More on the Madoff Scandal …
Is David Friehling Just A Red Herring?
| Dec 23, 08 11:24 AM
While investigators will no doubt squeeze Friehling for every last bit of information, we suspect he’ll prove to be a dry lead, largely irrelevent to the crime.
Our guess is that Friehling had one role to play in this whole affair: Sign his name on a line so that Madoff could show he was audited by an outsider. But since the whole thing was a fraud, there was no reason for Friehling to have actually done any pretend auditing, or to have any knowledge whatsoever of Madoff’s books. If Friehling was willing to jot his name on a line (for some money and as a favor to the father-in-law), what good is it for Madoff to bring in some small-timer into the Sanctum Sanctorum of the 17th floor?
We’re pretty sure Madoff had help. The Feds are honing in on lieutenant Frank DiPascali, and both the sons and the wife will be eyed suspiciously for awhile, not to mention anyone who was involved with Cohmad investments. But we doubt the guy whose job it was to lend his name to the audit report actually had any real knowledge.
Presumably, Friehling will get into trouble if in fact he lent his name to a bad audit. But that’s a much smaller crime than participating in the design and execution of a Ponzi scheme.
It’s also this reason why we think more attention will be paid to the NJ accountants Sosnik and Bell. Unlike Friehling, they actually dealt with the records that were sent to the public, and the fact that they handled hundreds of victims signifies more of a true business involvement with Madoff and his closest people.
See Also:
Meet Bernie Madoff’s Acountant: David Friehling, CPA
http://clusterstock.alleyinsider.com/2008/12/is-david-friehling-just-a-red-herring
Name: David Friehling, CPA
Firm: Friehling & Horowitz
Location: New City, NY (Rockland County)
More details:
- Cornell Alum
- Member of board of directors of Jewish Community Center of Rockland
- President Elect of Rockland Chapter of New York State Society of CPAs
- Donated to Cornell in past year (on “Honor Roll” of donors)
Name: David Friehling, CPA
Firm: Friehling & Horowitz
Location: New City, NY (Rockland County)
More details:
- Cornell Alum
- Member of board of directors of Jewish Community Center of Rockland
- President Elect of Rockland Chapter of New York State Society of CPAs
- Donated to Cornell in past year (on “Honor Roll” of donors)
http://clusterstock.alleyinsider.com/2008/12/meet-bernie-madoffs-accountant-david-freihling-cpa
L’Oreal Heiress Bettencourt Said to Have Invested With Madoff
Bloomberg
By Saijel Kishan and Katherine Burton Dec. 24 (Bloomberg) — Liliane Bettencourt, the world’s wealthiest woman, entrusted part of her $22.9 billion fortune with Bernard Madoff through the fund manager found dead in New York yesterday, …
Madoff Investor Reportedly Kills Self
Madoff investor found dead of possible suicide
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.If you wanted anything, a new account, money in, money out, you called Frank,” said one Madoff investor. “Nothing moved in that office without him, operationally,” this person said.
“Frank DiPascali would like to see investors get back whatever they can,” said Marc Mukasey, a lawyer for Mr. DiPascali. He declined to comment further.
After Mr. Madoff’s arrest on Dec. 11, investigators from the Securities and Exchange Commission showed up at the Madoff firm’s headquarters in Manhattan and questioned Mr. DiPascali. He told the SEC he didn’t know who was responsible for clearing and settling trades in the investment-advisory side of the firm, according to an SEC memorandum reviewed by The Wall Street Journal. He “responded evasively,” the SEC memo said.
Probe Eyes Audit Files, Role of Aide To Madoff
http://online.wsj.com/article/SB122999256957528605.html?mod=googlenews_wsj
[Marc Mukasey is the son of US Attorney General Mukasey… he’s part of the defense team at law firm Bracewell & Giuliani LLP defending Madoff’s operating chief Pascali]
Madoff’s Wife Said to Be Probed Over Helping Keep Ponzi Records
Bloomberg -
US Attorney General Michael Mukasey, Marc Mukasey’s father, recused himself from the Justice Department’s investigation into Madoff because his son …
Mukasey Recuses Himself From Madoff Investigation
New York Times, United States -
Mark Mukasey, a former federal prosecutor who heads the white-collar defense section at the law firm of Bracewell & Giuliani, is representing Frank Pascali …
L’Oreal Heiress Bettencourt Said to Have Invested With Madoff
By Saijel Kishan and Katherine Burton
Dec. 24 (Bloomberg) — Liliane Bettencourt, the world’s wealthiest woman, entrusted part of her $22.9 billion fortune with Bernard Madoff through the fund manager found dead in New York yesterday, two people familiar with the matter said.
