International Law

How Did Madoff Calculate?

Mark Cuban takes an inspired guess about Madoff generated his counterfeit statements of his firms "trades"

"I'm taking a flyer here, but if they were to put me on the case, the first people I would talk to are the software developers. 

Somewhere along the line there was a software program written or modified that allowed Madoff to enter the numbers he made up, who they were paying out cash to and would print the checks and  statements. 

Its very unlikely that it was off the shelf software because it would be impossible for all the numbers to balance, or he would need to use suspense type of accounts that would raise red flags for even the smallest of accounting firms."

Reuters reports on a different angle about the Madoff trades:

"There also appear to be discrepancies between monthly statements sent to investors and the actual prices at which the stocks traded on Wall Street.

For example, his November statement showed he bought software maker Apple Inc's securities at $100.78 each on November 12, about a month before his arrest.

But Apple's stock on that day never traded above $93.24. The statement also showed he bought chip maker Intel Corp at $14.51 on November 12, but Intel's highest price on that day was $13.97.

"You could print up any statements you want on the computer and send it out to a client and the chances are the client wouldn't know, because they are getting a statement," said Neil Hackman, president and chief executive of Oak Financial Group, a Stamford, Connecticut-based investment advisory firm.

To some, the numbers did not add up."

Doesn't it seem odd that we spend hundreds of millions to prevent the counterfeiting of $100 bills, but anybody can fake a securities statement? Shouldn't the forms at least be on hard to copy paper? 

Full post as published by Misleading Advertising Law on January 21, 2009 (boomark / email).