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Alleged Fraud Has Worldwide Exposure

NEW YORK (AP) - The list of investors who say they were duped in
one of Wall Street's biggest Ponzi schemes is growing, snaring some
of the world's biggest banking institutions and hedge funds, the
super rich and the famous, pensioners and charities.
The alleged victims who sunk cash into veteran Wall Street money
manager Bernard Madoff's investment pool include real estate
magnate Mortimer Zuckerman, the foundation of Nobel laureate Elie
Wiesel, and a charity of movie director Steven Spielberg, according
to The Wall Street Journal.
Among the world's biggest banking institutions, Britain's HSBC
Holdings PLC, Royal Bank of Scotland Group PLC and Man Group PLC,
Spain's Grupo Santander SA, France's BNP Paribas and Japan's Nomura
Holdings all reported that they had fallen victim to Madoff's
alleged Ponzi, or pyramid, scheme.
The 70-year-old Madoff (MAY-doff), well respected in the
investment community after serving as chairman of the Nasdaq Stock
Market, was arrested Thursday in what prosecutors say was a $50
billion scheme to defraud investors. Some investors claim they've
been wiped out, while others are still likely to come forward.
"There were a lot of very sophisticated people who were duped,
and that happens a great deal when you've had somebody decide to be
unscrupulous," said Harvey Pitt, a former chairman of the
Securities and Exchange Commission, a regulatory agency in charge
of monitoring investment funds like the one Madoff operated.
The extent of the potential damage prompted a leading fund
manager in London to lash out at U.S. regulators for failing to
detect the fraud earlier.
"I think now it is very difficult for people to invest in
things that are meant to be regulated in America, because they
haven fallen down in the job," Nicola Horlick, the manager of
Bramdean Alternatives, which has 9 percent of its funds invested in
Madoff's scheme, told the British Broadcasting Corp.
"All through the credit crunch this has been apparent,"
Horlick added. "This is the biggest financial scandal, probably,
in the history of the markets."
Among U.S. investors, the Boston-based Robert I. Lappin
Charitable Foundation, a charity that financed trips for Jewish
youth to Israel, let go of its staff after revealing that the money
for its operations was invested with Madoff.
New Jersey Sen. Frank Lautenberg, one of the wealthiest members
of the Senate, entrusted his family's charitable foundation to
Madoff. Lautenberg's attorney, Michael Griffinger, said they
weren't yet sure the extent of the foundation's losses, but that
the bulk of its investments had been handled by Madoff.
Lautenberg's foundation handed out more than $765,000 to at
least 100 recipients in 2006, according to the most recent listing
on Guidestar, which tracks charitable organization filings.
The foundation helps support a variety of religious,
educational, civic and arts organizations in New Jersey and
elsewhere, and its contributions range from a gift of more than
$300,000 to the United Jewish Communities of MetroWest New Jersey
to a $2,000 donation to a children's program at the Hackensack
Medical Center.
Reports from Florida to Minnesota included profiles of ordinary
investors who gave Madoff their money. Some had been friends with
him for decades, others were able to invest because they were a
friend of a friend. They told stories of losing everything from
$40,000 to an entire nest egg worth well over $1 million.
They join a list of more powerful investors that have come
forward, all worried about the extent of their losses. The roster
of names include former Philadelphia Eagles owner Norman Braman,
New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of
GMAC Financial Services, among others.
The Wall Street Journal, citing a person familiar with the
matter, said Mortimer Zuckerman, the chairman of real estate firm
Boston Properties and owner of the New York Daily News and U.S.
News & World Report, had significant exposure through a fund that
invested substantially all of its assets with Madoff.
The Journal also said the Steven Spielberg charity, the
Wunderkinder Foundation, in the past appears to have invested a
significant portion of its assets with Madoff. It said the Elie
Wiesel Foundation for Humanity, founded by the famed Holocaust
