Bernard Madoff from cityfile.com
Celso De Los Angeles from the website of Sto. Domingo, Albay.
I haven’t blogged in almost two weeks and I miss it. Unfortunately, the demands of adjusting to a new work environment has kept me busy and too mentally exhausted to keep up with the news. I literally haven’t seen a weekday sunset for the past month.
In an effort to catch up, I checked out Manolo Quezon’s blog. The shock of seeing all the crisis situations which unfolded over the past week or so was like a kick in the balls. Between the tanking economy and retrenched jobs, to a spate of bank failures, the perennial problem of corruption in high places, to the specter of narcopolitics, my anxiety level shot through the roof. I wanted to draw the blinds and crawl back to my La-Z-Boy. I get the feeling that the worst is yet to come.
As we lurch from one economic catastrophe to another, we can take cold comfort in the fact that financial scams are not unique to us. In terms of scope, nothing can beat the con perpetuated by Bernard Madoff, until recently a lion in Wall Street, who turned out to be a rat. With apologies to the intrepid New York City rats. In yet another variation on the time-worn Ponzi scheme, Madoff scammed an estimated U.S.$ 50 billion from various institutional and individual investors spanning the globe. Madoff defrauded Jewish charities, European royalty, prominent politicians and celebrities like Steven Spielberg and Larry King, even Arab banks. According to the criminal complaint filed against him, Madoff “deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars.” Basically, as he himself admitted, he ran a Ponzi scheme on a large, complicated and transnational scale. But like any Ponzi scheme, it was a fraudulent set-up where investors are paid out of money taken from subsequent investors instead of real business profits. Bamboozling Pedro to pay Juan, and so on. At some point, all Ponzi schemes are bound to collapse like the proverbial house of cards.
Major banks worldwide which were affected include the Spanish bank Grupo Santander SA, at least four French banks including BNP Paribas and Societe Generale, Britain’s HSBC Holdings PLC and Royal Bank of Scotland Group PLC, and Japan’s Nomura Holdings. Even financial powerhouse J.P. Morgan almost got burned but managed to pull out a few months before Madoff was arrested, under suspicious circumstances and without informing its clients who remained exposed to the risks of Madoff’s spurious hedge funds. Not a few Morgan investors who lost their shirts are now contemplating a lawsuit against the bank. Continue reading “Scams Galore: From Madoff to Legacy”