It's Evident


Unmasking the Fraud of Ponzi Schemes: Forensic Accounting and the Law Unite
Erica Pless, NCSTL Law & Science Fellow

I. Introduction
The U.S. Securities and Exchange Commission ("SEC") define a ponzi scheme as "an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors."1 This type of fraudulent scheme is named after Charles Ponzi who swindled approximately $15 million from 40,000 investors by offering them 50% returns through his postal reply coupon strategy in 1920.2 However, Ponzi was not the first and certainly not the last person to lure investors into a "too good to be true" investment scheme.

Recently, the number of Ponzi schemes has significantly increased, triggering a surge in both civil and criminal investigations. In 2009, the SEC commenced enforcement action in 60 ponzi scheme cases3 and issued 82% more restraining orders in ponzi and securities fraud cases than it did in 2008.4 The SEC now devotes more than 20% of its workload to ponzi investigations.5 From January of 2008 through June of 2009, the Federal Bureau of Investigation ("FBI") initiated over 100 ponzi scheme investigations6 and has increased the number of agents working on high-yield investment fraud cases.7 Also, the Commodity Futures Trading Commission more than doubled the number of civil actions it filed in ponzi cases from 2008 to 2009.8

With the multitude of schemes unfolding today, forensic accounting has become an essential crime fighting tool in the war against white collar fraud. Forensic accountants are charged with the difficult task of unmasking the various disguises that the perpetrators employ. Since the Bernard Madoff ponzi scheme collapsed in 2008, the demand for forensic accountants has increased in both the public and private sectors.9 Several federal agencies including the FBI, the Central Intelligence Agency ("CIA"), and the SEC are hiring forensic accountants and certified fraud examiners to investigate the numerous ponzi schemes that are plaguing the investment world.10 This article examines two of the most notorious ponzi schemes in history and explores how forensic accounting and the law unite to uncover the fraud.

II. Lou Pearlman

A. Description of Ponzi Scheme
During the 1990's, Lou Pearlman became an overnight success, making millions of dollars by forming successful boy bands such as the Backstreet Boys and 'NSync.11 Prior to entering the music business industry, Pearlman was well known to investors through his blimp leasing company, Airship International.12 Although this company floundered due to Pearlman's focus in the music business industry investors were not deterred due to Pearlman's success with the boy bands and his other prospering companies, Trans Continental Airlines, Inc. and Trans Continental Airlines Services, Inc. What the investors didn't know was that these two companies only "existed on paper."13

Over a twenty year period, Pearlman swindled over $300 million from 1,800 investors.14 Pearlman attracted many retirees by offering an opportunity to participate in Trans Continental Airline's employee stock-ownership plan.15 He named this investment program an Employee Investment Savings Account, or EISA, most likely to mislead people into believing it was part of the federal Employee Retirement Income Security Act, or ERISA. This investment plan offered an 8% return and Pearlman falsely claimed it was backed by the Federal Deposit Insurance Corporation ("FDIC"), American International Group ("AIG"), and Lloyd's of London.16 To further substantiate the legitimacy of his program, Pearlman created a fake accounting firm and issued false investor statements.17 In reality, the investment plan was a facade and many retirees lost their life savings. Similar to Ponzi and other schemers, Pearlman did not invest the money he received but used the funds to pay current investors dividends and redemptions and finance his lavish lifestyle.

In 2006, a concerned Florida investor contacted the Florida Office of Financial Regulation questioning how Pearlman was able to sell FDIC insured accounts.18 The agency began an investigation into Pearlman's business operations and by December it was pursuing charges against Pearlman.19 Meanwhile, one of Pearlman's attorneys contacted the FBI with his concerns about Pearlman's business activities.20 The FBI discovered that Pearlman was keeping two sets of books, creating fictitious people, and using the names of deceased people to aid the fraud.21 The FBI had enough evidence to charge Pearlman with 1 count of bank fraud but by January 2007, he had fled the country.22 Pearlman was later captured in Indonesia and brought back to the United States to face trial on multiple charges.23

In March of 2008, Pearlman plead guilty to two counts of conspiracy to commit an offense against the United States, one count of money laundering, and one count of presenting or using a false claim in a bankruptcy proceeding.24 He was sentenced to 25 years in prison but was also given the opportunity to reduce his prison sentence by one month for every $1 million he recovered for investors.25 He is currently incarcerated at a U.S. penitentiary in Atlanta, Georgia.26

