Of course, it's hard to call $10 million small potatoes, but that's the sum Ponzi scheme operator Luis Felipe Perez was ordered to return in December as he began a 10-year prison sentence. This week, authorities charged nine others in the case in Miami with bank fraud and conspiracy for allegedly falsifying documents to obtain loans of up to $1 million, which were used to feed the Ponzi operation.
Swiss authorities are pursuing a case against CHS Electronics tycoon Claudio Osorio for allegedly doctoring books to obtain loans and earn investor confidence, saying the deceptions led to the loss of $220 million. The former Ernst & Young "Entrepreneur of the Year," did not return phone calls to comment on the investigation, which has not yet brought official charges, The Miami Herald reported.
The Securities and Exchange Commission announced Thursday it had filed charges in New York against six so-called network consultants who allegedly passed along insider information to hedge funds for a grand total of $6 million in ill-gotten gains.
This all pales in comparison to the Ponzi scheme run by New York trader Bernard Madoff, who lost billions of dollars of investors' funds and is now serving a 150-year prison sentence. Court papers revealed Thursday suggest the obvious, that Madoff could not have pulled off a scam of that size, which lasted more than a decade, without a few close associates closing their eyes to the obvious. One of those failing to alert regulators to the scam playing out under their noses was Madoff's bank, JP Morgan Chase, court trustee Irving Picard contends in a lawsuit.
If Swiss banks can willfully pursue U.S. clients to help them dodge the IRS, there is no reason to believe a willful wink at a Ponzi scheme cannot be done in New York.
Unfortunately, for JPMorgan Chase, this isn't exactly the era for banks to receive the benefit of the doubt, especially given an in-house e-mail from a risk manager, sent June 2007, that declares Madoff's "returns are speculated to be part of a Ponzi scheme."
The e-mail goes on to suggest bank officials look into the matter.
Later, after Madoff's arrest, another bank employee suggested, "Perhaps best this never sees the light of day again!" referring to a risk assessment that implicates the bank as complacently dealing with one of history's most successful thieves, The New York Times reported.
The lawsuit also contends that the bank "only had to glance at the bizarre activity … to realize that Madoff was not operating a legitimate business."
"Incredibly, the bank's top executives were warned in blunt terms about speculation that Madoff was running a Ponzi scheme, yet the bank appears to have been concerned only with protecting its own investments," said Deborah Renner, an attorney with Baker & Hostetler who is involved in the case.
The bank, of course, denied it had known in advance that Madoff was running a Ponzi scheme and JPMorgan issued a statement that said it would "defend itself vigorously against the unfounded claims brought by the trustee."
In modern times, "defend … vigorously" includes quick negotiations to control the negative spin seized upon by rabid columnists and their ilk. To do that requires a hefty settlement that involves no admission of wrongdoing, which means everybody winks and it all goes away. But the next thief you see walking into a bank might happen to work there. Allegedly, of course.
In international markets Friday, the Nikkei 225 index in Japan rose 1.08 percent and the Shanghai composite index in China gained 0.3 percent. The Hang Seng index in Hong Kong added 1.81 percent and the Sensex in India lost 2.39 percent.
In Australia, the S&P/ASX 200 index rose 0.87 percent.
In midday trading in Europe, the FTSE 100 index added 0.43 percent while the DAX 30 in Germany gained 0.31 percent. The CAC 40 in France gained 0.42 percent and the Stoxx Europe 600 rose 0.26 percent.