The Koch Bros cashed out of Bernie Madoff's scheme in 2005 before the meltdown, moved $ offshore

[leveymg]

Last edited Sat Jun 4, 2016, 01:58 PM - Edit history (2)

So, what did these RW uber-funders and some hedge fund operators know about Bernie Madoff's scam that other investors, some of whom lost their life savings in 2008, didn't until it was too late? An article in yesterday's Chicago Tribune suggests a few answers, and raises some other bigger questions about who knew what leading up to the 2008 Wall Steet meltdown.

Koch Industries Inc. invested an unknown sum with the con man's now-defunct securities firm years ago, and walked away with $21.5 million in profits before Madoff's arrest in 2008. But since 2012 the company run by the conservative-activist brothers, worth today a combined $109 billion, has refused legal demands to return the money.

Irving Picard, the trustee liquidating Madoff's firm, contends in a suit that the cash is fraudulent proceeds of the fraud and should be shared among the thousands of victims. Koch Industries, and dozens of other early investors named in 87 other lawsuits, argue the company can keep the profits because the money was sent overseas and is beyond U.S. jurisdiction. At stake: a total of $2 billion.

http://www.chicagotribune.com/business/ct-koch-brothers-madoff-20160603-story.html

Contrary to the Koch spokesman misinformation reported vebatim in the Tribune report, but not corrected, Madoff's scam was already known to some in the SEC, which took no public action, and to well-connected hedge funds on Wall Street.

Koch Industries has said the suit lacks merit. "The Koch entity involved made an investment in an entirely separate fund," Koch spokesman Rob Carlton said in an email. "That Koch entity no longer exists, and its investment was redeemed in 2005, long before anyone knew of Madoff's fraud." The Koch brothers are controlling shareholders in the company, and have other investors.

Gotta wonder if the Koch fund that was moved safely off-shore is one of these hedge funds, and what the Koch and others knew early on about Madoff and the crooked balance sheets of other money managers. Koch had been placing money in Madoff funds since the 1990s, the Tribune reports, all the while Madoff's fund continued was shown to grow until it's reported worth tripled its actual capital received.

Koch Industries, an industrial conglomerate and one of the biggest private companies in the U.S., started investing with Madoff in the mid-1990s, court records show. At first, it invested with a Fairfield fund in the U.S., Greenwich Sentry.

In 2003, the company set up the entity in Britain, Koch Investment (U.K.) Co., to invest through a different fund that Fairfield set up in the British Virgin Islands that was exclusively for foreigners, called Fairfield Sentry. Two years later Koch Industries withdrew the cash that's now at the center of the trustee's lawsuit. (Koch also withdrew $58 million from Greenwich Sentry that same year, according to the fund's Chapter 11 filings.)

Here's a report from the WSJ that directly contradicts the claim of the Koch spokesman that Koch cashed out "long before anyone knew of Madoff's fraud": http://www.wsj.com/articles/SB125211472134588207

SEC Caught Madoff in Lies in 2005 Exam
By Kara Scannell
Updated Sept. 4, 2009 9:46 p.m. ET

The Securities and Exchange Commission caught Bernard Madoff in lies during a 2005 examination and found him belligerent, but didn't pursue details that could have uncovered his fraud, an inspector general's report found.

The examination, prompted by suspicions raised by a hedge fund, was one of the most extensive looks by regulators at Mr. Madoff's money-management firm. It is one of the missed opportunities discussed in a report released Friday by the SEC's inspector general, David Kotz.

Examiners spent two and a half months working inside Mr. Madoff's firm on the 16th floor of a Midtown Manhattan office tower known as the Lipstick Building. Their sole contact was Mr. Madoff, even though his firm had several compliance officers.
Read the Report

Read the SEC's 477-page internal audit at SEC.gov (4 MB)

The report says SEC examiners from the New York office found this "odd" and also recalled that Mr. Madoff was trying to manipulate the investigation and its focus.

At times, the money manager was a good storyteller, while at other times he grew frustrated, according to the report. One examiner recalled that Mr. Madoff's veins were popping out of his neck.

Mr. Madoff operated his business on the 16th and 17th floors. The SEC examiners said they spent all of their time on the 16th floor where Mr. Madoff's market trading business operated. Examiners said they never knew that Mr. Madoff used the 17th floor to run the firm's money management business, and instead thought it was a back office, the report said.

The SEC examiners never asked to go to the 17th floor and never asked to speak with anyone responsible for the money management business, the report said.

During the examinations, Mr. Madoff told the SEC he wasn't managing any money, yet two news articles said that he was managing money for hedge funds.

Who knew about Madoff and all the crooked books on Wall Street? Follow the money, particularly the ones who got out early.

[drm604]

1. Money is fungible.

I don't understand this. Surely the Kochs have $2 billion in cash or property onshore, regardless of what was moved offshore. Can't the feds just attach $2 billion of their onshore assets?

If they truly do have less than that amount onshore then take whatever they've got.

[no_hypocrisy]

2. You can't bullshit a bullshitter.

[Octafish]

3. Heh heh heh.

Well well well.

Thank you for the heads-up, leveymg. This whole Madoff fund stunk from the get-go and those who knew got in anyway.

Those who got out at the peak have some explaining to do -- and if they're crooks, some time.