SEC, Madoff agree to settle civil fraud case

The Securities and Exchange Commission on Monday announced an agreement with disgraced money manager Bernard Madoff that could eventually force him to pay a civil fine and return money raised from investors.

The partial judgment, which renders permanent a preliminary injunction that froze Madoff's assets after his arrest in December, must be approved by the judge overseeing the case in federal court in Manhattan.

The civil proceeding is separate from the criminal case against the prominent Wall Street figure, who is accused of bilking $50 billion from investors in what may be the largest Ponzi scheme in history. Madoff was arrested on Dec. 11 after allegedly confessing to his sons that he had stolen from investors for years.

Federal prosecutors have asked a judge to revoke the bail of Madoff, who has been confined to his Manhattan penthouse under house arrest. Madoff, who has not been indicted, is widely expected to eventually enter into a criminal deal with prosecutors in which he would plead guilty in exchange for some form of leniency.

The SEC said Madoff agreed to the partial judgment without admitting or denying the allegations in its civil complaint filed on Dec. 11. However, the agreement says Madoff cannot contest the "facts" of the complaint for the purposes of determining his obligation to pay civil fines and restitution — which will be specified later.

The SEC says the basic facts of the complaint are that Madoff committed a $50 billion fraud and told his sons his investment business was a sham. Madoff told them he had "absolutely nothing," that "it's all just one big lie," and was "basically, a giant Ponzi scheme," according to the complaint.

Madoff's defense attorney, Ira Sorkin, didn't immediately return a telephone call seeking comment Monday.

The fallout from the Madoff affair has been massive and has rocked a Wall Street already churning from the financial crisis. Thousands of victims who lost money investing with Madoff have been identified — including ordinary people and Hollywood celebrities — as well as big hedge funds, international banks and charities in the U.S., Europe and Asia.

The scandal also has brought disgrace to the SEC, which repeatedly ignored credible allegations about Madoff's operations brought to it over the course of decade. Congress and the agency's inspector general are investigating what caused the regulatory failure over Madoff and why SEC inspections of his business failed to detect the improprieties.

Madoff client list peppered with big names

Hall of Fame baseball pitcher Sandy Koufax, actor John Malkovich and World Trade Center developer Larry Silverstein are among the well-known people who were customers of accused swindler Bernard Madoff, according to new court papers.

Among the thousands of others on the roster are U.S. Sen. Frank Lautenberg of New Jersey; Fred Wilpon, owner of the New York Mets baseball team; imprisoned class-action lawyer Melvyn Weiss; Madoff's sons, Mark and Andrew and their children as well as Madoff's brother, Peter.

Filmmaker Steven Spielberg's Wunderkinder Foundation, Columbia University and the charity Jewish Funds for Justice are among other customers listed.

The 162-page document was filed late Wednesday with the U.S. Bankruptcy Court in New York as a court-appointed trustee liquidates Bernard L. Madoff Investment Securities LLC to recover assets for defrauded customers.

In all, five lists were filed with the court, labeled Customers, Vendors, Employees, Brokers/Dealers and Other Parties.

The customer list contains names and addresses of individuals and institutions. No details were included on the amounts of money invested. The lists were put together by AlixPartners LLP, a firm specializing in bankruptcy claims support that is assisting the trustee.

One of Madoff's lawyers, Ira Lee Sorkin, is also named on the customer list.

Sorkin declined to comment to Reuters on Thursday on whether he had invested with Madoff.

"I've been told it's a client list, and I've also been told it's a mailing list, so I think you need to check with the receiver or the trustee to determine whether these individuals are clients, customers, investors or just simply received mail," Sorkin said.

"My position from day one has been I will not discuss present clients or former clients," he said.

The Securities Investor Protection Corporation (SIPC), which is examining Madoff customer claims, was not immediately available for comment. A representative of the trustee, Irving Picard, could not be reached immediately.

The list provides new details about the clients that the once-respected Madoff cultivated over the years -- a roster sprinkled with names of people who live in affluent neighborhoods of Manhattan and parts of South Florida including Palm Beach and Boca Raton. Madoff long attracted clients through his reputation for posting amazingly consistent investment returns.

The Manhattan office of Madoff's firm was declared a crime scene after the 70-year-old investment manager was arrested on Dec. 11. Madoff is accused in what authorities have described as the biggest Ponzi scheme in history. In a Ponzi scheme, early investors are paid with money from new investors.