B. Forensics and the Law
The collapse of a ponzi scheme marks the beginning of a complex investigation requiring a dedicated and collaborative effort from law enforcement officers, forensic accounting experts, bankruptcy trustees, and attorneys. After a ponzi scheme fails, creditors of the entities responsible for disguising the fraud usually haul the entities into bankruptcy court by filing involuntary petitions. Under the U.S. Bankruptcy Code, a trustee is then appointed to recover and manage the assets of the entities, also known as the "bankruptcy estate." In March of 2007, several creditors filed involuntary petitions against Pearlman and Trans Continental Airlines, Inc. seeking the appointment of a trustee. The U.S. Bankruptcy Court appointed Soneet R. Kapila as the Chapter 11 Trustee in the Pearlman bankruptcy cases. Kapila and his accounting firm, Kapila & Company, quickly began the process of unmasking the fraud. In June of 2008, Kapila filed an application for interim compensation requesting over one million dollars for services rendered from March 27, 2007 through April 30, 2008.27 Kapila's application for interim fees describes his firm's forensic investigation into Pearlman's affairs, for which U.S. Bankruptcy Judge Arthur Briskman awarded Kapila $500,000 plus several thousand dollars in costs.28

When a ponzi scheme unfolds, one of the first steps in the investigation involves collecting, organizing, and reviewing documents and records. According to Kapila's application, his firm conducted a forensic records search of over 2,000 boxes of documents that had been confiscated from Trans Continental's offices and other locations.29 The firm prepared an inventory of the contents and flagged possible sources for asset recovery.30 The firm also retrieved and reviewed emails and other company documents which further aided the investigation.31

Tax returns can provide valuable information to forensic accountants in fraud cases. Kapila's tax associates conducted a forensic analysis of all tax returns that had been prepared for Pearlman and his entities "for the purpose of identifying assets, leads to assets both domestic and offshore, sources of revenues, persons of interest and any other items of significance."32 Kapila's firm identified that Pearlman had created over 100 straw entities to help perpetrate and disguise the fraud.33

Another crucial step in forensic accounting investigations involves reconstructing bank accounts and preparing cash flow analyses, commonly referred to as "following the money." Accountants scour each deposit, transfer, and transaction to "trace" the original source and subsequent use of funds. Typically, forensic accountants import or manually input banking data into finance or accounting software such as Quicken® or Quickbooks®. The software allows accountants to quickly review the data and run accounting reports for forensic analysis. In this case, Kapila's firm initiated a reconstruction of each bank account that Pearlman had utilized, which amounted to "over 28,000 transaction lines of data" during the time period investigated.34 Kapila's firm discovered that Pearlman had maintained over 150 bank accounts and had conducted business throughout the United States, Germany, the Netherlands, the Philippines, and Indonesia.35

Computer forensics experts are often called upon to assist in forensic investigations. In today's technology driven world, critical information is often stored on computer systems that are encrypted and/or protected with passwords. Experts empowered with the knowledge and tools to access and extract the data are imperative to the investigations. Kapila's Information Technology experts "extracted records from both the TCA server and numerous hard drives of employee computers, including Quickbooks® records, emails, and other documents" and "assisted in breaking passwords to allow Kapila access to the files for investigation."36

During the course of Kapila's forensic investigation, he designated approximately seven hundred investors as "clawback defendants."37 The U.S. Bankruptcy Code and state fraudulent transfer statutes permit trustees to file "clawback suits" against investors who withdrew money from a ponzi scheme during a certain period in order to recover the money and distribute it among all investors.38 The theory behind this rule is that the redemptions were actually fictitious profits based on fraudulent transfers. Florida permits a trustee to recover withdrawals dating back four years from the bankruptcy petition date.39 Therefore, many of Pearlman's victims had not only lost their life savings but were being sued to pay back money they had withdrawn during the designated four year period. Even more disturbing, some of the clawback defendants had only withdrawn their principal, or what they had invested, and had not profited from the scheme.40 Faced with public outcry and criticism for his aggressive clawback pursuits, Kapila filed a motion in August of 2009 to settle and dismiss 232 of the clawback suits he had originally filed.41 Kapila agreed to dismiss with prejudice those cases where the transfers only involved the return of principal or the profits received amounted to less than $20,000.42 As of April 2009, Kapila's firm announced it had recovered approximately $5 million in assets for the bankruptcy estate, with a cash balance of approximately $1.7 million.43 Litigation is still ongoing.

