Man talks about unveiling Bernie Madoff
The Jon M. Huntsman School’s Partner in Business Accounting Conference featured Frank Casey – the man who exposed Bernie Madoff – as the keynote speaker.
Casey told the tale of his nine-year attempt to convince the U.S. Securities and Exchange Commission of Madoff’s Ponzi scheme on Thursday at the Eccles Conference Center. He is often featured at events to speak about how the fraud led to the exposure of many failures in the financial industry.
Madoff was sentenced in 2009 to 150 years in prison for what the New York Times called the “largest, longest and most widespread Ponzi scheme in history.”
“A Ponzi scheme is a type of fraud where investors put money into a non-existent business or asset in hopes of high returns,” said Dr. Nate Stephens, a USU business professor. “The fraudster promises big returns and usually pays the first investors high returns with subsequent investor’s money.”
Stephens said Madoff was lying about telling people he was investing their money – he made it look successful.
Casey said Madoff developed the computerized over-the-counter trading systems, became chairman of NASDAQ and traded somewhere between 5 and 10 percent of the total volume of the U.S. stock markets every day.
“This man was a monster, a big dog on the street,” Casey said. “You don’t go after this guy calling him a fraudster, let alone a Ponzi operator, without putting your career right on the line.”
Dr. Christopher Skousen, associate professor in the school of accountancy, said those who invested with Madoff lost approximately $18 billion.
In 1999 Harry Markopolos and Casey met Rene-Thierry Magon de la Villehuchet, former president for Credit Lyonnaise USA, a French bank. Villehuchet was one the biggest investors in Madoff’s organization.
Casey questioned Villehuchet about who he was giving his money to. Madoff had been researched by Villehuchet’s company and checked out as credible.
After diving deep into Villehuchet’s finances, Casey and Markopolos realized there was fraud.
The duo submitted eight pages of research to the Security and Exchange Commission and they didn’t respond.
“We call every news publication we can think of,” Casey said. “Not one will take it; no smoking gun, that’s why. No bank or investors will admit it. No hedge funds will admit to funnelling money into Madoff. We start looking for an investigative reporter who is willing to risk their career.”
Michael Ocrant, an investigative reporter, started looking into the issue and Madoff contacted him. Ocrant assumed Casey was wrong about his assumption because Madoff was calm and collected about his answers.
The trading volume allowed on the stock exchange floor at the time wouldn’t support more than $5 billion. When Ocrant asked Madoff if he was running $10 billion through the floor, he admitted to $7 billion. That’s when they knew he was running a scheme.
On Dec. 11, 2008, Madoff admitted to a $50 billion Ponzi scheme.
Casey asked Villehuchet what would happen with the money he invested with Madoff.
“If you are right, then I am a dead man,” Villehuchet said. “I have all my money in it, most of my family money, every private wealth management bank from most of my career and half the royalty of Europe in it.”
Villehuchet lost $1.4 billion in 2008 and committed suicide in his office. Casey said he took himself out the way he did to atone for his sins of omission.
“It is truly amazing that Madoff was able to make this fraud last as long as it did,” Skousen said. “The government agencies, particularly the SEC, failed to recognize what was in the information that Mr. Casey shared with them.”