Also listed are the Madoff firm's outside auditors, David Friehling and Jerome Horowitz from the small Friehling & Horowitz accounting firm in New City, New York, as well as Madoff's wife, Ruth, and Madoff employees, including JoAnne "Jodi" Crupi and Frank DiPascali.

Among the financial institutions on the customer list are UBS AG, Bank of America Corp, BNP Paribas and Citigroup Inc.

Financiere Agache, a subsidiary of the holding company of French billionaire Bernard Arnault, was also on the list. Arnault is the head of luxury goods group LVMH and his Groupe Arnault holding firm controls Financiere Agache.

A spokesman for Financiere Agache told Reuters its account with Madoff had been inactive since 2004, although it had not been legally closed. The spokesman added that Financiere Agache had not booked any losses from the account.

At a bankruptcy court hearing on Wednesday, Picard said $946 million has been recovered so far from Madoff's firm. He said, however, that gaining access to the firm's computers and examining 7,000 unmarked boxes of documents stored in a warehouse was taking time.

Madoff investor found dead of possible suicide

The founder of an investment fund that lost millions with Bernard Madoff was found dead Tuesday at his Madison Avenue office of a possible suicide, authorities said.

Authorities found Rene-Thierry Magon de la Villehuchet at 7:50 a.m. with no pulse at his office of Access International Advisors, located on Madison Avenue a couple of blocks from Rockefeller Center.

A French newspaper is reporting that the 65-year-old de la Villehuchet committed suicide. The New York medical examiner spokeswoman says it has not determined the cause of death yet.

Madoff is accused of running a $50 billion Ponzi scheme that wiped out investors around the world, with big funds like de la Villehuchet's being especially hard hit.

His $1.4 billion fund specializes in managing hedged and structured investment portfolios. Access International Advisors was jointly founded by Patrick Littaye and de la Villehuchet. The hedge fund reportedly used intermediaries with links to the cream of Europe's high society and jet set to garner clients.

The former chairman and CEO of Credit Lyonnais Securities USA, de la Villehuchet was known as a keen sailor who regularly participated in regattas.

List of potential victims grows in NY fraud case

Madoff, 70, said in regulatory filings that he only had around 25 clients, but it has become apparent that the list of people who lost money may number in the hundreds or even thousands.

Among those who have acknowledged potential losses so far: Former Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services.

A charity in Massachusetts that supports Jewish programs, the Robert I. Lappin Charitable Foundation, said it had invested its entire $8 million endowment with Madoff. The organization's executive director said she doesn't expect it to survive.

Other institutions that believed they had lost millions included The North Shore-Long Island Jewish Health System and the Texas-based Julian J. Levitt Foundation.

Hedge funds and other investment groups looked like big losers too. The Fairfield Greenwich Group said it had some $7.5 billion in investments linked to Madoff. A private Swiss bank, Banque Benedict Hentsch Fairfield Partners SA, said it had $47.5 million worth of client assets at risk.

The losses may have extended far beyond the coffers of the wealthy and powerful.

The town of Fairfield, Conn., said it placed nearly 15 percent of its retiree pension fund with Madoff. Officials were scrambling to determine how much of the $42 million remained.

Harry Susman, an attorney in Houston, said he represents a group of clients who had unknowingly become entangled in the scandal by investing in a hedge fund managed by Merkin, which then put almost all of its $1.8 billion in capital in Madoff's hands.

"They had no idea they had exposure," Susman said. He said his clients were now dumbfounded as to how the fund came to invest all of its holdings with just one man, especially since concerns had been circulating for years about Madoff's operations.

For decades, Madoff had dual reputations among investors. Many wealthy New Yorkers and Floridians considered him a reliable investment whiz. Others, more skeptical, had questioned whether his returns were real, pointing to the firm's secrecy and lack of a big-name auditor.

But when he met privately with a family member at his firm earlier this month, something clearly was amiss.

First, federal authorities say the 70-year-old Madoff surprised the unidentified family member by saying he wanted to pass out hefty annual bonuses two months earlier than usual, court papers said. Then, when challenged on the idea, he said he "wasn't sure he would be able to hold it together" if they continued the discussion at the office, and invited him to his apartment.

It was the beginning of a stunning meltdown for the former Nasdaq stock market chairman.

Madoff himself described his investment business as an unsophisticated "Ponzi scheme," according to investigators who interviewed him.

