of 1 per cent weekly returns," is a prominent figure in Toronto's mostly Mandarin-speaking mainland Chinese community. He is believed to have at least 200 clients in Canada. In late February, Tang sent a letter to his clients, apologizing for "the sin that I had committed" but insisted that he did not steal investors’ funds.

"I know that only with everyone's supervision and assistance, I can repay everyone in around a year. This will be the most sincere form of apology," Tang wrote. "Please give me time. ... I have greatly abused everyone's trust in me. Let me use my actions to prove myself, restore your wealth, and amend for my sins."

Five investors walked into Toronto Police's 52 Division to lodge a criminal complaint. They were told to return next week to speak with the fraud unit.

Their move comes just days after the Ontario Securities Commission froze accounts belonging to Tang, his companies, Weizhen Tang Corp. and Weizhen Tang and Associates Inc., and his investment fund, Oversea Chinese Fund Limited Partnership.

The freeze order, as well as a separate one that prevents any stock market trading, will be in place at least until April 1 while the commission continues its investigation.


Weizhen Tang, who ran Weizhen Tang Corp. and Oversea Chinese Fund Ltd. Partnership, told investors recently the company had no assets to pay requested redemptions, the OSC, Canada’s main stock-market regulator, said in papers filed in Ontario Superior Court on March 23. A judge yesterday extended a freeze on Oversea’s assets until April 30.

“Tang had been using new funds raised from investors to pay redemptions requested by previous investors,” the OSC said in the filing. That is the classic definition of a Ponzi scheme, named after Charles Ponzi, who was charged with fraud in 1920.

It’s the first allegation of a Ponzi scheme in Canada since a slump in North American stock markets began in June. In the same period, the U.S. Securities and Exchange Commission has filed more than a dozen lawsuits to freeze money raised in alleged Ponzi schemes, including a $65 billion scam run by New York financier Bernard Madoff.

On his Web site, Tang said he began Weizhen Tang Corp. in 2007 in Toronto and was registered “within the framework of the Ontario Securities Act.” Most of his clients are “senior and affluent overseas Chinese” in Canada, the U.S., China, Hong Kong, Taiwan and Malaysia, he said.

The fund invests in stocks, foreign exchanges, futures, options and mutual funds on Wall Street and stock markets in China and Hong Kong, Tang said. The minimum investment is $150,000, U.S. or Canadian.

$15 Million Losses

Reporters who went to offices of Weizhen Tang Corp., at the corner of York and Adelaide Sts., in downtown Toronto yesterday, were initially told that Tang would speak to them.

A spokesperson who identified himself as Dr. Guo later told reporters that Tang's lawyer had instructed him not to make any comment. "Mr. Tang is, of course, not a perfect businessman," Guo said. "The truth will come out."

"I can assure you that my client is co-operating fully with the regulator and that to date there have been no charges of fraud laid against my client," Tang's lawyer, Hugh Lissaman, wrote in an email to reporters.

At Tang's home, near Bayview Ave. and Steeles Ave., a woman who answered the door but did not identify herself said that Tang was not there. Asked for comment, she said, "It's too early to say anything."

News of the OSC's freeze order against Tang flooded Chinese-language news websites, blogs and chat rooms in North America, China and even Europe. Bloggers and columnists debated whether Tang was more like Nebraska-born investor guru Warren Buffett, who has an estimated net worth of $62 billion (U.S.), or more like Bernard Madoff, the disgraced New York businessman, recently convicted of running a $65 billion Ponzi scheme.

Kelvin Li, news director of the popular Toronto Chinese language website, newnews.ca, said Tang, 51, immigrated to Canada more than 20 years ago from China via the U.S. after postgraduate studies there.

"He is very high profile. You see him everywhere at Chinese community events," said Li. "He sponsored the largest Chinese New Year community galas. He donated money to help victims of the devastating snowstorms and Sichuan earthquakes in China last year. He was also very involved in organizing the mass protest in Ottawa against pro-Tibet demonstrations prior to the Beijing Olympics."

Li has interviewed many of Tang's investors. He said some of them are new immigrants with working-class backgrounds, who used their lines of credit and mortgage money to come up with the $150,000 minimum investment amount.

Tang also used the newnews.ca website as a forum to communicate with his investors and has published at least four public letters.

