Law Humor

Bernie's Turkeys

Thanks for your note. I didn't know that you could be so poetic!
Anyway, and no thanks to you, the Donut Demons are still sitting on 17, and they're forwarding me the fan mail. What are they thinking??

Before I forget; Should I use that special Black Amex in Ruth's name for this year's re-union Christmas party? Mark says his credit card was canceled, and "Randy Andy" can't seem to be able to make a decision, and Peter says he's too busy to make decisions.

Anywho--here's a sampling of what was hand delivered (good thing that I've got some of that Soapopular too!)

To: Brett D.
Got your note.We like to keep our hands clean. Try the hand sanitizer that everyone else is using, its alcohol-free! BTW-The NYSE Surveillance dept still has your hard drive, so the less you rant, the better off you'll be. Regards to the Sonny side.

Fan Mail: from Mrs. P.

The Boston Globe reported yesterday that attorneys for Carl Shapiro filed an objection to the bankruptcy trustee's definition of net equity, arguing that Shapiro thought he was invested in a conservative portfolio of stocks and bonds unlike most of the other Madoff investors whose assets were traded using the more risky split strike conversion strategy.

The attorneys contend that because Shapiro set up a company, Wellesley Management, that tracked his portfolio daily and matched stock values to market prices at the end of every month, Shapiro is entitled to base his claim on his expectation that his profits were real.

Shapiro is under investigation and if Bernie generated customized account statements for Shapiro so he could evade income taxes or for any other purpose, Shapiro won't be entitled to anything other than a long prison sentence.

One transaction the authorities should investigate is a $71 million contribution Carl and Ruth Shapiro made to their foundation in 2007. On Part III of the 2007 990, there is a $31.5 million decrease in retained earnings labeled "Net Asset Adjustment - Difference Between Cost and Fair Market Value of Stocks Donated" that doesn't make any sense.

On 12/31/06, the foundation didn't own any stock. Throughout 2007, the Shapiros contributed stock to the foundation that had a total fair market value of $40 million. The per share price of the individual stocks contributed correlates to the share price listed on Yahoo on the date of the contribution. (See Schedule B - Part II)

During the year, the foundation sold stock that had a cost of $39.8 million for $71.3 million, resulting in a net gain on the sale of assets of $31.5 million. (Part IV)

On 12/31/07, the foundation held $14 million in stock at cost that had a fair market value of $12.8 million.

The $31.5 million adjustment to retained earnings doesn't make any sense because there were no stocks to write down at 12/31/07.

A reconciliation of net cash generated during the year to cash on hand at 12/31/07 shows approximately $31.2 million in cash unaccounted for:

Sources of cash:
Cash on hand at 12/31/06 49.5 million
Cash contribution 31.0 million
Proceeds from interest, dividends 12.4 million
Proceeds from sale of stock 71.3 million
Total cash generated in 2007 $164.2.million

Uses of cash:
Grants, expenses 13.8 million
Purchase of stock 14.0 million
Net investment in treasuries 4.0 million
Other investment .7 million
Total cash used in 2007 $32.5 million

Net cash generated in 2007 $131.7 million

Cash on hand at 12/31/07 $100.5 million

Cash unaccounted for $31.2 million

I doubt very much the Shapiros lost track of $31 million. It looks more like the Shapiros were happy to take credit for a $71 million charitable contribution but kept the $31 million cash piece of it in their own pocket.

Since Paul Konigsberg signed off on the 990 as the tax preparer, maybe someone should ask him where the $31 million went. After all, he's the one who made it disappear

Full post as published by Bernard Madoff on November 19, 2009 (boomark / email).