Buy term paper: Bernard Madoff

The name of Bernard Madoff is known to everyone who ever contacted with the world of finances. Till the recent time Madoff was one of the most influential personalities for the traders as the stock broker, investment consultant and non-executive chairman of the NASDAQ stock market. Nevertheless, in spring 2009 he was arrested and soon pleaded guilty to federal 11 felonies including the biggest Ponzi scheme in the history of the USA. The objective of this report is to analyze the activity of Madoff from the business ethics point of view.
1.Describe three types of illegal business behavior alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business.
First. Ponzi scheme. The mechanism of this fraud was described long ago. It is the financial pyramid, in which money of lower-level investors are used to pay dividends to upper-level investors. Without real gains the founder of Ponzi scheme always takes the money and runs.
Second. False gains. Madoff declared high gains in his business to attract new investors. The same idea was used by Kenneth Lay from Enron.
Third. False accounting. It was proved that Madoff used the third-face accounting firm running by just one accountant to create the illusion of real audit in his finances.
2. Name three types of parties who were impacted by the actions of Mr. Madoff and describe how they were impacted.
First. Primary investors. The people who invested money in Madoff’s business lost everything they invested. The arrest of Madoff was followed with the series of suicides among his investors. «According to the most recent federal filings, Bernard L. Madoff Investment Securities, the firm he founded in 1960, operated more than two dozen funds overseeing $17 billion» (Henriqoues, 2008)
Second. His partners. After the collapse of his business many of his partners lost their business reputation due to contacts with Madoff.
Third. Probably all participants of stock market. Due to the series of corporative scandals started in 2000, the stock market lost the trust of investors. «There was some worry on Wall Street that Mr. Madoff’s fall would shake more foundations than his own» (Henriques, 2008).
3. Describe three business safeguards (risk management) that may have prevented the harm caused by Mr. Madoff.
First. The reports of SEC’s inspectors. Madoff confirmed he could be arrested in 2003, but the lack of professionalism in SEC inspectors helped him to avoid punishment that time.
Second. The independent audit. After the collapse of Enron and Sarbanes-Oxley bill the financial reports of big companies are investigated, but Madoff avoided the investigation.
Third. The possibility to control the electronic trades. It was proven that Madoff and his workers used special software to changes the dates of records and other falsifications.
4. Describe three ways private investors might have better protected themselves from risk.
First. Diversity in investment portfolio. Never put all eggs in one basket. Every separate investment is a risk, so to protect the money it is necessary to invest if different kinds of business actives, stocks and securities.
Second. Interest to the mechanisms of financial turnover. It is possible to hire the investment consultant or\and the broker, but personal control on the investment is just the mechanism of protection.
Third. Monitoring of media. Many schemes of financial fraud are known for many years, for example, the Ponzi scheme. Knowing the features of financial pyramid or other fraud it is possible to avoid losses participating in such activity.
5. Describe three legal actions that possibly may be brought against Mr. Madoff under criminal or civil law.
As it known, «On March 12, 2009, Mr. Madoff pleaded guilty to all the federal charges filed against him — 11 felony counts, including securities fraud, money laundering and perjury» (Creswell, Landon, 2009). Before the sentence he was put under home arrest. His personal actives was confiscated, his known accounts were frozen. Besides, many of his partners were put under investigation.

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