Perhaps more startling than the loss was that it apparently caught regulators and investigators off guard, only coming to light last week when Madoff's own family turned him in.

The core of the scheme -- taking investments from one client to pay returns to another -- "has been around since the beginning of time," said Marc Powers, a former Securities and Exchange Commission enforcement chief and head of the securities practice at Baker Hostetler.

The firm somehow pulled off the fraud despite being subject to examination by the SEC, Powers added. "You wonder how these things escaped the normally careful review of these regulatory organizations."

The latest dose of bad news in the world of finance has left Madoff's clients "panicked," said Stephen A. Weiss, a lawyer for several dozen investors. "These people are sorrowful. These people are angry. And many are now destitute."

The wave of ill will -- fuel for inevitable lawsuits -- was aimed at a man who had cultivated an image as a straight-shooter with a personal touch.

The day after his arrest, his company's Web site still boasted that "in an era of faceless organizations ... Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner's name is on the door."

It went on to say "Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."

Madoff's resume was the stuff of Wall Street legend: He founded his company in 1960 with $5,000 he earned in part working as a lifeguard on Long Island beaches while putting himself through Hofstra University Law School. It eventually became one of five broker-dealers that spearheaded the formation of the Nasdaq Stock Market, where he served as a member of the board of governors in the 1980s and as chairman of the board of directors in the early '90s.

By 2001, Madoff's firm was one of the three top market makers in Nasdaq stocks and the third-largest firm matching buyers and sellers of securities on the New York Stock Exchange, according to Baron's.

Investigators say Madoff's crime originated in a separate and secretive investment-advising business.

Madoff apparently kept the loss a secret even from his two sons and other family members who work at the firm until he and two of them retreated to his apartment occupying the entire 12th floor of an Upper East Side building on Dec. 9, according the complaint drawn up by an arresting FBI agent.

"It's all just one big lie," he told his family. He confided he had blown the money in what was "basically, a giant Ponzi scheme," the complaint added.

Several attorneys representing investors, however, have questioned how he could have acted alone, given the size of the alleged fraud and vast holdings of his firm.

According to the court complaint, Madoff told his family he expected to end up behind bars, but wanted to execute his own version of a bailout package by doling out $200 to $300 million he had left to family, friends and employees. After the meeting, a lawyer for the family contacted regulators, who alerted the federal prosecutors and the FBI.

Madoff was in a bathrobe when two FBI agents arrived at his door unannounced at 8:30 a.m. on Dec. 11. He invited them in, then confessed after being asked "if there's an innocent explanation," the complaint said.

Responded Madoff: "There is no innocent explanation."

Bernard Madoff and his $50 billion Ponzi scheme

Shock and panic spread through the country clubs of Palm Beach and Long Island after Bernard Madoff, a trading powerbroker for more than four decades, allegedly confessed to a fraud that will cost his wealthy investors at least $50 billion – perhaps the largest swindle in Wall Street history.

Mr Madoff, 70, a former Nasdaq stock chairman, was apparently turned in by his two sons and arrested on Thursday morning at his Manhattan apartment by the FBI. Andrew Calamari, a senior enforcement official at the US Securities and Exchange Commission, described the scheme as “a stunning fraud that appears to be of epic proportions”.

The FBI’s criminal complaint states that when two federal agents arrived at Mr Madoff’s apartment, he told them: “There is no innocent explanation.” The agents say that he told them “he paid investors with money that wasn’t there”, that he was “broke” and that he expected to go to jail.

Many of his investors came from the enormously wealthy enclaves of Palm Beach, Florida and Long Island, New York, where people had invested billions in Mr Madoff’s firm for decades. He was a fixture on the Palm Beach social scene, and was a member of some of its most exclusive clubs, including the Palm Beach Country Club and Boca Rio Golf Club, where he drummed up much of his business.

The FBI claims that three senior employees of Mr Madoff’s investment firm turned up at his apartment on Wednesday to ask questions about the company’s solvency. Two of them are believed to be his sons, Andrew and Mark, who have worked for their father for two decades.

Mr Madoff told them that he was “finished”, that he had “absolutely nothing”, and that “it’s all just one big lie”. He said the investment arm of his firm was “basically a giant Ponzi scheme”, and that it had been insolvent for years.

A Ponzi scheme, named after the swindler Charles Ponzi, is a fraudulent investment operation that pays abnormally high returns to investors out of money put into the scheme by subsequent investors, rather than from real profits generated by share trading.