In one dated March 21, he claimed that he had mortgaged his North York home for further investment.

"Part of the profits I make, I can return the money to you. If the money keeps on rolling, it would be no problem for me to return the money to you. The key is to give me time, give me a last chance," he wrote. "Even if I have to be jailed, I hope I could at least return you the money first. That would be less pain for me."

Allegations that Tang may have been operating a Ponzi scheme — where earlier investors are paid returns using money from later investors, rather than any real profits — comes from documents filed by the OSC in court this week.

The regulator believes that about 200 investors have put approximately $68 million into the Oversea fund and $35 million has been paid out to date.

The commission began its investigation in February 2009, according to documents filed in the Ontario Superior Court of Justice on March 24. Tang told OSC investigators that he traded stocks, futures, stock options, and foreign currencies, for Oversea.

Investors signed an agreement that Tang would charge no fees for returns of six per cent or less; "However, for returns above six per cent, Tang would charge a 25 per cent 'incentive fee,'." the documents read.

According to one investor, "Tang advised him that new investor money is being paid out to old investors and admitted there was no money left at this time in Oversea," the filing says.

Tang also admitted to losing $15 million in 2007 but did not report this to Oversea's investors.
"Tang stated that investors in Oversea are owed about $30 million," according to the documents.

The commission asks the Ontario court to issue a cease-trade order in cases where investors may be at risk, said Kelley McKinnon, partner at Gowling Lafleur Henderson, former deputy director of enforcement and former chief litigation counsel at the OSC. "The commission orders a temporary cease-trade when they have some evidence of illegal activity and a risk of ongoing harm so they want to stop trading while they continue to investigate," she said.

The documents also show that Tang's wife, Hong Xiao is listed as an officer and director with Weizhen Tang and Associates.

Xiao received a 10-year suspension and was ordered to pay a $45,000 (Canadian) fine by another regulatory agency, the Investment Dealers Association, in July 2004 for two counts of conduct unbecoming or detrimental to the public interest. She was also ordered to repay another $5,000 in commissions.

Tang is registered as a limited market dealer. Neither company is registered as an investment counsellor or portfolio manager in Ontario.

His last letter to clients, dated March 25, begins "How difficult is it for a person who has sinned and lost all trust to stand up again? Because I cannot timely return your investments, I have caused you great pain."

It goes on to say: "I sincerely request that I be given another chance merely for the sake of recovering your hard-earned money and reviving the honour of overseas Chinese. A re-emerged Weizhen Tang will be in the best interest of all of you."

The letter ends with a promise: "Within two months, a new Tang Weizhen will emerge! You will certainly receive my first repayment! At that time, the whole society will witness the cheers or accusations!"

In extensive material on the company's website, Tang says that he uses his years of experience in the stock market and uses stock indices, foreign exchanges and futures for "reliable short-term speculation."

He boasted of an average annual return rate of more than 40 per cent for four years.
Tang also held "investment summits" — the last one was held at the Metro Toronto Convention Centre in January of last year — with economists from China and the United States who were invited to speak to prospective investors. Among the guests were officials from the Chinese consulate in Toronto.

One alleged victim, who came from the same Hunan province as Tang and invested $300,000 with him, was quoted in the Toronto Star stating that Tang's clients met regularly to discuss the matter in the last month but the majority of them have refused to come forward and believed that Tang could come up with the money.

"They were brainwashed," said the woman, who asked not be identified. She said she and 14 others were discouraged from coming forward to authorities while clients in the other camp are petitioning the OSC not to pursue charges against Tang, fearing the action would stop them from claiming any money back ever.

Another investor, who with his wife invested $500,000 last September, said Tang's initial clients from as early as 1999 were mostly people from his hometown through word of month, but in recent years the businessman has advertised heavily in the local Chinese media.

"We were drawn to him because of his promise of the weekly 1 per cent return," said the man, in his 40s, outside the police station. Like other alleged victims, he refused to give his name. "We trusted him."

The OSC said it has evidence that in 2007, Oversea lost about $15 million. Tang had told investors the fund made “significant profits,” the OSC said.

Hugh Lissaman, who is listed as Tang’s lawyer in the court documents, didn’t immediately respond to a request for comment by local media.

