Essay on Bernard Lawrence
Describe the three types of illegal behavior alleged allegations against Mr. Madoff and for each of the behavior explain why it is illegal or unethical in the conduct of business? Ans) Bernard Lawrence Madoff was a stock broker, investment advisor and the non executive chairman of the NASDAQ. Bernard has been found guilty for 11 federal crimes for which he has been sentenced to imprisonment for 150 years and had to pay $170. 179 billion as a penalty. He was convicted for 11 federal crimes which included security fraud, money laundering, perjury, theft from an employee benefit plan, wire fraud and mail fraud.
In order to further clarify three of the crime would be explained in details which are as follows: Money Laundering: Bernard Lawrence had been convicted for 2 International money laundering crimes. He had been using the money of his investors for his own purposes and was showing false accounts. His company was convicted of tax evasions and taking advantage and showing false accounting in his books. This is a serious crime in the whole world as this is a way of misinterpreting and misleading the investors and the government officials.
This is an unethical business practice because it refers to concealing important details of the business from the various stakeholders and thus taking undue advantage from that. The companies seem to misguide the public and the government and save million dollars by evading taxes and buying assets from the money that they have actually stolen from the investors. Securities fraud: The victim was convicted of securities fraud where he was guilty of doing illegal sale and purchase on the trading floors. He had broken various securities laws and embezzled millions of dollars.
This is an illegal practice because the investors by doing so start manipulating the stock exchange and the stock prices. This is considered a crime because by this the stock prices can be over stated or understated which would harm the small investors. Theft from Employee benefit plan: He was alleged of stealing $10 million from the pension fund assets. This is a plain act of stealing where he took the money that was the right of 35 labor unions. Due to this the labor union would not have been able to get the money that was basically their right by law. (Voreacos, 2009)
Question 2: Name three types of parties who were impacted by the practices of Mr. Madoff and describe how they were impacted? Ans) The scandal had impacted the lives of various people which included people from all walks of life. From various celebrities to huge investment companies and banks have had an impact on their balance sheets due to the scandal. Some of the parties involved were: Universities: Various universities and schools which include the New York University and Maimonides school had invested their idle funds with the company which they lost due to the scandal.
Investment Funds: Various investment funds had their assets managed by the company. The investment companies lost the money that they had invested with the investment fund of Lawrence Bernard. Various investment companies had even bought the shares which brought them loss of billions of dollars. Charity organization: A lot of Non profit organizations and charity organization of celebrities and other people had invested the charity’s money. The charities had to lose billions of dollars due to the fraud as they did not get their invested money back. (Madoff’s Victims, 2009)
Question 3: Describe three business safeguards that may have prevented the harm caused by Mr. Madoff? Ans) The ponzi scheme was a major negligence from the respective authorities. The SEC authorities did not have complete check over various factors due to which people had to face losses of millions of dollars. Some of the ways the debacle could have been prevented are: Strict policies from Securities Exchange Commission (SEC): This scandal had been in practice for almost over a decade but was not detected by the SEC. Thus the SEC was not too active in its practices.
The organization was giving a high return which was an unusual activity. Thus in such an abnormal situation SEC should have been more diligent and transparent in fulfilling its duties. If there had been cross checking of the accounts and financial transactions this loss could have been prevented. Transparent practices by the external auditors: It is something very pungent that such a massive scandal had hit the financial world despite of the strict financial standards and the constant audits by the licensed auditors. The external auditors would have to be more ethical and transparent in their activities.
If they would have identified small symptoms of unethical practices to the state earlier, millions of dollar could have been saved. Forensic Accountants reactive attitude: The forensic accountants have been silent over the issue until it was the news all around the world. The forensic accountants are trained to identify any sorts of fraud symptoms in the economy. There was a reactive approach by these accountants which caused this fraud to go on for too many years. The forensic accountants could have prevented the loss by actively reporting them on time. (Herrerra, n. d. )
Question4: Describe three ways the private investors could have prevented themselves from risk? Ans) The investors could have been prevented from the debacle by knowing the investment practices and the basic rules of investment. Generally the investors are not aware of the practices due to which they are not able to identify if the investment is done in the right manner. Second, the loss could have been prevented if the investors have been careful in selecting the investment company. The investors would have been saved if they would have not selected the company for investment.
The investors could have managed their funds properly by not investing huge amount in just one avenue. The risk could have been mitigated if they had invested at various avenues due to which they would not have to bear such a huge loss. (Herrerra, n. d. ) Question5: Describe three legal actions that possibly may be brought against Mr. Madoff under criminal or civil law? Ans: Mr. Madoff had been convicted of 11 serious federal crimes to which he was sentenced to imprisonment for 150 years. The three legal actions against him are as follows: Securities fraud: 20 years of imprisonment with 3 years supervised release.
Along with this there would also be a fine of $5 million or twice the gross gain or loss from the offense. Money Laundering: 10 years of imprisonment with 3 years of supervised release. These would also be a fine of $250,000 or twice the gross gain or loss from the offense. Perjury: 5 years of imprisonment with 3 years of supervised release. These would also be a fine of $250,000 or twice the gross gain or loss from the offense. (Department of Justice Press Release, 2009) References Department of Justice Press Release. (2009, March 12). Retrieved June 7, 2010, from Federal Bureau of Investigation New York: http://newyork.
fbi. gov/dojpressrel/pressrel09/nyfo031209. htm Herrerra, C. (n. d. ). Ponzi Schemes and Forensic Accountants. Retrieved June 7, 2010, from Accounting Sites: http://www. bellaonline. com/articles/art49196. asp Madoff’s Victims. (2009, March 6). Retrieved June 7, 2010, from The Wall Street Journal: http://s. wsj. net/public/resources/documents/st_madoff_victims_20081215. html Voreacos, D. (2009, March 11). Madoff Criminal Charges: Summary of the 11 Counts Against Him. Retrieved June 7, 2010, from Bloomberg: http://www. bloomberg. com/apps/news? pid=20601087&sid=a6Osnj. SoYdM&refer=home