survivor and writer, was hard hit by losses, citing two people
familiar with the organization's investments.
Messages were left with the Zuckerman fund and Wunderkinder
foundation. The Wiesel foundation said it was looking into the
matter.
The Journal also reported potential investors and firms exposed
to the alleged fraud included: Carl Shapiro, founder and former
chairman of women's apparel company Kay Windsor Inc.; Bed Bath &
Beyond Inc. co-founder Leonard Feinstein; Yeshiva University; EIM
Group; UBS AG; Fairfield Greenwich Advisors; Tremont Capital
Management; Maxam Capital Management and Ascot Partners.
Among those overseas confirming exposure on Monday, Banco
Santander, the largest bank in the euro zone by market
capitalization, said its clients have 2.33 billion euros ($3.07
billion) in exposure with Madoff, mostly through a fund called
Optimal Strategic US Equity.
HSBC, Britain's largest bank, said a "small number" of its
insitutional clients had exposure totaling some $1 billion in
Madoff funds.
It added that it has custody clients who have invested with
Madoff, but it did not believe those "custodial arrangements
should be a source of exposure to the group."
Royal Bank of Scotland - Britain's second-largest bank, which is
now 58 percent owned by the British government - said it could lose
around 400 million pounds ($600 million) through exposure in
trading and collateralized lending to funds of hedge funds invested
with Bernard L Madoff Investment Securities LLC.
Man Group, the world's largest publicly traded fund manager that
reported exposure of around $360 million on Monday, said "it
appears that a systematic and comprehensive fraud may have been
committed, evading a range of structural controls."
Japan's Nomura Holdings said it has 27.5 billion yen ($306
million) in exposure, but added that any losses were likely to be
limited compared to its capital base.
French banks foresee nearly 1 billion euros in potential losses
as indirect victims of the alleged fraud.
Natixis, France's fourth-largest bank, set its maximum indirect
exposure at about 450 million euros. A statement by the investment
bank said it made no direct investments in hedge funds managed by
Madoff. However, it said that some of its clients' money was
invested in funds managed by "first class custodians," which in
turn entrusted those securities to Madoff's investment securities
company.
Both Societe Generale and Credit Agricole said they had
"negligible" exposure of below 10 million euros each. However,
the euro zone's largest bank, BNP Paribas, has estimated its risk
exposure to hedge funds managed by Madoff at up to 350 million
euros.
In a statement Sunday, BNP Paribas said it has no investment of
its own in Madoff's hedge funds, but "does have risk exposure to
these funds through its trading business and collateralized lending
to funds of hedge funds."
Swiss bank Union Bancaire Privee indicated it had hundreds of
millions of dollars in client assets invested under the management
of Madoff. The Geneva bank, one of Switzerland's largest, did not
disclose a total amount invested, but did say the exposure of its
clients "represents less than 1 percent of the total assets under
management of the bank."
UBP's announcement Monday followed weekend disclosures by Swiss
banks Reichmuth & Co. of Lucerne, Banque Benedict Hentsch & Cie SA
of Geneva and Neue Privat Bank of Zurich that they had millions of
dollars worth of client assets at risk in the case.
Unicredit, Italy's largest bank, said its exposure to Madoff's
company is about 75 million euros, representing amounts the bank
invested directly and not funds belonging to its clients, said
spokesman Andrea Moreschi. Unicredit has a separate, indirect
exposure through Pioneer Investment, its asset management division.
In Germany, Deutsche Bank AG, Dresdner Bank AG and Commerzbank
AG declined to comment on the matter.
On Friday, representatives from major U.S. banks - Bank of
America Corp., Citigroup Inc., PNC Financial Services Group Inc.
and Merrill Lynch & Co. - declined to comment on whether they had
exposure to Madoff's company. Both BlackRock Inc. and Goldman Sachs
Group Inc. said they had no exposure.
Morgan Stanley, Wells Fargo & Co., Comerica Inc. and U.S.
Bancorp did not return calls seeking comment.

(Copyright 2008 by The Associated Press. All Rights Reserved.)


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