Madoff From Cocaine to Confessions

//Madoff From Cocaine to Confessions

Madoff From Cocaine to Confessions

Bernie Madoff was exposed by federal authorities for orchestrating a $50 billion ponzi scheme, there were some other interesting revelations like sending  people out to go buy cocaine for company use. Because of the ridiculous amount of cocaine in the office it was called  “North Pole.” He would also provide “topless entertainers wearing only G-string underwear serving as waitresses.”

Now in a little bit different situation he tells in his words his side of the story and how it got to that point.

Apr. 23, 2011 11:20 P.M. … These altered transaction[s] were long and short transactions, not model option trades like the other clients, i.e., banks and funds, and were no[t] part of any Ponzi scheme and took place post ‘92. The long positions were purchased legit starting in 1980 when everything was o.k. …

Oct. 11, 2011 7:20 A.M. … Although both Picard and [Assistant U.S. Attorney] Litt would have everyone believe that I never traded legitimately, this was nothing but a theory they jumped to by misinterpreting my state[ment] about short sales during our very first meeting. I know you realize that they have never been able to support this absurd theory to this day. …

You can do a back of the envelope calculation as follows. From 1963 I made substantial arbitrage profits for the Picower, Shapiro and Chais families joined by the Levy family in 1970. [M]ost of these profits were re­invested and the amounts compounded. In 1970 Saul Alpern formed his partnerships later [run] by Avellino and Bienes. In 1980 I started trading for [French banker] Albert Igoin and his French and Swiss banking associates. All of these accounts averaged about 20% annually and were involved in various forms of convertible arb using bonds, pfds [preferreds], Rts. [rights] and units. [A]nd ALL WERE LEGITIMATE TRADING. THIS CONTINUED THRU THE EARLY 90’S. I would add that the long position portfolios I structured for the Picower, Shapiro, Chais and Levy accounts were also legit. It was the[ir] later tax maneuvers that were a problem [for me]. …

A series of transactions are affected for the client, including shorts against the box, pairs [of] short sales and long term options, all with the goal of hedging the portfolio of securities.

The market continues to move higher, resulting in substantial long term gains (unrealized) with the expected corresponding losses (unrealized), although smaller than the gains on the long positions.

Now, the market crashes in 1987 and the client panics and is afraid of losing his benefit of long term gains if the market continues to sell off.

The client knows that the hedge transactions were established with the understanding they were to be long term in duration due to the contra sides own currency hedging strategies.

This being said, the client insists on realizing his long term gains on the equities, and leaving the short hedge transactions net short.

It is important to know that at this point in time, the gains were substantially greater than the loss on the hedges.

Because of the nature of our hedge agreements, and in order to preserve my very important relationship with the foreign counterparties of the hedges, I pleaded with the client to not force the sales. My pleas were to no avail. …

In order to avoid an ugly period of litigation and negative press, I agreed to take over the contra side of the hedge transactions with the understanding that the domestic client would hold me harmless from the losses on the hedge transactions. Provisions were made in the client’s trust agreements and wills to protect me even in the event of their death. Their hope was that the market would continue to sell off and erase the hedge loss. Unfortunately the ­opposite occurred. The market moved higher (post-crash), resulting in huge loses on the naked short hedge position.

For a period the client sent in bonds and cash to cover the margin calls but after a time claimed his inability to help due to his tax and other investment obligations. He assured me he would be able to re-liquify in time and honor his agreement.

The rest is history.

PROOF I’M NOT A BAD GUY

Feb. 20, 2011 2:35 A.M. … In the last few days people were still pushing money on me in large sums, but I couldn’t get myself to take [them]. … I am telling you this so you can see that I just could not continue this charade any longer. …

Feb. 23, 2011 6:05 A.M. … Everyone here always asks me why i never ran. I certainly had the opportunity over the last few years to stash money somewhere with all the connections I had everywhere. Certainly that is the way the criminal mind works. The truth is that it never was something I ever gave any thought to. …

May 7, 2011 3:10 P.M. … The acknowledgement that my family salaries and living expenses came from the legitimate side of the firm was of the utmost importance to all of us. Picards constantly inflammatory claims that we used the firm as a piggy bank was not supported by anything other than his flare for the dramatic. …

Oct. 11, 2011 7:20 A.M. …

Most of the early hedge funds like Steinhardt, Soros, Julian Robertson, Tudor Jones to name a few had returns between 25–35%. There was nothing unusual about my returns of 20%.

Oct. 24, 2011 6:11 P.M. … I never tried to involve my sons or brother in a conspiracy … I would never have involved my family in my wrongdoing. …

Nov. 25, 2011 7:05 A.M. … What on earth would I have to gain about be[ing] untruthful … at this point[?]

I’M THE VICTIMS’ ADVOCATE

Dec. 17, 2010 3:05 P.M. … Now that [the] Picower estate settled with the Gov’t for 7 billion and Shapiro for 600 million an[d] Union Bancaire for 500 million as well as [P]icard recovering almost 2 billion previously, with other settlements outstanding there doesn’t seem t[o] be an actual loss to clients. This was my claim from the very start. …

Dec. 29, 2010 12:05 P.M. … At some point I would like to make it known that I was greatly helpful in the recovering of assets for the victims. …

 

Dec. 7, 2011 9:41 P.M. As I said from the start my interest was to assist in recovering assets so that everyone would get their investment principal back. This was the only thing I could do to try and undo some of the pain I have caused to my family and clients. …

http://www.forbes.com/sites/dianabhenriques/2012/03/20/exclusive-the-secret-madoff-prison-letters/

2012-03-21T13:12:20+00:00

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