About Paul R. Hollrah
Paul R. Hollrah is a freelance writer. He is a member of the Civil Engineering Academy of Distinguished Alumni at the University of Missouri - Columbia and a Senior Fellow at the Lincoln Heritage Institute. He currently resides in Tulsa, Oklahoma.
Past Articles
Bernie & Ruth & Chuck & Hillary
Obama is Dancing, But Who Calls the Tune?
Well...Is He, or Isn’t He?
A Tale of Two Impeachments
The Road to Fascism
Mad Max Threatens California
The Opaque Presidency
Goodbye, George Bush
The Supreme Court’s Hottest Potato
Rich White Trash
Amazing Grace: The American Sequel
Electoral Reform: The Multiple Vote
The Electoral College Has Failed
Real Electoral Reform
Something is Rotten...in the US Senate
Obama’s "Butt Boys”
Off with Their Heads
Our Sacred Cows are Coming Home to Roost
Russian Democracy: A Missed Opportunity
The Impatient Mr. Fitzgerald
Buying Soiled Underwear
Martin Luther King’s Nightmare
Slackers & Useful Idiots
The End of the Culture War
Who Killed the Automobile Industry?
Another Elephant in the Living Room
From Little ACORNS
Israel Dodges a Bullet
Just Because He’s Black
Loose Lips

Paul R. Hollrah

Bernie & Ruth & Chuck & Hillary
March 16, 2009

No, we’re not suggesting a sequel to the 1969 film, Bob & Carol & Ted & Alice, a film starring Natalie Wood, Robert Culp, Elliott Gould, and Dyan Cannon as hip new-age couples struggling with the temptations of mate-swapping. What concerns us here is a much more serious real-life drama in which some 4,800 investors have been defrauded of an estimated $64.8 billion by an unscrupulous New York investment advisor, Bernard Madoff. Although, given the principal actors in the film and in the ongoing Madoff scandal, some interesting parallels might be drawn.


Madoff, CEO of Bernard L. Madoff Investment Securities, LLC, a Wall Street investment advisory, former Chairman of the NASDAQ Exchange, admired and trusted by thousands of America’s wealthiest individuals and foundations, has done more to destroy the faith of the American people in those who are entrusted with the responsibility for growing and managing our invested capital than any living human being. Because of Madoff, millions of Americans now lay awake at night questioning whether their stock portfolios, their mutual funds, and their annuities are safe and secure.


On a day when Madoff faced hundreds of his investors in a Manhattan courtroom, before being assigned a prisoner number and hauled off to jail, more questions have been raised than have been answered. Most importantly, to what extent have the bureaucrats at the Securities & Exchange Commission (SEC) failed in their responsibility to regulate and police the securities industry? In the Madoff case they obviously dropped the ball, and it’s not because they weren’t warned.


For example, we know that in 2005, a Boston investment advisor and derivatives expert, Harry Markopolos, submitted a nineteen-page report, anonymously, to the SEC saying it was "highly likely” that Madoff Securities was "the world's largest Ponzi Scheme.” Markopolos reminded the SEC that he had first brought the Madoff matter to the attention of their Boston field office in 1999, during the Clinton Administration, but no action was taken. In his report he asked the SEC to be discreet about circulating the report, saying, "I am worried about the personal safety of myself and my family.”


In his filing, Markopolos suggested two possible scenarios. Under Scenario #1, which he described as "unlikely,” he said, "I am submitting this case under Section 21A(e) of the 1934 Act in the event that the broker-dealer and (electronic communication network) depicted is actually providing the stated returns to investors, but is earning those returns by front-running customer order flow. Front running qualifies as insider trading since it relies upon material, non-public information, that is acted upon for the benefit of one party to the detriment of another party.”


Under Scenario #2, which Markopolos described as "highly likely,” he said, "Madoff Securities is the world’s largest Ponzi Scheme. In this case there is no SEC reward payment due the whistle-blower so basically I’m turning this case in because it’s the right thing to do.”