A phone number listed on Tang’s Web site was answered by a man who identified himself only as Dr. Gou and said he was Tang’s friend and consultant. Gou said Tang wasn’t available to comment and it was too early to discuss the OSC allegations.

While these ARE some very serious allegations, they are at this time just that, allegations.. It should be borne in mind by all that everyone is considered to be innocent until proven guilty in a court of law.

The case is Between Ontario Securities Commission and Oversea Chinese Fund Ltd. Partnership. Ontario Superior Court of Justice (Toronto).

Madoff Files Appeal to Get Out of Jail

Bernard Madoff's lawyers are appealing a judge's decision to revoke his $10 million bail and send him to jail to await sentencing. Madoff pleaded guilty on Thursday to 11 felony counts including securities fraud and was immediately jailed. His lawyers filed papers with a federal appeals court Friday. The court papers were not immediately available.

Bail was revoked after the 70-year-old financier confessed to carrying out what may be the biggest fraud in Wall Street history. Madoff told U.S. District Judge Denny Chin that he was "deeply sorry and ashamed."

Sentencing is June 16. Madoff is facing up to 150 years, plus fines and mandatory restitution.

In other Bernard Madoff news, Newly filed court documents show Bernard Madoff and his wife had a net worth of more than $823 million at the end of last year. The document detailing the Madoffs' assets was contained in papers his lawyers filed Friday in an effort to get him freed on bail.

The document shows the Madoffs owned four real estate properties worth $22 million and had $17 million in cash and a $7 million yacht, among other assets.

Bernard Madoff will plead guilty

Bernard Madoff's lawyer says his client will plead guilty to 11 counts, meaning the former Nasdaq chairman could spend the rest of his life behind bars.

The counts include money laundering, perjury and securities, mail and wire fraud. Madoff, 70, is accused of carrying out one of the largest financial frauds in history.

On Tuesday, the judge presiding over the case asked Madoff's lawyer, Ira Sorkin, if his client would plead guilty.

"That's a reasonable expectation," Sorkin replied.

Prosecutor Marc Litt said the U.S. government has not offered Madoff a plea deal on the 11 counts, which carry a combined penalty of up to 150 years in prison.

The comments were made at a hearing to resolve any potential conflicts of interest between Madoff and Sorkin; the lawyer's family invested more than $900,000 with Madoff.

The judge decided Madoff understood his right to "conflict free counsel" and "is waiving that right," so ruled that Sorkin could continue to represent him.

Prosecutors allege Madoff essentially ran an unprecedented Ponzi scheme, which the U.S. Securities and Exchange Commission failed to uncover, that bilked investors out of between $20 billion and $50 billion.

So far, authorities have managed to recover $1 billion.

Frank Razzano, a former SEC lawyer, said that if Madoff pleads guilty, and has not made a plea deal with prosecutors, he would not be obligated to share information about whether anyone else is connected to the case.

"He does not have to provide information with respect to his wife, children and fellow employees," Razzano said. "Normally, if you enter into a plea deal with the United States government, you have to agree to provide truthful information to the government and you can't assert your Fifth Amendment rights -- the right to remain silent."

However, Razzano said authorities would continue to investigate the scheme, and look into who may be connected.

"Prosecutors are going to run every single lead into the ground," he said.

Among the alleged victims were numerous charities, including and the Elie Wiesel Foundation for Humanity, which lost about $15 million. The group's mandate is to educate the public about the Holocaust and combat intolerance. A Canadian charity, the Jewish Federation of Greater Toronto, was also reportedly affected.

The British bank HSBC was one of the largest victims, losing about $1 billion. Celebrities like director Steven Spielberg and actor Kevin Bacon also lost money, although the exact amount is unknown.

U.S. prosecutors indicate Madoff plea may be in works

Prosecutors filed court papers Friday indicating Bernard Madoff may be ready to plead guilty to charges arising from one of the biggest financial frauds in history.

Madoff, 70, is scheduled for court twice next week, including a Tuesday appearance to waive any potential conflicts of interest involving his lawyer, and a Thursday morning arraignment. A defendant must enter a plea - guilty or not guilty - at an arraignment.