III. Bernard Madoff

A. Description of Ponzi Scheme
An article discussing ponzi schemes would be incomplete without covering the notorious Bernard Madoff ponzi case. Bernard Madoff operated a ponzi scheme through his investment and money-managing firm, Bernard L. Madoff Investment Securities LLC ("BLMIS"). Madoff founded the firm in 1960 and purportedly managed a legitimate business until the 1990's. But for nearly two decades, the elusive and secretive Madoff orchestrated the largest ponzi scheme in history by offering consistent 10-12% returns to an exclusive group of people including his close friends, universities, and many charities.44 His sales pitch to feeder fund managers and investors involved "split-strike conversions" and "collar strategies."45 Analysts warned that this strategy could not produce the consistent returns that Madoff was promising to investors.46 Despite questions and concerns surrounding Madoff's aloof strategy, investors flocked to him, entrusting him with their life savings, endowment funds, and charitable trusts. Madoff's appeal and allure captivated investors, drawing them in to what they perceived was an elite group only open to Madoff's chosen ones.

Madoff utilized his deceptive charm, industry knowledge, and reputation in the investment world to lure people into his scheme but he did not act alone. Madoff employed several family members and maintained close connections to regulatory agencies in Washington D.C.47 Madoff even served as the Nasdaq chairman for several years in the early 1990's.48 Over the years, Madoff exploited his power and used his connections to squash eight investigations initiated by the SEC and other agencies as easily as one swats away a fly.49 Several employees assisted Madoff by falsifying account statements showing alleged trades and inflated account balances and cooking the books.50

The scheme collapsed in 2008 when investors requested withdrawals of $7 billion and Madoff was unable to secure new investors to cover the payments.51 Madoff was arrested in December 2008 and in March 2009 plead guilty to 11 federal charges including securities fraud, investment adviser fraud, mail fraud, wire fraud, international money laundering, money laundering, making false statements, perjury, making a false filing with SEC, and stealing from an employee benefit plan.52 He was sentenced to 150 years in prison and is currently incarcerated at Butner Federal Correctional Institution in North Carolina.53

Several of Madoff's employees have also been charged with knowingly participating in the fraud including Frank DiPascali Jr., a key Madoff executive, David Friehling, Madoff's accountant, Daniel Bonventre, former operations director, and two computer programmers.54,55 DiPascali plead guilty to ten criminal counts, including: conspiracy, securities fraud, mail fraud, wire fraud, investment fraud, two counts of falsifying the books of a broker dealer, international money laundering, perjury and federal income tax evasion, for which he faces up to 125 years in prison.56 Friehling plead guilty to nine counts including securities fraud, investment-advisor fraud and obstructing tax law administration, for which he faces up to 114 years in prison.57 Bonventre plead not guilty to nine counts of securities fraud, conspiracy, and other charges for which he faces up to 82 years in prison.58 The two computer programmers also plead not guilty to charges of falsifying the books and records of a broker-dealer and of an investment advisor, and conspiracy.59 Authorities are also prosecuting several of Madoff's family members for criminal tax fraud.60 Charges against other co-conspirators are likely forthcoming.

B. Forensics and the Law
Under the Securities Investor Protection Act ("SIPA"), when a brokerage firm fails and customers are owed missing or nonexistent cash and/or securities, the Securities Investor Corporation ("SIPC") initiates a liquidation of the brokerage firm and appoints a trustee to administer the estate.61 Under SIPA, victims can file claims against the estate and SIPC is authorized to pay valid claims up to $500,000 per customer, with a maximum of $100,000 for cash claims.62 Customers can seek additional funds from the bankruptcy estate but are subject to a pro rata distribution based on their net equities in the fund as defined in SIPA section 78lll(11). Since Madoff had registered BLMIS with the SEC as a broker-dealer, those clients that had invested with BLMIS directly are permitted to file claims under SIPA.63 However, the victims that indirectly invested with BLMIS through feeder funds are not eligible to file claims under SIPA. Legislation is currently pending to extend SIPA's coverage to indirect investors.64

