Everybody cheer! KBR & Halliburton settle bribery case . . . what about Bernie Madoff?

Yesterday, the SEC announced that KBR and Halliburton have settled their Foreign Corrupt Practices Act case with the SEC and Department of Justice for total fines and disgorgement of $579 million.   The underlying bribes apparently totalled far less: a mere $5 million paid to a Nigerian political party for a train contract.

At this point, a voice inside my head keeps screaming, “What about Madoff?!”  The FCPA violation alleged here is essentially a victimless crime, functionally a penny-ante “bailout” of a few Nigerians that actually helped the companies’ shareholders.  Yet, this SEC complaint is undersigned by no fewer than six SEC attorneys who, judging from the factual timeline, were busily engaged on this case — together with uncounted DOJ counterparts — over at least the past five years while Bernie Madoff made off with $30-50 billion belonging to investorsContinue reading

Harry Markopolos undresses the SEC: Is Mary Schapiro the right one for this job?

On Wednesday last week, while most of the nation was transfixed by “stimulus plan” negotiations, the U.S. House Capital Markets Subcommittee held a little-noticed hearing, featuring uber securities sleuth Harry Markopolos, that could rock U.S. securities regulation to its core.  As a financial markets player, attorney and professor for over twenty years, I have seen some amazing things in domestic and international financial markets. However . . .

Nothing in my recollection quite equals the drubbing that Markopolos unleashed on the SEC last Wednesday morning.  The first 64 pages of Markopolos’ written testimony should be required reading for every financial markets professional and, drumroll, every U.S. senator and representative with a hand in upcoming securities-market legislation.  To hear Markopolos tell it, what we need at the SEC is not more money but more brains and fewer arrogant attorneys.

Among the long list of disturbing revelations at pages 62-64 of the 375-page submission: Continue reading

Bernie Madoff, James Madison and public virtue

James Madison saw Bernie Madoff 220 years in advance. That so many supposedly bright people were duped by Madoff testifies to their ignorance or disregard of history and to what may be an approaching nadir in the cycle of American public virtue.

At the Convention called by the Commonwealth of Virginia to debate the newly proposed U.S. Constitution, Madison declared, in support of the Constitution:

But I go on this great republican principle, that the people will have virtue and intelligence to select men of virtue and wisdom. Is there no virtue among us? If there be not, we are in a wretched situation. No theoretical checks, no form of government, can render us secure. To suppose that any form of government will secure liberty or happiness without any virtue in the people, is a chimerical idea. Continue reading

Bernie Madoff’s Ponzi play: If it’s too good to be true, it isn’t true

Every time I think I’ve seen the biggest scam ever, a bigger one comes galloping over the horizon.  Well, I take it back.  Bernie Madoff’s is dwarfed by TARP.  Let’s call Bernie’s the biggest scam by a single individual.  Fifty billion dollars is enough to put a dent in almost anyone’s checking account.

For lay readers, the document currently circulating as Madoff’s “indictment” is not an indictment in technical legal terms.  Indictments are handed down by grand juries.  This document is a criminal complaint filed with the court by a single complainant who, in Madoff’s case, happens to be an FBI agent.  An indictment may follow.  Whatever the nature of the document, the key lesson for readers is one that American investors, especially, seem reluctant to internalize. Continue reading