The FBI complaint states that Mr Madoff told his sons that he believed the losses from his scheme could exceed $50 billion. If that is the case, his fraud would be far greater than past Ponzi schemes and easily the greatest swindle blamed on a single individual.

There has been scepticism for years on Wall Street over how Mr Madoff managed to pay such consistently high returns. Ponzi schemes inevitably collapse, and Mr Madoff found himself to be no exception. This month, clients asked for $7 billion to be returned, the FBI says.

Mr Madoff ran the scheme separately from his main business and his sons had no involvement in it.

Mr Madoff has been charged with a single count of securities fraud. He declined to enter a plea in Manhattan’s US District Court and was released on $10 million bail. He faces up to 20 years in jail and a $5 million fine if convicted. His lawyer, Dan Horwitz, said that his client was “a person of integrity. He intends to fight to get through this unfortunate event.”

One investor told The Wall Street Journal: “This is going to kill so many people. It’s absolutely awful.” Ira Roth, from New Jersey, said that his family had $1 million invested, and that he was in a state of panic.

Bernard L. Madoff arrested on fraud charge in NYC

Bernard L. Madoff, his silver hair reflecting the lights of a federal courtroom, was released on $10 million bail secured by his signature and that of his wife. He declined to comment as he walked out of U.S. District Court in Manhattan.

Madoff, 70, the founder of Bernard L. Madoff Investment Securities LLC, maintained a separate and secretive investment-advising business that served between 11 and 25 clients and had a total of about $17.1 billion in assets under management, prosecutors said.

Late Thursday, the Securities and Exchange Commission announced a civil securities fraud charge against Madoff and said it was seeking emergency relief for investors, including an asset freeze and the appointment of a receiver for the firm.

Andrew M. Calamari, associate director of enforcement in the SEC's New York office, said the SEC was alleging "a stunning fraud that appears to be of epic proportions."

A criminal complaint signed by FBI Agent Theodore Cacioppi said Madoff told at least three senior employees at his Manhattan apartment Wednesday that the investment adviser business was a fraud and had been insolvent for years, losing at least $50 billion.

Madoff told the employees he was "finished," that he had "absolutely nothing," that "it's all just one big lie" and it was "basically, a giant Ponzi scheme," according to the complaint filed in court.

The employees understood Madoff's admission to mean that "he had for years been paying returns to certain investors out of the principal received from other, different, investors," said the complaint, which did not identify the investors impacted by the scheme.

Cacioppi said one of the employees told him that Madoff was "cryptic" about the firm's investment advisory business and kept its financial statements locked up. The FBI agent said another employee told him that Madoff last week had said clients had asked for about $7 billion in redemptions and he was struggling to meet those obligations but thought he could do so.

Cacioppi said two senior Madoff employees told him that Madoff said during the Wednesday meeting that he planned to surrender to authorities in a week but first wanted to distribute $200 million to $300 million he had left to certain selected employees, family and friends.

Cacioppi said he and another FBI agent arrived Thursday at Madoff's apartment, where Madoff invited them in and acknowledged knowing why they were there.

"After I stated, `We're here to find out if there's an innocent explanation,' Madoff stated, `There is no innocent explanation,'" the agent wrote.

"Madoff stated, in substance, that he had personally traded and lost money for institutional clients, and that it was all his fault," Cacioppi said.

The agent wrote that Madoff said he had "paid investors with money that wasn't there" and that he was broke and insolvent and had decided that "it could not go on" and that he expected to go to jail.

Defense lawyer Dan Horwitz called Madoff "a person of integrity" and said he intends to fight the charge.

If convicted, Madoff could face up to 20 years in prison and a maximum fine of $5 million.

Bernard L. Madoff Investment Securities LLC ranks among the top 1 percent of U.S. securities firms, according to the company's Web site.

In 2001, Barron's reported that Madoff's firm was one of the three top market makers in Nasdaq stocks and the third-largest firm matching buyers and sellers of securities on the New York Stock Exchange.

Shortly after leaving law school, Madoff founded his firm in 1960. It was one of five broker-dealers most closely involved in developing the Nasdaq Stock Market, where he served as a member of the board of governors in the 1980s and as chairman of the board of directors.

Prosecutors noted in a release that the company Web site boasts: "Clients know that Bernard Madoff has a personal interest in maintaining an unblemished record of value, fair-dealing and high ethical standards that has always been the firm's hallmark."