Irving Picard, the SIPA trustee responsible for administering Madoff's consolidated bankruptcy cases, has engaged numerous consultants, attorneys, and experts to assist in the enormous and unprecedented task of unmasking the fraud, recovering funds for distribution, and processing customer claims. Picard hired AlixPartners to serve as claims agent and FTI Consulting Inc. ("FTI") to provide forensic accounting and litigation support services. With the help of the FBI, Picard's team engaged in the arduous and time consuming task of gathering and preserving evidence of the fraud.65 According to the Trustee's Amended Third Interim Report, this coordinated effort yielded approximately 7,000 boxes of Madoff's business documents and records, 4,000 reels of microfilm and 87 transfile boxes of microfiche.66 Picard's team painstakingly reviewed and indexed the documents, and scanned 8.3 million pages of text.67 Additionally, more than 1.4 million emails and 1,500 forms of electronic and digital evidence have been preserved in "secure and forensically sound formats" including computers, hard drives and portable memory devices.68 The FBI and Picard's team "provide[d] forensic images and server data for review and analysis and conducted numerous forensic analysis of electronic data."69 The forensic and investigative efforts employed by those involved produced "substantial detail and for extensive periods of time BLMIS' financial history and relationships with BLMIS' investors, employees, vendors and others," which has significantly assisted the Trustee in his efforts to recover money for Madoff's victims.70

AlixPartners and FTI are also assisting Picard with processing the customer claims that have been filed against the estate. As of March 31, 2010, Madoff's victims had filed 16,314 claims.71 AlixPartners and FTI are responsible for reviewing and analyzing each claim to ensure its validity and accuracy prior to sending the claims to a SIPC review specialist who then conducts another review and makes a recommendation to the trustee for payment. As of March 31, 2010, the Trustee had determined 12,249 claims, allowing 2,011 claims for an estimated SIPC payout of $668 million, amounting to the "largest commitment of SIPC funds in any one SIPA liquidation proceeding."72 Not surprisingly, this payout also "exceeds the total aggregate payments made in all SIPA liquidations to date."73 As of March 31, 2010, the total amount of allowed customer claims was over $5.3 billion, exceeding the SIPC payout by approximately $4.6 billion.74 Therefore, Picard and his team are diligently working to recover money and assets for the bankruptcy estate so that these victims will receive as large a pro rata distribution as possible.

The senior managing director at FTI Consulting, Joseph Looby, an electronic fraud and accounting forensics expert, conducted a forensic analysis of Madoff's financial affairs. On October 16, 2009, Looby filed a declaration supporting Picard's method of computing net equity for determining customer claims.75 According to the declaration, just prior to the scheme collapsing BLMIS mailed out false investor statements showing that clients had approximately $65 billion invested with the firm.76 The media has latched on to this figure as the true amount of fraud in the Madoff case. However, the forensic investigation thus far has revealed that BLMIS clients had deposited less than $20 billion in their BLMIS accounts.77 Understandably, Madoff's victims want Picard to use the inflated amount shown on the false investor statements to determine their net equities which would yield higher claim amounts. But on March 1, 2010, U.S. Bankruptcy Judge Burton R. Lifland issued an opinion approving Picard's net investment methodology.78 Using a cash in/cash out basis, Picard has determined customers' net equities by computing the difference between the amount customers had invested and the amount customers had withdrawn from BLMIS. Although the court approved Picard's methodology, it also filed an immediate appeal in the U.S. Court of Appeals for the Second Circuit requesting certification as a matter of great public importance.79 The appeal is pending.

Looby's declaration also included a detailed explanation of how Madoff utilized technology to hide the massive fraud. In order to uncover Madoff's complex strategy, Looby and his colleagues interviewed Madoff's business associates, reviewed customer agreements and "thousands of documents, as well as schedules … relating to the books and records of BLMIS, third party records, bank records and other documentation relevant to BLMIS and its customer accounts and information systems."80 Through this investigation, Looby and his team discovered that BLMIS had operated on two outdated IBM Application System/400 computer systems, known as "House 5" and "House 17."81 The House 5 computer system contained the only legitimate trading portion of BLMIS as it was "interfaced with other trading platforms and programs including order entry, trade execution, securities clearing, and the Depository Trust & Clearing Corporation ("DTCC")."82

Unlike House 5, House 17 was not interfaced with other systems and was only accessible to certain BLMIS employees. The House 17 system contained the heart of the fraud. It "was designed to record and assist with the printing of the fictitious securities purportedly bought and sold by BLMIS, customer cash transactions, customer statements, trade confirmations, management reports, and Internal Revenue Service 1099 forms."83 BLMIS's computer programmers designed software "that could be utilized to enter fictitious 'trades' with any desired price or trade date that could then be allocated, pro rata, to the various BLMIS customer accounts residing within its database."84 BLMIS employees allegedly entered the fictitious stock/option prices, dates, and volumes into House 17 which "could then be printed on a fictitious customer statement and trade confirmation."85 Utilizing House 17 in this manner, Madoff and DiPascali concocted a "strategy consist[ing] of purported investment[s] in baskets of common stocks within the S&P 100 Index hedged by a collar of put and call options to limit the potential client investment loss (or gain) that may be caused by normal stock price volatility."86 In reality, BLMIS was not purchasing securities for its customers.

