Friday, 15 May 2009

Billions lost, many wounded and no antidote!

The $60 Billions collapse of Bernard Madoff’s fraudulent investment business has rattled windows all round the world. Even Jersey’s Woolworths bankruptcy papers reveal £160 millions debt connections with him or his business associate J. Ezra Merkin’s funds (see a previous post on this site dated 8th May) – and both these elderly Jewish lawyers are now in jail and unlikely ever to be released.

Although not much reported on this side of the Atlantic the huge financial failures have encouraged considerable anti-Jewish sentiment and conspiracy theories abound on the NET.
Unfortunately, Madoff and Merkin seem to have exploited their special status and connections within Jewish communities across America to solicit investments into their doomed funds whilst at the same time masquerading as generous philanthropists.

Merkin was involved in 3 particular “feeder” funds that funneled billions into Madoff’s sham enterprise and besides many individuals across the nation being reduced to poverty their activities have also broken or damaged many genuine charitable and non-profit organizations and institutions.

The US Bankruptcy Court filed a dossier of losing investors that ran to 162 pages and included such as the American Jewish Congress (founded in 1918) which might have lost many millions and its New York HQ or Yeshiva University (of which Madoff was a trustee) besides more modest charities like the “Gift of Life” (a bone-marrow charity) or the “Children of Chernobyl” fund etc etc.

The Jewish communities seem to have been particularly vulnerable and their traditional mix of generous philanthropy and fund raising for good causes together with a strong religious motivation and presence rendered them easily exploitable.

In Miami the Palm Beach Country Club was particularly targeted because its membership was largely Jewish and wealthy. But the historic origins of the club in the 1950’s reveal a great deal about the realities of life because it was founded when other clubs would not accept Jewish members. Yet even today, the Everglades, Bath and Tennis Club of Palm Beach are reported as still having “very few” if any Jewish members.

That so many wealthy individuals or organizations might so easily be parted from their money is always surprising and is in no way peculiar to any particular religious or social group. Walter Noel’s Fairfield Greenwich Group – advertised as a conservatively run “alternative fund” - lost $7.5 billions to Madoff.
But the impact of apparent “respectability” over more certain “regulation” seems to be an overwhelming force where investment opportunities – aka profit – are concerned.

Both Madoff and Merkin have reportedly played on their religious affiliations. Merkin is supposed to have appeared as a “Rabbi” on occasions but he was more certainly President of the New York synagogue founded by his father who was an escapee from pre-war Nazi Germany. Thus, it is easy to comprehend how such figures would have appeared as reliable people to do business with - without too many questions asked.

Yet, the Madoff scandal has exposed others, usually as a result of worried clients belatedly posing questions. Although only 2% of the US population is declared as ethnically Jewish it is reckoned that they provide 40 – 50% of the nation’s billionaires so must be a particular and regular target for fraudsters.

Arthur Nadel, another aged New York trained Jewish lawyer and musician flew away from Sarasota in Florida in March where he ran the Scoop Management hedge fund. He was arrested soon afterwards but the business had debts of $350 millions, which appears modest in comparison with Madoff’s achievement and he too had played the part of philanthropist and was active in the Florida Jewish community.

Lawrence Salander was arrested in New York too at about the same time. He too is Jewish and was a fine art dealer who sold the same items to more than one customer until stopped and his losses were declared at more than $88 millions.
His high value clients included John McEnroe to whom he sold a painting by Gorky called “Pirate II” – which he had also sold elsewhere.

In Minnetonka it was the Evangelical Christians who were especially targeted by Tom Petters and his family until a member of staff blew the whistle when Madoff’s news reached Minnesota. Their so called hedge fund has debts of $3.5 billions and the Polaroid business was among the assets and is a considerable local employer.

Lesser fraudsters Paul Greenwood and Stephen Walsh were also arrested in Manhattan and bailed for £7 millions each in connection with their investment activities.
In a familiar tale they had managed 100’s of millions of dollars for universities and charities and creamed off substantial sums to buy horses and collectibles and other good things of life for their fast-lane style.

James Nicholson the President of Westgate Capital New York Investment Fund was also arrested on allegations of defrauding his clients of yet more hundreds of millions of dollars.

Marcus Schrenker an Indiana pensions fund manager took the extreme measure of trying to fake his death in January 2009 by parachuting from his Piper plane after making a false May-Day call. He surrendered and was arrested and awaits processing by the judiciary and governments of several States. He has already forked out $12 millions for selling a defective aircraft and a couple of $millions as compensation resulting from earlier clients’ actions. The debts are likely to be considerable.

The tall Texan, 58 years old (Sir) Allen Stanford was also eventually arrested and charged with his nefarious activities with the Stanford International Bank and related businesses and losses of over $8 billions are currently claimed.
He too liked to be seen as a great philanthropist – especially through his promotion of cricket among poor Caribbeans and the gullible English cricket authorities – and his empire spanned from Dallas to Antigua and St Croix in the US Virgin Islands. He had been forced out of Montserrat in the 1980’s when the British government made a half hearted attempt to clamp down on ill-regulated, overseas tax havens.

Stanford was also the master at presenting a “reliable” image and the US dossier refers to 50,000 defrauded customers, so his message must have been convincing whereas more certain and official regulation was noticeable by its absence. Now the entire economic futures for many of the small Caribbean islands looks uncertain as a direct result of his failures but the greater mystery is - with all the regulating bodies that are supposed to exist around the world - how could such enormous financial frauds be perpetrated?

The other mystery is where has all the billions of money actually gone?

Arthur Nadel managed to make $20 millions disappear from the books by “wire transfer” to “unknown destinations” shortly before he flew.

Bernard Madoff is alleged to have withdrawn $12 billions in 2008 and $6 billions more in the 3 months prior to his arrest but where it is now seems to be a mystery and his wife is reported to be shopping still at the smartest shops.

But are we sure that none of this money has finished up in Jersey and how shall we know or care if it has? In the meantime, nobody seems to be very curious about the £160 Woolworths millions that have been claimed by GMAC, the fund that Ezra Merkin managed until it ran up debts of billions…….. Perhaps the JFRC or Senator Maclean will comment?

Submitted by Thomas Wellard.

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