The 86-year-old daughter of L’Oreal SA founder Eugene Schueller was the first investor in a fund managed by Access International Advisors, the people said, speaking on condition of anonymity because her investment isn’t public. The body of Access co-founder Thierry Magon de La Villehuchet, 65, was found in his Madison Avenue office yesterday. Police said he probably killed himself.
Bettencourt, a Parisian, joins wealthy individuals from around the world, including Spanish billionaire Alicia Koplowitz, U.S. moviemaker Steven Spielberg and Nobel laureate Elie Wiesel, among victims of what Madoff, 70, told investigators was a $50 billion Ponzi scheme.
“More high-profile names who have been victimized by Madoff will start to become known now,” said Ron Geffner, who represents hedge funds at the New York-based law firm Sadis & Goldberg LLP. “There’s a strong sense of anguish, fear and distrust.”
Calls and e-mails to Fondation Bettencourt Schuelle, the foundation she started in the Parisian suburb of Neuilly-sur- Seine, weren’t returned. Bettencourt ranked 17th in Forbes’ list of the world’s richest people in 2008, the highest-ranking woman. Access, which oversaw $3 billion, raised money mainly from wealthy European investors.
‘Extensive’ Due Diligence
Access said in a Dec. 12 letter to clients that funds including its LUXALPHA SICAV-American Selection invested solely with Madoff’s eponymous investment firm. The fund had $1.4 billion in assets as of Nov. 17, according to data compiled by Bloomberg.
Access says it carries out “extensive” due diligence on the funds to which it allocates money, a process that can take as long as six months and cost $100,000. It also hires private investigators to run “extensive background checks” on fund managers, including searches on professional credentials, regulatory filings and bankruptcy, according to marketing documents dated September.
New York police are working on the assumption that de La Villehuchet’s death was a suicide, Commissioner Raymond Kelly said yesterday. The fund manager was found “with his feet propped up on his desk, a trash pail nearby to collect blood,” and no sign of a second person, Kelly said in the interview.
Body at Desk
He had cuts made by a box-cutter in the area of his biceps and his wrist, and pills were found nearby, Kelly said at a news conference. No suicide note was found. His body was found at his desk early yesterday morning by a security guard who had been called by an employee unable to enter the office, Kelly said.
Villehuchet founded Access in 1994 with Patrick Littaye. One of the firm’s partners was Philippe Junot, according to the marketing documents. Junot is the former husband of Princess Caroline of Monaco. Prince Michel of Yugoslavia is an investor relations executive, according to the documents.
Prior to Access, De La Villehuchet was chairman and CEO of Credit Lyonnais Securities USA, the U.S. investment banking arm of the French bank. He had joined Credit Lyonnais in 1987, and before that ran Interfinance, an international broker firm specializing in French, Belgian and Italian stock markets that he founded in 1983. He worked at Banque Paribas from 1970 to 1983.
Access, which had 26 employees, said in a statement on Dec. 12 it was working with lawyers to assess its exposure to Madoff. UBS AG, LUXALPHA’s administrator until this year, is no longer involved with it, said Karina Byrne, a UBS spokeswoman.
De La Villehuchet’s death comes as lawsuits mount in connection with investors victimized by Madoff. Fairfield Greenwich Group, a hedge-fund firm that had $7.5 billion invested with Madoff, has been sued for allegedly failing to protect its clients’ assets. Madoff was arrested on Dec. 11 and is now under house arrest at his apartment in New York.
To contact the reporters on this story: Saijel Kishan in New York at skishan@bloomberg.netKatherine Burton in New York at kburton@bloomberg.net
Last Updated: December 23, 2008 20:06 EST
http://www.bloomberg.com/apps/news?pid=20601087&sid=a.mL6Nm9f57w&refer=home
Madoff Victims May Have to Return Profits, Principal (Update1)
By Carlyn Kolker, Tiffany Kary and Saijel Kishan
Dec. 23 (Bloomberg) — Like some of Bernard Madoff’s clients, a Florida restaurant owner was lucky enough to withdraw part of his investment before the money manager allegedly confessed to a $50 billion Ponzi scheme. Now he’s worried he might be asked to give it back.
The 53-year-old investor, who asked not to be identified to protect his stake, took out about $600,000 this year from his $1.5 million account, using some of it to pay down a mortgage. He and other Madoff clients who withdrew funds as long as six years ago may be sued on behalf of other victims to return profits and even principal, securities and bankruptcy lawyers say.
“Right now there are Madoff winners and Madoff losers,” said Lynn LoPucki, who teaches bankruptcy law at Harvard University. “Before this is over there will be nothing but Madoff losers.”