The U.S. attorney's office suggested Friday in a brief court filing that the money manager is ready to waive an indictment and one of Madoff's lawyers said he had already done so. A waiver of indictment is a necessary procedural step before a defendant enters a guilty plea.
Prosecutors have a deadline of next Friday to bring an indictment against Madoff under the speedy-trials law.

Madoff has been confined to his Manhattan penthouse since his arrest in early December after authorities said he told his family that he had engaged in a US$50 billion fraud. Authorities have since said money lost by investors might be less than $17 billion and the higher amount may represent false profits.

Madoff has never contested the allegations and recently surrendered millions of dollars in major assets, actions that typically precede plea deals.
Investigators have spent the last three months trying to untangle Madoff's complicated financial operation while attempting to return what is left of his assets to investors who lost billions. Madoff's co-operation could be key to explaining the mysteries and intricacies of his business, and also explain if others were involved in the fraud.

Daniel J. Horwitz, a Madoff defence lawyer, would only say "we've waived the right to indictment and the case will proceed by information."

Typically, a defendant is brought before a judge, waives indictment and enters a guilty plea the same day to a charging document known as an "information." It resembles an indictment but is brought by prosecutors rather than a grand jury.
Prosecutor's spokeswoman Rebekah Carmichael declined to comment.

Matthew Fishbein, a former chief of the criminal division in the federal prosecutor's office in Manhattan who is now in private practice, said a waiver of indictment is often followed quickly by a guilty plea but it does not have to be imminent.
"This seems to be a more complicated information and more back and forth going on. It may simply be that this basically buys them some time," he said.

Madoff already has surrendered rights to his business and any of the assets held by the business. A trustee overseeing his assets said he has identified nearly $1 billion in assets that are available to reimburse investors who have lost money.
Shortly after his arrest, Madoff offered to relinquish many of his and his wife's assets, including properties in Palm Beach, Fla., and Antibes, France, as well as his boats and cars, according to a Jan. 13 court filing signed by Horwitz and fellow defence lawyer Ira Sorkin.

Madoff's mother also tangled with the feds

The late Sylvia Madoff was registered as a broker-dealer in the 1960s but left the business after being cited for failing to file reports.

Accused Ponzi schemer Bernard Madoff was not the first person in his close-knit family to run afoul of federal authorities. A broker-dealer firm registered in the name of Madoff's mother, Sylvia, was effectively forced to close by the U.S. Securities & Exchange Commission more than 40 years ago.

In August 1963, the SEC announced it was "instituting proceedings...to determine whether" 48 broker-dealers, including "Sylvia R. Madoff [doing business as] Gibraltar Securities," had "failed to file reports of their financial condition...and if so, whether their registrations should be revoked."

An SEC litigation release a month later announced hearings in the case of Madoff and many of the other firms in question.

Then, in January 1964, the SEC dismissed administrative proceedings against a number of the firms, including Madoff's, in what appeared to be a deal: No penalties if you promise to stay out of business.

"The firms conceded the violation," the SEC's litigation release noted, "but requested withdrawal of their registrations; and in this connection they represented that they are no longer engaged in the securities business and do not owe any cash or securities to customers. The Commission concluded that the public interest would be served by permitting withdrawal, and discontinued its proceedings."

Despite Sylvia Madoff's SEC registration as a broker-dealer, three high school classmates of Bernard Madoff say they don't recall her being a stockbroker (something that would have been unusual, and memorable, in that era - not to mention theoretically easy to spot given that the firm's address was the Madoff family home in the Laurelton neighborhood of Queens, N.Y.).

But a fourth high-school classmate of Bernard Madoff, Ed Heiberger, says he recalls that it was Madoff's father, Ralph, who "was either a stockbroker or a customer's man" (the latter is the equivalent of a client or account representative).

Both Sylvia and Ralph Madoff died in the 1970s, according to Social Security records.

This wouldn't be the first Madoff mystery, of course. It's possible that Sylvia Madoff was running a securities business even as her son launched his own in 1960. Another possible explanation is suggested by property records for the Madoff's house. The "grantor/mortgagor" was listed as Sylvia R. Madoff, according to Queens property records.

But the property had tax liens totaling $13,245.28 (about $100,000 in today's dollars) for unpaid federal taxes owed by Ralph Z. Madoff and three other people. The taxes were assessed in 1956, but the lien was not paid off until 1965, when the house was sold, suggesting that the Madoffs were either fighting the tax bill or unable to pay it.

