BERNARD LAWRENCE

Illegal and Unethical Activities of Bernard Lawrence



Illegal and Unethical Activities of Bernard Lawrence

Q.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.

Answer: Madoff served as the Chairman of the Board of Directors of the Sy Syms School of Business at Yeshiva University, and as Treasurer of its Board of Trustees. He resigned his position at Yeshiva University after his arrest. Madoff also served on the Board of New York City Center, a member of New York City's Cultural Institutions Group (CIG). He served on the executive council of the Wall Street division of the UJA Foundation of New York which declined to invest funds with him due to the conflict of interest. Mr. Madoff, a wealthy, well-connected financier who's on important boards and served as the head of the Nasdaq stock exchange. Nobody could imagine him being a crook, even though his investment service generated suspiciously consistent returns year after year. It appears that when he started his investment firm in the early 1960's, Mr. Madoff earned legitimate profits trading in penny stocks. He moved to blue-chip securities when the rules were changed in the mid 1970's. It's unclear when he started paying off investors with money coming in from new investors, but it seems that he earned legitimate profits as an honest money manager for many decades. He didn't start out to be a crook, he became one over time.( Kouwe, 2009)

Rather than offer high returns to all comers, Madoff offered modest but steady returns to an exclusive clientele. The New York Post reported that Madoff "worked the so-called 'Jewish circuit' of well-heeled Jews he met at country clubs on Long Island and in Palm Beach. The New York Times reported that Madoff courted many prominent Jewish executives and organizations; according to the Associated Press, they trusted Madoff because he is Jewish. One of the most prominent promoters was J. Ezra Merkin, whose fund Ascot Partners steered $1.8 billion towards Madoff's firm.( Weiner, 2005)

Q.2: Name three types of parties who were impacted by the actions of Mr. Madoff and describe how they were impacted.

Answer: Affected institutions include Yeshiva University, the Women's Zionist Organization of America, the Elie Wiesel Foundation and Steven Spielberg's Wunderkinder Foundation. Jewish federations and hospitals have lost millions of dollars, forcing some organizations to close. The Lappin Foundation, for instance, was temporarily forced to halt operations because it had invested its entire $8 million endowment with Madoff. Among the other Madoff investors and associates whose account records and other information kept by the Madoff firm are being scrutinized by the government for signs of complicity, according to people familiar with the matter: Frank Avellino, a Florida accountant who ran an investment fund that channeled client money to Mr. Madoff; Noel Levine, a real-estate investor who works out of a two-room office located next door to where ...