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Case study - identifying ethical issues in business
Case study - identifying ethical issues in business
Case study - identifying ethical issues in business
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Introduction The Bernie Madoff Ponzi Scheme is a well-known case and is known as one of the biggest Ponzi scheme’s. In summary the scheme occurred for many reasons that I will some up into 3 points; A lack in competency by regulatory agencies, a lack of regulation, and finally a breach in ethics by Bernie Madoff himself. To explain further, the regulatory agencies like the lawyers and SEC are supposed to prevent schemes such as this one from happening but because they lacked the skills to correctly assess the situation, interpreting the number of tips they had received regarding scheme that had been filed, and to act on those in an efficient manner. One of the tips was made by Harry Markopolos in 2000, of who correctly predicted that Madoff was guilty of fraud. Even after this tip from Markopolos, Madoff was not arrested until 2009. Many family members were also a part of the fraud along with some non-family members such as Frank DiPascali and a team known as the 17th floor team, who helped Madoff carry out his fraud. The idea behind Madoff’s fraud was that he would produce false statements of their investments and when people wanted to pull out their investments, the money wasn’t actually there, which rightfully rose more than a few eyebrows and ultimately led to his arrest. Truism 1 “Most people in the U.S. want to do the right thing, and they want others to do the right thing. Thus, reputation and trust are important to pretty much everyone individuals and organizations. However, individuals do have different values, attributes, and priorities that guide their decisions and behavior. Taken to an extreme, almost any personal value, attribute, or priority can “cause” an ethical breach (e.g. risk taking, love of money or sta... ... middle of paper ... ...hat my values are not being taken to the extreme because very easily they can go from being seemingly ethical to unethical. Simply put, everything in moderation even certain values. The next lesson I learned will be particularly useful when I become a manager. That lesson is to make good people want to stay in the company because it betters the company and good people help uphold important ethical standards. Also, in regards to the managerial role, is to reward ethical behavior and punish unethical behavior. All in all, I believe and the evidence points to the Madoff scheme taking place because of an ethical dilemma. It’s important to stand strong in your values and do the right thing because not only does that benefit you, but also it benefits the organization you are a part of and with enough ethical people ponzi schemes like the Madoff case can be prevented.
A Ponzi scheme is a fraudulent investment business where the businessman, a person or company, pays returns to its investors from money by new investors, rather than from profit earned from a legitimate source. It is called a Ponzi Scheme after Charles Ponzi, the original Ponzi Schemer. Charles’ Ponzi Scheme was, he bought overseas stamps and exchanging them for U.S stamps which were more expensive. He sold the U.S stamps for a profit of about $250,000 per day. With those profits, he bought a mansion in Lexington, Massachusetts, which made others question how he had the money to pay for such a life. Ponzi was caught in August 1920, when The Boston Post began investigating his “company”. The investigators had investors go in and try to take their money out, but they couldn’t. Charles Ponzi was arrested on August 12, 1920, with 86 counts of mail fraud. He owed about $7 million, he pleaded guilty to mail fraud, and for that, spent 14 years in prison. His wife divorced him while he was in prison and he died impoverished in Rio De Janeiro, Brazil, on January 18, 1949. Therefore, out of his scheme came the “Ponzi Scheme”, it publicized a hidden wrong doing. In fact, many people are participating in Ponzi Schemes throughout the world today. Charles Ponzi’s scheme inspired many, like Bernard Madoff. They both scammed people for their money, except the fact that Ponzi just served years and Madoff is serving 150 years in
In December 2008, one of the largest Ponzi scheme surfaced when Mark and Andrew Madoff reported the works of their father, Bernard Madoff to the federal authorities. A Ponzi scheme is an investing scam that promises high rates of return with little risk to investors. The operator generates returns for older investors by gaining new investors. Bernard was arrested on December 11, 2008 and charged with securities fraud. He pled guilty to 11 counts and was sentenced to 150 years in federal prison-the maximum possible prison sentence. A reported $17.3 billion was invested into the scam by Bernie’s clients and only about $2.48 billion have been returned to these victims as of September 2012.
Rashbaum, William K., Diana B. Henriques. “Accountant for Madoff Is Arrested and Charged With Securities Fraud.” The New York Times. The New York Times, 18 Mar. 2009. Web. 3 Dec. 2011.