Clients of Madoff had about $36 billion with his firm, according to a Bloomberg tally that may include some double counting. Before his arrest on Dec. 11, Madoff, 70, confessed to employees that his “giant Ponzi scheme” may have cost as much as $50 billion, according to an FBI complaint. His misconduct may have stretched back to at least the 1970s, two people familiar with the government’s inquiry of Madoff said last week.
The Florida investor, who first gave his money to Madoff five years ago, said he had no hint of fraud and would go to jail rather than give up the amount he took out.
Irving Picard, the trustee appointed to liquidate Madoff’s brokerage, Bernard L. Madoff Investment Securities LLC, holds the fate of the restaurant owner and other investors in his hands.
Enough Funds Left?
Picard, who didn’t return a call seeking comment on plans to sue victims to recover funds, said in a court filing yesterday that “there has not been any showing or determination that there are sufficient funds” to satisfy victim claims.
A so-called clawback of paid-out funds in the Madoff liquidation could result in lawsuits against investors such as charities, hedge funds and individuals who redeemed profits and took out principal. Nonprofit institutions such as the Carl and Ruth Shapiro Family Foundation, a foundation controlled by Democratic U.S. Senator Frank Lautenberg of New Jersey, and Yeshiva University relied on funding from Madoff investments.
Lawyers and representatives of the Shapiro and Lautenberg foundations didn’t return calls seeking comment. In a statement, Rick Matthews, a Yeshiva University spokesman, said, “Our lawyers and accountants are in the process of an investigation.”
‘Further Risk’
“Charities are looking at their legal options as regarding their right to recoup money,” said Mark Charendoff, president of the New York-based Jewish Funders Network, whose 1,000 members fund Jewish causes and are assessing losses from Madoff investments. “I don’t know that they’ve been focused on or are aware that they may in fact be at further risk of loss.”
Bankruptcy laws authorize a trustee like Picard to recover money that was distributed as part of a fraud and share it among the victims, LoPucki said.
“The purpose of these laws is to balance the losses among the various investors, but how that balance is supposed to be struck is not clear,” LoPucki said.
Under New York state law, which can be invoked for Madoff recoveries, a trustee can seek redemptions going back six years, said Tracy Klestadt, a New York bankruptcy lawyer.
In a similar case, U.S. Bankruptcy Judge Adlai Hardin in White Plains, New York, ordered investors of defunct hedge-fund manager Bayou Group LLC in October to disgorge profits they’d taken out. Investors were required to pay back any gains they’d redeemed involving “fictitious profits.” Before the fraud was discovered, Bayou paid out more than $135 million, according to court papers.
‘Good Faith’ Rule
Hardin also ruled some investors would have to hand back their principal. Only investors who acted in “good faith” — a legal standard that makes investors prove they didn’t have knowledge or suspicion of fraud — could protect their initial stake, Hardin ruled. He said investors could show they had good faith if they didn’t see any “red flags” when they withdrew the funds.
That decision could be a guide for Picard, Klestadt said.
The Bayou decision set a high bar for investors who hope to protect their principal, said Carole Neville, a lawyer representing Bayou investors.
“What the Bayou case holds at the moment, is, if you had any reason to feel uncomfortable about your investment and took your money out, you don’t have good faith,” Neville said.
‘Almost Impossible’ Standard
“On the surface it seems a standard that’s almost impossible for people to meet,” said Robert Crane, president of New York’s JEHT Foundation, a group dedicated to criminal justice matters that relied on donors who invested with Madoff and said it’s closing in January.
Seeking money from investors who say they were defrauded can result in protracted litigation. In the Bayou case, which is being appealed, $20 million of the $33 million recovered from redeeming investors went to pay legal fees, Neville said.
“It’s a very unattractive position to be in,” said Marvin Pickholz, a litigation attorney at Duane Morris and former Securities and Exchange Commission enforcement official. “You are now going against your fellow shareholders who are in the same situation you are in.”
The trustee would have to prove that the money was redeemed while the alleged fraud was occurring and would have to puzzle through Madoff’s books and records to prove the amounts that were redeemed, Pickholz said.
“It could be a nightmare,” he said.
Bankruptcy trustees “spend huge amounts of money trying to get money from some investors and give it back to other investors,” LoPucki said. “The incentive of the trustee and the lawyers is to churn, to bring lots of cases, spend lots of time and charge lots of fees.”
To contact the reporters on this story: Carlyn Kolker in New York at ckolker@bloomberg.net; Tiffany Kary in New York at tkary@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net.
Last Updated: December 23, 2008 10:03 EST
http://www.bloomberg.com/apps/news?pid=20601127&refer=law&sid=awmAWSxKpXRM