Looby and his team confirmed the fraudulent sales by comparing the information reported on BLMIS customer statements with actual data from DTCC, Chicago Board Options Exchange ("CBOE") and other organizations. The fraud was evidently clear. In his declaration, Looby cited several examples of the astonishing findings. On October 11, 2002, "CBOE reported OEX (S&P 100 index) volume of 6,298 calls and 6,407 puts. In contrast, BLMIS applied an imaginary basket to 279 accounts with a volume of 82,959 OEX calls and 82,959 puts – more than approximately 13 times the CBOE volume."87 Looby's team also determined that BLMIS had reported an October 16, 2002 aggregate purchase of 17.8 million shares of Exxon Mobil ("XOM") stock which would "have exceeded the XOM market volume for that day by 131%."88 After reviewing DTCC records, Looby's team discovered that the "maximum BLMIS position for XOM in October of 2002 was just 5,730 shares."89 Looby's team also identified that several purported trade prices which were reflected on BLMIS statements did not coincide with actual high and low stock exchange prices.90 Additionally, a review of BLMIS bank records showed that on several occasions BLMIS did not have the necessary funds to purchase the quantity of securities that were reflected on false customer statements.91 Looby's detailed investigation and analyses have obviously provided Picard and criminal investigators with vital and critical information.

Picard, armed with evidence from his team of experts and consultants, has initiated clawback litigation to recover money from certain investors. But unlike Kapila, the trustee in Pearlman's bankruptcy cases, Picard is primarily focusing on investors who profited from the scheme.92 As of March 31, 2010, Picard's team has filed 14 lawsuits seeking the recovery of over $14.8 billion in principal and fictitious profits.93 They have also attained settlement agreements with 83 customers, amounting to more than $30 million, which will be added to the funds available for distribution to victims.94 Picard's team will most likely file additional lawsuits, aided by the more expansive New York law that permits trustees to recover funds dating back six years from the bankruptcy filing date.95 As of March 31, 2010, Picard has recovered $1.5 billion for the estate and hopes to make an initial pro rata distribution to Madoff victims by the end of 2010.96

IV. Conclusion
Ponzi scheme investigations require time, skill, and expertise from attorneys, accountants, law enforcement officers, bankruptcy trustees and other experts. A coordinated and collaborative effort from those involved is essential for a thorough resolution. Forensic accountants must not be overlooked. They provide specialized knowledge that is necessary to unmask the fraud perpetrated by creative and deceptive criminals like Pearlman and Madoff. Therefore, it is imperative that a team of forensic accountants work side by side with attorneys, bankruptcy trustees, and law enforcement officers in all ponzi scheme investigations, both before and after the schemes inevitably collapse. When the joint forces of forensic accounting and the law unite, the only prospect for future Pearlmans and Madoffs is a life behind bars.