Is it possible that Ralph Madoff, burdened with federal tax trouble, contrived to register his own stock business in his wife's name? The records are lacking so far, and Andrew Grass, who was the chief enforcement attorney for the SEC's New York office at the time, says he can't remember the case.

Bernard Madoff's lawyer, Ira Sorkin, declined to comment. His brother Peter Madoff's lawyer, John "Rusty" Wing, did not respond to phone calls and questions emailed to him. But it adds yet another intriguing question in the case of a man who becomes seemingly more and more elusive.

India rocked by Satyam scam

Chair of outsourcing firm with offices in Canada resigns after revealing profits massively inflated

Ramalinga Raju visited Toronto four years ago to discuss how Indian outsourcing firm Satyam Computer Services Ltd. was using Canada as a beachhead to gain access to the huge U.S. market.

But on Tuesday, the Satyam chair was waving a white flag of surrender after he admitted to a massive accounting fraud that caused the company's stock to plummet by nearly 80 per cent while casting a cloud over India's emerging economy.

Raju, who founded India's fourth-largest software services exporter with his brother and brother-in-law two decades ago, shocked investors and the Indian business community by tendering his resignation and revealing that Satyam's profits had been massively inflated over the years.

He claimed that about $1 billion (U.S.), or a staggering 94 per cent, of the cash on Satyam's books was "artificial" or "non-existent" and apologized to the company and its stakeholders.

"What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years," Raju wrote in his statement of resignation. "Every attempt to eliminate the gap failed. It was like riding a tiger, not knowing how to get off without being eaten."

He added that no other board member was aware of the financial irregularities at Satyam, which in Sanskrit means "truth."

It is the biggest corporate scandal in India's memory, dubbed "India's Enron" by analysts, and one that has raised questions about regulatory oversight and the role of Satyam's external auditors, global firm PricewaterhouseCoopers.

As well, the scandal promises to shake up India's once-booming outsourcing sector while possibly threatening foreign investment.

The fallout could even extend to Canada, where the Indian outsourcing industry had carved out a niche in southern Ontario because of proximity to the U.S. heartland.

"They find a presence in Canada useful because, in addition to doing business with Canadian clients, they also want to do business with American clients," said Bernard Courtois, president of the Information Technology Association of Canada, which counts some of Satyam's competitors as members.

Satyam maintains computer networks and has provided a range of back-office outsourcing services for such blue-chip clients as Citigroup Inc., General Electric Co. and General Motors Corp. The U.S. government has also been a client.

In Canada, Satyam boasts a client roster that includes four of the country's big five banks.
With offices in Toronto, Montreal and Calgary, the company also does business in the Canadian health-care sector and donated $1 million earlier this year to Hamilton's Mohawk College to build "the first working prototype of Canada's national blueprint for electronic health records."

In 2004, Satyam opened its first Canadian development centre in Mississauga with about 100 workers as part of an industry-wide effort to ameliorate concerns some U.S. companies had about the optics of sending jobs overseas. Canada was seen as a "nearshore" compromise with its slightly cheaper labour, English-speaking workforce and attractive tax benefits.

"There are some (U.S.) customers who feel a great affinity to the Canadian market," Raju told the Star in Oct. 2004.

Gary Teelucksingh, Satyam's senior vice-president for the Americas, did not return calls to his Mississauga office yesterday.

Satyam's competitors – Infosys Technologies Ltd., Tata Consultancy Services Ltd. and Wipro Ltd. – also operate Canadian development centres in Toronto, Mississauga and Windsor.

Outsourcing and, particularly, offshoring of jobs has been a potent political topic in recent years.

"In the U.S., it was this sort of irrational behaviour caused by a mindset that was concerned about illegal immigration and security concerns post-9/11," said Courtois.

But the outsourcing boogeyman never really reared its head in Canada, in part because the country has benefited from jobs shipped north from the U.S. – a trend Courtois expects will continue to accelerate. "I think with the current economic crisis, more people are going to take a look at it," Courtois said.

Prosecutors:Madoff was ready to send out cheques worth $173 million

Prosecutors say that Bernard Madoff had $173 million in signed cheques in his office desk that he was ready to send out at the time of his arrest last month.

