Legal News

Investigators Probe Whether Madoff Stashed Money in Offshore Accounts

By Amir Efrati

Where is the money? That’s the question everyone’s been asking since the Madoff scandal erupted on Dec. 11 after the New York money manager was arrested for engineering possibly the largest Ponzi fraud scheme in U.S. history.

Madoff allegedly confessed to his sons that investors’ losses could exceed $50 billion, but investigators believe that figure includes all of the fictitious profits he reported to clients since his scheme began, possibly as early as the 1970s. The amount investors actually gave to the Madoff firm as principal — which has all but disappeared — is expected to be a bit lower.

A person familiar with the investigation previously told WSJ that it appears Madoff for years made few, if any, trades with client money. It’s possible, then, that much of the money that went into Madoff’s investment-advisory business was paid out to other Madoff investors who withdrew funds from their accounts. After all, that’s what Ponzi schemes are all about.

Now WSJ’s Jesse Drucker, citing a source familiar with the situation, reports that the Feds believe Madoff had an account or possibly multiple accounts located in offshore tax havens or locales with robust privacy laws where he may have hidden ill-gotten gains. That matches a report over the weekend by the U.K.’s Observer, which said forensic accountants examining Madoff’s books believed he had regularly sent large sums of money to offshore accounts in the Caribbean and Europe. “There are accounts at New York Mellon Bank that we have been looking at that appear to have sent and received money from offshore locations,” a source told the Guardian.

If that’s true, Madoff would be smart to include such information in a filing he agreed to make by the end of the day to the Securities and Exchange Commission that will list, under the penalty of perjury, all of his accounts and assets, as well as locations of accounts where his firm had assets.

Also, for those keeping up with Madoff events both major and minor, here’s one that’s probably in the latter category: a $10,000 copper sculpture of two seated lifeguards (above) that was stolen from Madoff’s Palm Beach estate last week was found today in front of the Palm Beach Country Club, whose members include many Madoff investors.

Photo: AP

Full post as published by Law Blog - WSJ.com on December 31, 2008 (boomark / email).