The second graf of this story reads: “But it was the SEC’s decision in the 1990s not to take a stand on the controversial issue of ‘payment for order flow’ that helped fuel the rise of Bernard Madoff Investment Securities, the successful broker-dealer operation two floors above Mr Madoff’s private fund operation in Manhattan.”

That way of putting it implies a government-centered way of looking at the world that I don’t share. There are lots of parties other than the SEC who missed this and shouldhave gotten it — like the folks responsible for due diligence at the various institutions than invested in Madoff’s operations.

STILL … I do think the whole idea of payment-for-order-flow stinks. If the Madoff meltdown does help finally discredit it, that will be some slender silver lining.

While massive fraud committed by a large group of co-conspiritators is rare, there is precedent for this. The Equity Funding scandal by an insurance company in California took place from about 1964 to 1973 and involved about 100 people. There was actually a movie about this. It is considered as a major fraud involving the largest number of participants. Most internal control experts recommend segregation of duties to prevent fraud since collaboration involving more than two or three people is rare. This is why the Madoff case could prove to be a fascinating study for psychologists, fraud experts and ethicists. Major frauds involving the teamwork and cooperation of dozens are rare, but they do happen. The question is, how did the general business and ethical environment contribute to this horror. The participants were not “useful idiots” who had no idea of the mangitude of their crimes. If that were true, none would be getting long jail sentences. You don’t send auditors to jail for over 100 years on some minor violation that anyone could have done. Friehling did’t sign his name without knowing that he was helping to make a major fraud worth billions. He had to know that his audit opinion was a key element in this whole operation. Banks, funds and other investors relied on the phony audited reports to decide to invest. Indeed, without Friehling’s willing participation, Madoff couldn’t pull this thing off. Any accountant would know this. I have discussed this event with four other CPAs and many other financial experts and they are unanomous that Friehling’s participation was key to this fraud and that he knew more, much more, than most people think.

I read about the charging of the auditor/accountant, and what I read made it clear that the authorities have no evidence that he was in on what Madoff was actually doing. What is clear is that he did not audit him at all—he faked the audit, no doubt at Madoff’s behest. The crimes he is charged with are connected with that.

But it does not mean he was taken into Madoff’s confidence about what Madoff was actually doing, or that he helped him actively generate false records of transactions to send to clients.

I certainly would not be surprised, however, if it comes out later that he did those things as well.

Here is an article about it [emphasis mine]:

Prosecutors said Friehling essentially rubber-stamped Madoff’s books for 17 years, serving as Madoff’s auditor from 1991 through 2008 while he worked as the sole practitioner at Friehling & Horowitz.

The SEC said Friehling instead pretended to conduct minimal audit procedures of certain accounts to make it seem he was conducting an audit and then failed to document his purported findings and conclusions as he was required to do….

And how about this? Friehling invested with Madoff, and quite a bit of his money seems to have remained invested with Madoff—he only took about a third of it out over the years. Would he have put money in and left most of it there if he had known it was a Ponzi scheme? Of course, it’s a conflict of interest for him to have been auditing Madoff and also investing with him.

Friehling is unquestionably a crook. And he unquestionably knew there was something very wrong with the Madoff operation. But I’m not at all sure he was ever even allowed to look at the books and find out what it was.

Interesting… I guess he has accepted jail because, he figures, he has nothing else to lose…

extratv.warnerbros.com/2009/03/is_bernie_madoff_battling_canc.php

Bernie Madoff took his last steps of freedom into a New York courtroom today, but is the con man carrying a deadly secret?

The Swindler of the Century may be stricken with prostate cancer. The disease is apparently so advanced, that left untreated, it could lead to Madoff’s death.

The “Most Hated Man in America” spent a final night in luxury with wife Ruth before today’s courthouse chaos. “Extra” is also uncovering Ruth Madoff’s secrets! FOX Business Network’s Tracy Byrnes reveals to “Extra” she loves to puff Marlboro Lights, enjoys white wine, and lives the jet-setting lifestyle to the fullest.

Bernie and the Missus were high school sweethearts and grew up in the same neighborhood in Queens. Over 50 years later, they own a swanky Manhattan penthouse, mansions in the Hamptons and Palm Beach, and a private jet.

It is reported in the weeks leading up to Madoff’s arrest, he was still raking in as much as $10 million an hour – that’s $173 thousand a minute! Madoff pled guilty to eleven charges, including securities fraud, money laundering and making a false filing to the Securities and Exchange Commission. This is the the largest investor fraud ever committed by a single person, amounting to almost $65 billion.

Judge Dennis Chin accepted the guilty pleas and ordered Madoff to jail, where the 70-year-old awaits formal sentencing on June 16.

How Madoff Pulled It Off
46 Percent Annual Gains With No Risk? Bernard Madoff Convinced Investors He Was Making All The Right Moves

we dont want the world to look at the US the way we are looking at bernie maddoff do we?

after all, there is nothing to stop the world from teaming up to get back at the state form of bernie, is there?

and if the chinese get fed up and dump our trillion currency..

i hope you dont live in the city like i do…
cause you, like me, would be most likely a dead man.

now the chicoms are warnig us like putin that we should not commit economic suicide by becomeing socialist.. (communist).

China’s premier didn’t say it in so many words, but the implied warning to Washington was blunt: Don’t devalue the dollar through reckless spending.

“Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried,” Wen said at a news conference Friday after the closing of China’s annual legislative session. “I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.”

bernie maddoff is the exception, not the rule (and an exceptional exception he is!).

but the truth is that they are using it to create such hatred to get the kind of power that was possible last century because they think that because THEY are the despots, its going to be differnt.

oh the outcome will be the same, but jsut look different in specifics, the point that jonah goldberg was making. dont look for goosteps to know, look to the core, which always is the same.

now that the chicoms get it, they dont want to lose it (unlike their russian foils, they are not so uncaring as to the prols… after all, if they were as brutal, they could have easily solved the overpopulation problem!!! what they havent done thats in their perview is important too)