The detail was provided in a court filing Thursday as prosecutors argued that Madoff should have his bail revoked and be sent directly to jail.

They said the 100 cheques were further evidence that he wants to keep his assets away from burned investors.

Investigators previously have said that Madoff had planned on distributing more than $200 million to his closest friends and family after he realized his scheme had unravelled.

In support of their effort to have Bernard Madoff's $10 million(US) bail revoked, in a court filing, prosecutors listed SIXTEEN watches, including diamond-encrusted timepieces from Tiffany and Cartier. Four diamond brooches. Two sets of cuff links. An emerald ring.

Madoff, who is said to have confessed last month to a huge Ponzi scheme, is under 24-hour house arrest in his $US7 million Manhattan apartment.

The filing was released on Wednesday morning, less than 48 hours after a hastily called court hearing in which prosecutors said that Madoff and his wife, Ruth, had sent packages of valuables to his sons and brother, violating the terms of his bail agreement.

Madoff has promised the Securities and Exchange Commission not to dispose of any of his assets, which may be sold and used to repay investors.

His sons, Andrew and Mark, blew the whistle on their father by informing their lawyers of the unexpected parcel.

At the hearing on Monday, a lawyer for Madoff, Ira Lee Sorkin, told the court that many of the items were relatively inexpensive, including $25(US) cuff links and $200(US) mittens.
He argued the valuables were sent innocently and that the mailings happened before an asset freeze came into effect.

But assistant US attorneys Marc Litt and Lisa Baroni said in their filing that Mr Sorkin's description of the packages was at best, incomplete.

The filing said the defendant had sent a package containing "13 watches, one diamond necklace, an emerald ring and two sets of cuff links". "The Government has been informed that the value of those items could exceed $US1 million. Two other packages - containing a diamond bracelet, a gold watch, a diamond Cartier watch, a diamond Tiffany watch, four diamond brooches, a jade necklace and other assorted jewellery - also were sent to relatives."

There was no mention of the mittens.

Victims of Madoff's fund scheme include director Steven Spielberg.

He was also accused of sending more than $1 million worth of jewelry to friends and family over the holidays.

Defence lawyers have said that he is not a risk to flee or any danger to the community, and therefore he should remain free on bail.

Do-Not-Call scam

I found this scam warning and I thought that I would post it here for anyone that may be reading:

Cellphone providers are warning against a scam circulating via e-mail regarding the CRTC's recently implemented do-not-call telemarketing list.

The e-mail warns recipients that cellphone providers are releasing their customers' numbers to telemarketers, so they should expect calls that will inevitably waste their airtime. Recipients are urged to call one of two phone numbers purportedly attached to the national do-not-call list, which the Canadian Radio-television and Telecommunications Commission launched on Sept. 30, in order to block such unwanted calls.

"All cellphone numbers are being released to telemarketing companies and you will start to receive sale calls," the e-mail says. "You will be charged for these calls."

The e-mail suggests the release of number databases has been confirmed by Telus Corp. and urges recipients to pass the message on to their friends.

Telus, however, issued an advisory on Tuesday evening warning that the e-mail was "fraudulent and dangerous" and urged customers not to respond to it or forward it.

Spokesman Shawn Hall said the company has no intention of releasing wireless numbers to telemarketers.

"We have no plans to do that ever," he said.

Telus is working on determining the source of the e-mail. Marc Choma, spokesman for the Canadian Wireless Telecommunications Association, said a similar scam was run a few years ago in the United States when the country rolled out its own do-not-call list.

One of the numbers in the e-mail is in fact the CRTC's do-not-call contact number, but the other has been linked to telemarketing scams going back a number of years, Hall said.

The do-not-call list allows Canadians to add their phone numbers - both landline and wireless - to a database that is circulated to telemarketers. A telemarketer that calls a number on the list is liable for a fine up to $15,000.

While the CRTC requires landline providers to list customers' numbers in the phone book, it is illegal for wireless companies to release cellphone numbers without their subscribers' express consent.

Telus has polled customers as to whether they would want their wireless numbers published in the phone book but found the majority believed their contact information to be private.

"It came back rather resoundingly that people did not want their cellphones listed in the phone book, and we respect that," Hall said.

Thank you to Sympatico, Telus, and the CBC for the heads up


Until next time........