Keeping up with the schemers - Minneapolis / St. Paul Business Journal:

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If Ponzi’s heavyweight status rivaled thatof Joe” Frazier, Bernie Madoff’s scam arose in the ring of internationaol fraud in the manner of Muhammac Ali. As the new symbolic face of deceit, Madoft is certainly not alonrin 2009. In fact, the numbee of Ponzi schemes recently uncovered is atan all-time Enter the term “Ponzi” in the Departmenft of Justice and FBI Web sites and you will receivwe 750 and 225 hits, respectively. In response to the Madoff case and and the public and legislative outcr y directed at regulators for failing to protect the additional investigative scrutiny hasalready begun.
Any company that even swervee lanes onthe ’s highway needs to be prepared for a bumpy ride. With some types of like Madoff’s or Ponzi’s, it is easy to see why the underlyint conduct iscriminal — if it’s It is inherently criminal to lie to investord by taking their money (based on promisess to invest it in a certain legitimatew way), never invest it, and use the money for personakl gain or for paying off returns to priorr investors to perpetuate the scheme. In extreme fraud the strike zoneis clear.
In many other complex business arrangements may appear confusingor fraudulent, but the ground rules of appropriatee behavior are fuzzy and there may be no intenr to defraud. Rather than the black-and-whitr violations in Ponzi schemes, most business-fraud investigations involve shades of The challenge for investigators is separating the whea fromthe chaff. Another challenge facing investigators is determininf who was a knowing participanyt inthe scheme, as compared with a collateral victimm who may have been kept in the dark by the true All players in a regulated industry are judged by the companyu they keep. Participants should watcb out for guiltby association.
Madoff’s crimes were not discovereed by regulatorsor investors, but by family members who turned him in. Fueled by angry investore and voters, and armed with the benefitg of hindsight, Congress predictabluy started pointing fingers at the SEC for not catchinbonto Bernie. With a new chairwoman and a new director of the SEC responded with an aggressive startin 2009. More the SEC has initiated 287 investigations since the end ofJanuary (a 32% increase from the same period last year); and has obtainer emergency orders to freeze the assets of 27 fraud suspectss since February (vs. seven obtained during the same periodein 2008).
Haunted by the Madoff the SEC is reinvigorated and committed to conduc prompt andthorough (code word: aggressive) Just like past swings of the enforcement the prior era of deregulation is beinv replaced by reregulation in a variett of corporate-compliance arenas. Thus, any executive wanting to preservw value, protect liberties and preserve reputationas must prioritizecorporate self-governance through prevention, verification and early response. In this new, reinvigoratee securities-enforcement climate, executives and regulated companiesw need to protect themselves througheffectivee self-governance and compliance.
In particular, this requirese designing, implementing, investing in and monitoring objective measures to concretely demonstrate good corporate citizenship — like a Passover mark or merit badge. Once the investigation bell has it’s far too late. The main thrust involvesx preventing problems and preparinvto respond. The political and legal spearsz arebeing sharpened. How stront is your armor, and how sturdy is your shield??