Courtesy of Pam Martens.
Bernard Madoff Outside Federal Court in Manhattan
According to the settlement documents released Tuesday by Preet Bharara, the U.S. Attorney for the Southern District of New York, Bernie Madoff was not content to simply engineer the largest Ponzi scheme under the very noses of the largest squad of regulators in the history of finance, he was simultaneously running a brazen check-kiting scheme under the same noses.
Irving Picard, the Trustee of the Madoff victims’ fund set up by the Securities Investor Protection Corporation (SIPC), provided a great amount of detail on this operation in a court filing against JPMorgan in 2011. This week, U.S. Attorney Bharara added additional details.
According to Bharara, Madoff was writing checks from an account at “Madoff Bank 2” – a bank other than JPMorgan – to Norman F. Levy, a mutual customer of both Madoff’s firm and JPMorgan. Later the same day, Madoff would transfer money from his primary business account at JPMorgan to his account at Madoff Bank 2 to cover the earlier check. In the final leg of the transaction, Levy would transfer funds from his own JPMorgan Chase account to Madoff’s primary business account at JPMorgan in an amount sufficient to cover Madoff’s original check to him.
Bharara does not mention Levy by name but it’s clear from Picard’s earlier filing that the client involved is Levy. Bharara also mentions in a footnote that this client died in September 2005, the date of Levy’s death at age 93. Levy was a Manhattan real estate broker and one of Madoff’s largest and oldest clients.
The Justice Department said “These round-trip transactions occurred on a virtually daily basis for a period of years, and were each in the amount of tens of millions of dollars. Because of the delay between when the transactions were credited and when they were cleared (referred to as the ‘float’), the effect of these transactions was to make Madoff’s balances…appear larger than they otherwise were, resulting in inflated interest payments to Madoff by JPMorgan Chase.”
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