The secret of Madoff it's his marketing genius

A Ford Grand the Marquis metallic grey "camping" for three weeks at the corner of Lexington and 64th Street. It is the car of the US Marshals which ensures, day and night, before the home of Bernard Madoff. Requires caution: it does not leave without monitoring the man who confessed to have implemented the biggest financial scam of all time. December 17, six days after his arrest by the FBI, the output of the septuagenarian contrite smile, with his blue baseball cap screwed on the head, had almost cause a riot in this fancy neighborhood of Manhattan. And Monday, while he went to the Federal Court, appeared a sensation again (see also page 26).

A "hole" estimated at between 37 and 50 billion dollars, thousands of customers "robbed", dozens of foundations and two or three universities "essorées", a suicide... It is true that the Bill is heavy. But how this former lifeguard, who began by installing fire extinguishers in Queens, discrete man praised for his courtesy and his philanthropic works, Chairman of the Nasdaq from 1990 to 1991, could get this far Who were his accomplices What was his listener What was the secret of "uncle Bernie", as called by his friends from the expensive clubs in Palm Beach or Long Island

The prophecy of Markopolos

The more astounding is that the answer is, black and white, in a detailed report sent to the Securities and Exchange Commission (SEC) on November 7, 2005! Revealed by the Wall Street Journal on December 18, the report prepared by an expert in derivatives, Harry Markopolos (available on Google under the title: "The World's Largest Hedge Fund is a Fraud") faithfully reconstitutes the genesis of the "Madoff"system for ten years. Everything is there. Its first elements had even been exposed as early as may 1999 (!) in the Office of the SEC Boston. In this 19-page report, Harry Markopolos, including the hearing by a commission of inquiry of the Congress, expected Monday, was canceled at the last minute for "health reasons", details the strategy of the Machiavellian broker, since the creation of the Nasdaq in 1971 by the National Association of Securities Dealers (NASD), which his brother Peter b. Madoff was Vice President, until the end of the 1990s. It clearly explains how the family Madoff even if his two sons, Mark and Andrew, who denounced their father to the FBI, say have all ignored its manoeuvres criminal "managed in fact the largest hedge fund in the world, with assets under management between at least 20 billion and perhaps 50 billion... How this true-false "hedge fund", which presented itself as a broker, ECN ("broker-dealer" with orders registry), used a network of feeder Fund funds, which he managed almost 100 of the collection in exchange for kickbacks, unbeknownst to end investors. Markopolos report lists also these funds of funds "very view" which served as touts to Bernard Madoff: society Fairfield Sentry (Arden Asset Management) Walter Noel, Broyhill All-Weather Fund, Tremont Capital Management (held by the Oppenheimer funds) or even the company Access International Advisors of Patrick Littaye and the French Thierry de La Villehuchet, who committed suicide in his Madison Avenue Office, New York, on 23 December.

At this time, a Fund Manager, "representative of the Arab money", which wanted to audit the Madoff firm had been told that "only the brother-in-law of Madoff is permitted to audit its accounts for reasons of confidentiality to keep secret the owner of Madoff strategy and avoid that it can be copied." In its conclusions on "potential breakup" linked to the discovery of the "Ponzi scheme" implemented by the broker, Markopolos said that "all markets will be affected but the European banks will be most affected". It also provides that Fairfield Sentry, Broyhill, Access International Advisors, Tremont and several funds of funds are condemned to "explode".

The facts tend to give him reason. "There is very likely that all these feeder funds have closed their eyes because this was a fortune." "They have played the Tartuffe," confirmed Jean Karoubi, President of the Longchamp Group, a manager of fortune based in New York, is pleased to have resisted the advances of Madoff. "In the late 1980s, the people of Fairfield had tried me caser of Madoff ensuring me that they had a full team dedicated to"monitoring"of its activities. Ensuring a return rate of 10 to 17 per year to its investors, Madoff claimed to have found a martingale with the amount of information it brassait as a brokerage firm.

"Neither kosher nor Orthodox."

It is in his sanctuary on the 17th floor of the Lipstick Building, in the form of lipstick, on 3rd Avenue, that "uncle Bernie" had developed his tour of legerdemain. It was just himself. Not depositary, step of "prime broker". Very few employees of Bernard Madoff Investment Securities, installed in the 18th and 19th floors had access to the 17th, called the "floor of the"hedge fund". "There are walls of China between our different divisions," said Bernard Madoff, a Conference filmed at the Philoctetes Center for the Multidisciplinary Study of Imagination, in October 2007 (1). "In the current regulatory environment, it is virtually impossible to violate the rules, in any case for a long time," he added without eyebrows. The policy sold to his clients was the split strike conversion", consisting of investing primarily in shares of the S & P 100 index by buying and selling simultaneously these stock options to limit the volatility of the portfolio. For the former star of Merrill Lynch, Henry Blodget analyst, it is because they subodoraient that Madoff had privileged information that eager investors to give up their money without too ask questions.

"The secret of Madoff, it's his marketing genius." "He claimed to benefit its customers of the privileged information he gathered on the market as a broker", confirms Augustin Landier, Professor of finance at New York University. Through its clubs, Jewish networks and a small group of aristocrats in France, he has consolidated his image of "Insider". "He succeeded despite the rumours keep intact to its customers its reputation for shrewd operator, avant-garde...". "As such, incarnates this"planted"finance: decision-making power marketing in banks and asset management, the reign of"story-telling"", summarizes Augustin Landier.

Everyone didn't work. "I met Bernard Madoff twenty years ago, but I've always found that its legal structure was neither kosher nor Orthodox", remembers today Jean Karoubi. He wondered about the "fees" levied by the foster Fund registered in Bermuda, the Cayman or the British Virgin Islands... These privileged "touts" took management ("management fee") of 1 to 2 fees, in addition to a percentage of profits ("incentive fee") up to 20, for a simple job of marketing. In this case, "managers did not have basic vigilance." "And the Fund of funds that invested in the feeder funds nor." In the general climate of permissiveness, many have dropped their guard. "More time passed, less it was suspicious of Madoff," summarizes the pattern of Longchamp.

Full of "red flags".

"Madoff had succeeded in creating this species of will which was that he was above reproach," says the founder of an important New York alternative funds. "In the 1990s, it was one of the most aggressive market-makers on the Nasdaq." "It is him that led most to become completely electronic," recalls another Manager. "When things are going well, people do want too know." The money arrives... You do you not ask too many questions... "But the fact that no major U.S. Bank is"exposed"to the scandal says a lot about cett"invisible belt"surrounding Madoff.

All have not died. A former Société Générale trader recalls that the French Bank had "black-listed" Madoff after failing to buy a portfolio of "structured products" managed by its care in 2003. It is ultimately BNP Paribas resumed said portfolio at Zurich Capital Markets, with the key potential loss of EUR 350 million. "The serious people who wanted to invest in Madoff were not done." JP Morgan and Goldman Sachs have sent their audit teams and were abandoned. "There were plenty of"red flags"red flags, Editor's note to who wanted to see them", adds that former of the General.

"As in the Kerviel case, it is in times of crisis lies to unveil", summarizes Augustin Landier in based on the formula of Warren Buffett: "You cannot know that swimming naked until the tide is removed."