1 Ponzi Schemes – Frequently Asked Questions, available at (last visited June 18, 2010) [hereinafter "Ponzi Schemes"].
2 Mary Darby, In Ponzi We Tru$t; Fraud on the Internet, SMITHSONIAN MAGAZINE, 134, December 1, 1998.
3 Ponzi Schemes, supra note 1.
4 Sareena M. Sawhey, The Case for the Forensic Accountant, Mar. 11, 2010, available at (last visited June 18, 2010).
5 Id.
6  Kevin Perkins, Remarks at the Ponzi Scheme News Conference, June 19, 2009, available at (last visited June 18, 2010).
7 Sawhey, supra note 4.
8 Id.
9  Eg., Post-Madoff, Forensic Accountants Seeing Increase in Business, Jan. 29, 2009, (last visited Jun.18, 2010) [hereinafter "Post-Madoff"]; Dan Browning, FRAUD'S Silver Lining; It Spells Growth For Two Highly Specialized Local Investigative Firms Going After White-Collar Crime, STAR TRIBUNE, 1D, Apr. 5, 2010.
10 Eg., The Securities and Exchange Commission Post-Madoff Reforms, (last visited June 18, 2010); Post-Madoff, supra note 9.
11 Bryan Burrough, Mad About Boys, VANITY FAIR, 252, November 2007.
12 Id.
13 Lou Pearlman Signs Plea Agreement That Includes Additional Charges That He Defrauded Investors, March 4, 2008, [hereinafter "Plea Agreement"] (last visited June 18, 2010).
14 Helen Huntley, As He Ran, Case was Built, ST. PETERSBURG TIMES, 1D, July 13, 2008.
15 Burrough, supra note 11.
16 Id.
17 Christopher Palmeri, The Final Act for a Boy-Band Svengali?, Mar. 6, 2007, available at (last visited June 18, 2010).
18 Huntley, supra note 14.
19 Id.
20 Id.
21 Id.
22 Id.
23 Helen Huntley, Lou Pearlman Arrested in Indonesia, ST. PETERSBURG TIMES, 1A, June 15, 2007.
24 Plea Agreement, supra note 13.
25 Barbara Liston, Boy Band Mogul Pearlman Sentenced to 25 Years, May 21, 2008, available at (last visited June 18, 2010).
26 Helen Huntley, Lou Pearlman's Ponzi Scheme Was Just One of His Lies, Jan. 4, 2009, available at (last visited June 18, 2010).
27 First Application for Interim Allowance of Compensation and Reimbursement of Expenses, In re: Louis J. Pearlman, et al., No. 6:07-00761-ABB (Bankr. M.D. Fla. June 25, 2008) [hereinafter "First Application"].
28 Order, In re: Louis J. Pearlman et al., No. 6:07-00761-ABB (Bankr. M.D. Fla. Sep. 26, 2008).
29 First Application, supra note 27, at 14.
30 Id.
31 Id. at 15.
32 Id. at 16.
33 Id. at 9-10.
34 Id. at 9, 18.
35 Id. at 8,9.
36 Id. at 21.
37 Trustee’s Motion to Settle and Compromise Certain Adversary Proceedings and to Establish and Implement Omnibus Procedures Related to Such Settlement at 7, In re: Louis J. Pearlman et al., No. 6:07-bk-00761-ABB (Bankr. M.D. Fla. Aug. 25, 2009) [hereinafter "Motion to Settle"].
38 11 U.S.C. § 547 (2006), 11 U.S.C. § 548 (2006), 11 U.S.C. 544 (2006).
39 Fla Stat. § 726.110 (2008).
40 Jeff Harrington, Some Investors Got Out of Lou Pearlman's Ponzi Scheme, But Not Soon Enough, ST. PETERSBURG TIMES, 1A, Apr. 26, 2009
41 Motion to Settle, supra note 37.
42 Id. at 2.
43 Status Update # 12, In re Louis J. Pearlman et al., No. 6:07-bk-00761-ABB (Bankr. M.D. Fla. Apr. 22, 2009), available at (last visited June 18, 2010).
44 Rob Curran, Traders Say Madoff's Strategy was Unworkable, Wall Street J., C5, Dec. 24, 2008; See generally Harry Markopolos, NO ONE WOULD LISTEN: A TRUE FINANCIAL THRILLER, 2010.
45 Id.
46 Id.
47 Elizabeth Williamson and Kara Scannell, The Madoff Fraud Case: Family Filled Posts At Industry Groups, WALL STREET J., A16, Dec. 18, 2008.
48 Robert Frank and Tom Lauricella, Uncle Bernie and His Angry Clients – Madoff Created Air of Mystery, WALL STREET J. A1, Dec. 20, 2008.
