bernard madoff case study
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Bernard Madoff Case StudyTRANSCRIPT
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BERNARD MADOFF’S PONZI SCHEME
DCS 3301
BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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WHAT IS PONZI SCHEME?
• Investment fraud which is identical to “Pyramid Scheme”
• Promises high ROI (Return On Investment)
• Pays “dividend” by using investments from other investors
• Requires sufficient new investors to sustain the scheme OR;
• When the investors withdraw all of his investments
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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MAIN ETHICAL ISSUES
• The Power of Greed
• Negligence of the Securities and Exchange
Commission(SEC)
• Exploitation of trust gained from close members
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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ETHICAL DILEMMAS I
PUBLIC INTEREST VS FINANCIAL GOODS
Is it ethical for Madoff to cheat the public to fulfill his
desire of getting fast money or it is unethical to do so?
• Trick investors through his wealth management company
• Promising high ROI (Return On Investment)
• Unethical to earn money through illegitimate method
• Fraud amounted more than $10 Billion
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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ETHICAL DILEMMAS II
GREED VS TRUST
Is it ethical for Madoff to give up his title, generous
philanthropist (trust) to get what he is addicted in doing,
cheating investors’ (money)?
• Bernard Madoff – Well-known public figure Charity and Liberal Contributor
• Used Trust gained from his title to scam people into the scheme
• The Power of Greed caused others to lose their trust and faith in him.
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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ETHICAL DILEMMAS III
NEGLIGENCE OR DECEPTION
Securities and Exchange Commission (SEC) failed to
follow or did not want it to be found?
• SEC failed to properly investigate Madoff’s trading even though complaints have
been made.
• No necessary step executed to determine the legality of Madoff’s trading
• SEC might be deceiving the public to cover up facts that some SEC affiliates are
involved in the Scheme.
• Unrealistic investigation done by SEC
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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Investors should conduct a background research on
the company that they plan to invest in
• Research about the company details and the owner details
• Research on company licensure on investment trading
• Shared to public via mass media
RECOMMENDED ACTIONS
IN FACING THE ETHICAL ISSUES
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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RECOMMENDED ACTIONS
IN FACING THE ETHICAL ISSUES
The government and their regulators should be thorough and strict on their investigation
• SEC exists to protect investors, uncover frauds that are happening in the market and protect the public interest
• SEC to set-up Customer Service Department to follow-up on complaints from investors
• SEC should be more professional in approaching complaints by executing detailed investigations
• SEC should send spies to the company in order to understand how the company runs and what actions are used to fraud on investors
• Increase punitive on people running fraud businesses.
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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Bernard Madoff should not have involved his family
members into his fraud
• Family members should stop him from going any further and cause
major damage to others
• Family members can choose not to be involved in the scheme by not
helping him
• Family members should not be overwhelmed by the Power of Greed
RECOMMENDED ACTIONS
IN FACING THE ETHICAL ISSUES
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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Bernard Madoff should not have even committed the
fraud as it made him betray the trust of his peers
• Should not take advantage of the trust between him and his friends.
• Check the background of the scheme and not build trust based on Madoff’s
positive personality expressed.
• Should not trust schemes that guarantee high or over-consistent Return On
Investment
RECOMMENDED ACTIONS
IN FACING THE ETHICAL ISSUES
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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REFERENCES
• Solution Inn, 2012, What are the ethical issues involved in the Madoff case? , Solution Inn, viewed 5 March 2013, <
http://www.solutioninn.com/business/organizational -behavior/business-ethics/what-are-the-ethical-issues-involved-
in-the-madoff-case>
• The FBI, n.d., Common Fraud Schemes, FBI.gov, viewed 13 March 2013, < http://www.fbi.gov/scams-
safety/fraud/fraud>
• DesJardins J, 2011, An Introduction to Business Ethics, pg 17, 4th Ed, Mc-Graw-Hill
• DesJardins J, 2011, An Introduction to Business Ethics, pg 2, 4th Ed, Mc-Graw-Hill
• Evans M, 2012, Ponzi schemes can be a threat to banks, American City Business Journals, viewed 13 March 2013,
< http://www.bizjournals.com/triad/print-edition/2012/08/31/ponzi-schemes-can-be-a-threat-to-banks.html?page=all>
• Collins D, n.d., Bernie Madoff’s Ponzi Scheme: Reliable Returns from a Trustworthy Financial Adviser , pg 447,
School of Business at Edgewood College in Madison, Wisconsin
• Jory S & Perry M, 2013, Ponzi Schemes: A Critical Analysis, FPA, viewed 13 March 2013, <
http://www.fpanet.org/journal/BetweentheIssues/LastMonth/Articles/PonziSchemes/>
BERNARD MADOFF’S PONZI SCHEME
DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP
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DONE BY
TAN XIEN YI TEY YI YAN
MOCKEE KOH KISHEN MOHAN
AUDREY SAN HOR WAI YIN