In neither case was any action taken by the SEC auditors. Why? Is it because Madoff has friends in high places? The Center for Responsive Politics has looked into the Madoff family’s political contributions between June 1993 and October 2008. Federal Election Commission records show that members of the Madoff family made some 250 political contributions to 45 candidates and committees totaling $391,350. .


Two of the largest recipients of Madoff family cash were Senators Chuck Schumer (D-NY), $27,000, and Hillary Rodham Clinton (D-NY) $23,500. The Madoff family also made seven contributions totaling more than $104,000 to the Democratic Senatorial Campaign Committee, a committee chaired by Schumer. Other major recipients of Madoff cash were Cong. Ed Markey (D-MA), $34,000; and Senator Ron Wyden (D-OR), $25,000.


So how did Madoff Investment Securities, "the world’s largest Ponzi Scheme,” escape detection for over a decade in both Democratic and Republican administrations? Did senior Democrats in Congress take steps to run interference for Madoff?


Those within the SEC, past and present, who had every opportunity to intervene, but didn’t, must be brought before Congress and publicly exposed. And those who refuse to disclose details of how they managed to overlook Madoff’s criminal activity should be indicted and prosecuted


According to The Washington Post, an internal probe at the SEC is said to focus, in part, on the relationship between Madoff’s niece, Shana Madoff, and her husband, Eric Swanson. Shana Madoff served as compliance officer for the Madoff firm, while Swanson, a former SEC official, was involved in a 2004 SEC examination of Madoff’s business prior to their marriage. Swanson also conducted an internal review of a Madoff examination that occurred in 1999.


The SEC maintains, according to the Post, that Swanson played no role in any Madoff examinations after the onset of his personal relationship with Shana Madoff. And while it would be irresponsible not to examine what impact the Madoff-Swanson relationship might have had on the SEC’s overall failures, it is unlikely that Swanson would have been in a position to have a controlling influence over multiple SEC investigations of that magnitude.


Two other possibilities present themselves. First, as Madoff heads off to prison… probably for the rest of his life… some question whether he entered a guilty plea, without offering a defense and without the benefit of a jury trial, in order to protect his wife, Ruth, his brother, Peter, and his two sons, Mark and Andrew, from being prosecuted. That suspicion will likely cause federal investigators to look more closely at the role played by other members of the Madoff family.


And finally, for a case of this magnitude to be rushed through the system, from indictment to incarceration, in such a short time frame makes one wonder if there are not more powerful forces acting behind the scenes.


If undue influence was exerted in Washington it is much more likely that such pressure would have come from influential members of Congress. The SEC should be required to provide copies of all emails and other communications, written and telephonic, between members of Congress and the Madoff firm. And if that avenue of investigation runs into a roadblock we can be relatively certain that we are on the right track. The story of Bernie & Ruth & Chuck & Hillary might prove to be far more intriguing, and far more rife with villains, than that of Bob & Carol & Ted & Alice.

Opinions expressed by contributing writers are expressly their own and may or may not represent the opinions of The New Media Journal, BasicsProject.org, its editorial staff, board or organization. Reprint inquiries should be directed to the author of the article. Contact the editor for a link request to The New Media Journal. The New Media Journal is not affiliated with any mainstream media organizations. The New Media Journal is not supported by any political organization. The New Media Journal is a division of BasicsProject.org, a non-profit, non-partisan 501(c)(3) research and educational initiative. Responsibility for the accuracy of cited content is expressly that of the contributing author. All original content offered by The New Media Journal and BasicsProject.org is copyrighted. Basics Project’s goal is the liberation of the American voter from partisan politics and special interests in government through the primary-source, fact-based education of the American people.

FAIR USE NOTICE: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance a more in-depth understanding of critical issues facing the world. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 USC Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.

hit counter

The New Media Journal.us © 2011
A Division of BasicsProject.org

Dreamhost Review