49 Kara Scannell, Madoff Chasers Dug for Years, to No Avail --- Regulators Probed at Least 8 Times Over 16 Years; Congress Starts Review of SEC Today, WALL STREET J., C1, Jan. 5, 2009; See also Robert J. Rhee, The Madoff Scandal, Market Regulatory Failure And The Business Education Of Lawyers, 35 J. CORP. L. 363 (2010) (proposing that the SEC failed to uncover Madoff's fraud due to a lack of education and understanding in core business principles and suggesting that law schools should incorporate accounting, finance, and economics courses into their curriculum).
50 Aaron Lucchetti and Tom Lauricella, The Madoff Fraud Case: Investors Were Told They Had a Total of $64.8 Billion, WALL STREET J., A2, Mar. 11, 2009.
51 Robert Frank and Amir Efrati, Madoff Tried To Stave Off Firm's Crash Before Arrest, WALL STREET J., C1, Jan. 9, 2009.
52 Bernard L. Madoff Pleads Guilty To Eleven-Count Criminal Information And Is Remanded Into Custody, Mar. 12, 2009, (last visited June 18, 2010).
53 Zachery Kouwe, Madoff Arrives at Federal Prison in North Carolina, N.Y. TIMES, B2, July 14, 2009,
54 Chad Bray and Tom Lauricella, The Madoff Fraud: 'All Fake': Key Madoff Executive Admits Guilt, WALL STREET J., C1, Aug. 12, 2009.
55 Two Ex-Madoff Employees Indicted, WALL STREET J., C5, Mar. 18, 2010.
56 Trustee's Amended Third Interim Report for the Period Ending March 31, 2010 at 10, Securities Investor Protection Corporation v. Bernard L. Madoff Investment Securities, LLC, In re: Bernard L. Madoff, Adv. Pro. No. 08-1789 (BRL) (Bankr. S.D.N.Y. Apr. 14, 2010) [hereinafter "Trustee's Interim Report"].
57 Id. at 12-13.
58 Id. at 15.
59 Id. at 14.
60 Amir Efrati, Prosecutors Set Sights on Madoff Kin --- Brother, Sons of Convicted Ponzi-Schemer Face Tax-Fraud Probe; Former Accountant Is Cooperating, WALL STREET J., C1, Feb. 12, 2010.
61 15 U.S.C. §78aaa-111 (2006).
62 15 U.S.C. §78fff-3 (2006).
63 Members of Congress Introduce Legislation to Improve Relief for Victims of Madoff, All Ponzi Schemes, available at§iontree=4,186&itemid=978, Apr. 16, 2010 (last visited June 18, 2010).
64 Id.
65 Trustee's Interim Report, supra note 56 at 47.
66 Id. at 48.
67 Id.
68 Id.
69 Id. at 47.
70 Id. at 49.
71 Id. at 27.
72 Id. at 28-29.
73 Id. at 29.
74 Id.
75 Declaration Of Joseph Looby In Support Of Trustee’s Motion For An Order Upholding Trustee’s Determination Denying "Customer" Claims For Amounts Listed On Last Customer Statement, Affirming Trustee’s Determination Of Net Equity, And Expunging Those Objections With Respect To The Determinations Relating To Net Equity, Securities Investor Protection Corporation v. Bernard L. Madoff Investment Securities, LLC, In re: Bernard L. Madoff, Adv. Pro. No. 08-1789 (BRL) (Bankr. S.D.N.Y Oct. 16, 2009) [hereinafter "Declaration"].
76 Id. at 5.
77 Id.
78 Memorandum Decision Granting Trustee’s Motion For An Order (1) Upholding Trustee’s Determination Denying Customer Claims For Amounts Listed On Last Customer Statement; (2) Affirming Trustee’s Determination Of Net Equity; And (3) Expunging Objections To Determinations Relating To Net Equity, Securities Investor Protection Corporation v. Bernard L. Madoff Investment Securities, LLC, In re: Bernard L. Madoff, Adv. Pro. No. 08-1789 (BRL), (Bankr. S.D.N.Y Mar. 1, 2010).
79 Court's Certification of Net Equity Order of March 8, 2010 For Immediate Appeal to the United States Court of Appeals Pursuant to 28 U.S.C. §158(d)(2), Securities Investor Protection Corporation v. Bernard L. Madoff Investment Securities, LLC, In re: Bernard L. Madoff, Adv. Pro. No. 08-1789 (BRL), (Bankr. S.D.N.Y Mar.8, 2010).
80 Declaration, supra note 75 at 2.
81 Id. at 4.
82 Id. at 6.
83 Id. at 8.
84 Id. at 9.
85 Id.
86 Id.
87 Id. at 19.
88 Id.
89 Id.
90 Id. at 20.
91 Id.
92 Richard Burnett, Victims Say They are Being Targeted, ORLANDO SENTINEL, July 17, 2009.
93 Trustee's Interim Report, supra note 56 at 35.
94 Id. at 31.
95 NY CLS CPLR § 213, subd. 1.
96 Trustee's Interim Report, supra note 56 at 4.