Posted on 01/12/2009 8:52:49 AM PST by DeaconBenjamin
Roughly half the estimated losses from Bernard Madoff’s alleged $50bn “Ponzi” are being borne by non-US investors, underscoring the global scope of the carnage.
While most of the small individual investors appear to be in the US where Mr Madoff’s main business was based, some of the biggest by dollar amount were from abroad, according to an analysis of the available data.
They range from the RMF division of London’s Man Group, the world’s largest listed hedge fund, to Spain’s Banco Santander, the biggest bank in the eurozone, and Austria’s Bank Medici.
Leading banks from Britain, France and Japan have admitted in recent weeks to lending billions of dollars to funds to gear up their investments with Mr Madoff, while others created special products to help investors buy in, which provided a degree of protection.
Wealthy investors from Switzerland, Austria and Israel had company in the US, where the Wilpon family, the owners of the New York Mets baseball team, and actors Kevin Bacon and Kyra Sedgwick were among the high-profile victims.
The list has also grown to include scores of institutions. Charities, universities, pension funds – such as the West Palm Beach Police Pension Fund in Florida – and labour unions, including those representing carpenters, plumbers and electricians in upstate New York, have revealed exposures.
The wide scope of the fallout underlines the extent to which investors of all stripes have chased yield in recent years and raises questions about how investors, particularly those from outside the US, can recover funds.
“It’s clear that this is the best illustration of the herd instinct that typically overtakes investors,” said James Cox, a Duke University law professor.
“There is also a competitiveness in a large sector of investors, who don’t want to feel like a sap for getting only 7 per cent historical returns on equities when you can do better.”
The total scale of actual losses still remains unknown. Mr Madoff, who is expected to learn on Monday whether a judge will jail him before trial, gave the $50bn loss estimate in his alleged confession, which has yet to be verified by investigators.
Many believe the figure may include fabricated profits he reported to investors. Losses at New York’s Yeshiva University, for instance, amount to $14.5m though “fictitious profits” had increased the apparent value to $110m, according to the school.
Prosecutors, who want his bail revoked for allegedly violating a court order freezing his assets, have only said in a court filing that it was likely that thousands of victims have lost a sum in the billions of dollars. Under the bail conditions, Mr Madoff is under house arrest in his Upper East Side Manhattan apartment.
The latest tally by Bloomberg shows that investors had about $42bn invested with Mr Madoff’s firm, though in some cases individual investors and bank losses may overlap with amounts in investment funds.
Indeed, a majority appears to have invested – either knowingly or unknowingly – through third parties such as “feeder” funds, which channelled money to Mr Madoff. US-based Fairfield Greenwich and Tremont Capital, two of the biggest, alone account for about a quarter of the $42bn total.
Some high-profile investors, such as Hollywood director Steven Spielberg’s Wunderkinder foundation and several charitable organisations that face ruin, went in through the more traditional route of their long-standing financial advisers.
“The first time I heard the name Bernie Madoff was about three weeks ago when I found out that, you know, he had swindled all this money,” Jeffrey Katzenberg, chief executive of DreamWorks Animation, recently told CNBC.
JP Jeanneret Associates, an investment adviser to pension funds, welfare funds, unions and annuity funds in New York state, said last week that Mr Madoff’s firm was one of the managers it had used in its investment programmes over the years. Now it is trying to determine the scope of the losses it and its clients have suffered.
“One effect of the scandal will be to reinforce the value to investors of the strong protections that are characteristic of publicly offered funds,” said Paul Stevens, president of the Investment Company Institute, a trade association representing US mutual funds.
If the Chinese and Saudi’s can prove they lost money with Madoff’s scheme, then Bush will certainly advocate for it’s bailout.
To bad that Obama’s swindle will be borne 100% by U.S. Citizens.
BoilingPots is exactly right. We can’t allow foreign investors to be bilked by Madoff! The least US taxpayers can do is bail them out. Hell, we bail out everybody else around the globe. And we can always just print some more, right Hussein?
Maybe we can work a deal with Japan so that Madoff gets prosecuted and serves his prison sentence there. I’ve been told that Japanese prisons aren’t a lot of fun.
Now that's a positive spin from a president of an investing company. Of course, the investors might wonder what happened to all the strong protections when Bernie Madoff ran the biggest Ponzi scheme ever.
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