At this time federal prosecutors arrested long time employees of Madoff Investment Securities. They were put on trial for allegations of conspiracy of fraud. The biggest deception comes from about the time of the 1987 crash. Madoff wanted to improve his returns after the downturn. This led to his giant Ponzi scheme where he was able to accumulate vast amounts of money and offering no returns. Initially he used his other business, Madoff Investment Securities LLC. He also had “a non-social situational aspect that contributed to a gullible investment decision was, paradoxically, that Madoff promised modest rather than spectacular gains. Sophisticated investors would have been highly suspicious of a promise of gains as spectacular as those promised almost 100 years earlier by Charles Ponzi.”(Greenspan, 2008, p.28). A large part of Madoff’s success came from his realization that the large investors were looking for steady returns. Returns that are high, but not too high as to raise suspicion. Madoff was truly a master at his
How did this massive collapse of the sixty-five billion dollar Ponzi Scheme even begin? Bernie Madoff saved up five thousand dollars from a job he had as a lifeguard, in nineteen sixty he opened a firm with the money he saved. The Firm helped create the National Association of Securities Dealers Automated Quotations (NASDAQ) In which he held chair from nineteen ninety through nineteen thirty. Madoff’s firm became profitable by exploiting the wealthy Jewish communities. Bernie became very involved with his Jewish fellowmen he knew at his local synagogue, where he would invite them to let him invest their money and then as the pyramid grows those men brought in men they knew to also let Madoff invest their money. He promised high rates of returns to his
Thank you for your post. Your presentation of Bernie Madoff provided a magnificent insight into the mind of a charismatic leader who used his skills to defraud his investors of almost “$50 billion” (Creswell & Thomas, 2009, para.5). As you pointed out in your post, Bernie Madoff was an exceptionally gifted at attracting many successful people to his Ponzi scheme (Dortch, 2015). Bernie was a master at creating an image of achievement. Creswell and Thomas (2009) stated:
Bernard Madoff is a successful businessman, investor, and entrepreneur. At the beginning of his career he was thought of to be a young and successful. He started a business that was made up of employees that were primarily family members. Throughout the duration of his business, a fraudulent scheme took place. In this scheme Bernard Madoff was part of a fraud that managed to take near $17 billion dollars in principal, ruined retirements, drained savings, and destroyed some individuals lives. In this business it included Bernard Madoff as well his brother who were tied to this case and in the end resulted in jail time for the two brothers. Bernard Madoff was served 150 years in prison. While in 2012, his brother Peter pleaded guilty fabricating
Securities and Exchange Commission (SEC), and theft from an employee benefit plan (Bernard L, 2009). Most simply put, Madoff committed investment fraud which involves the illegal sale or purported sale of financial instruments. Investment fraud is characterized by offers of low- or no-risk investments, guaranteed returns, overly-consistent returns, complex strategies, or unregistered securities. These schemes often seek to victimize groups with a common religion or ethnicity in order to utilize the common interests to build trust to effectively operate the investment fraud against them. The perpetrators range from professional investment advisers to a sports coach. Trust is what makes these schemes so successful. A common type of investment fraud is a Ponzi scheme which involves the payment of purported returns to existing investors from funds contributed by new investors offering overly consistent returns, unregistered investments, promised high returns with little or no risk, or secretive or complex strategies (White,
enabled the Madoff’s Ponzi scheme to go on for a long time by falsely stating that BMIS financial statements during an annual audit report time it was pursuant to Generally Accepted Accounting Standards, including the requirements to maintain auditor independence and perform audit procedures regarding custody of securities. According to the SEC’s complaint, David “did not conduct any audit procedures to BMIS internal controls.” He routinely failed to make inquiries about the paperwork or request backup documents. He also lied to the American Institute of Certified Public Accountants for years and denied that he conducted audit work so he did not have to go through the peer review process. He invested his and his family’s personal money into Bernard L Madoff Investment Company. Accountants aren’t allowed to audit broker-dealers with whom they are investing. They would be violating the code of Ethics, which state that an accountant or their families should not personally invest in a client’s company having the insight knowledge that it will turn a
According to Lappin, Madoff “insisted he acted alone, but after months of deliberations, the jury wasn’t buying it- all five of Madoff’s co-conspirators were convicted on March 24, 2014 for aiding, abetting and colluding with their leader for decades” (Lappin, 2014). Moreover, after a long trial that began the fall of 2014, the NY jurors found
The case of Bernie Madoff has been chosen as my case study since it is one of the biggest investment fraud occurred in history in the US and internationally. The scandal had a major impact affecting more than 15,000 investors and over 147 private foundations with an estimated losses of $50 billion.
Ethics and ethical behaviors are an essential component to long-term business and personal success. Ethical lapses are unforgivable in finance and usually result in financial scandals as those witnessed at Arthur Andersen, Enron, and WorldCom. Ethical behavior (doing the right thing) plays a big role in determining the future of a business. Unethical behavior destroys trust, which is an important component that an entity cannot function without. Ethical errors would either result in some going to jail or end of careers, thus terminating future prospects (Keown, Martin, and Petty,
Every one of us wants to work for an ethical organization; sometimes it is difficult to find that because of who we are and whom we work for. Not everyone is perfect and if history has shown us many of us can be selfish people in the business world. We struggle to make moral judgments in the everyday grind of work. Greed drives unethical behaviors in organizations to the ground and what the chapters we have been reading teach us are steps we can take and learn to make business dealings honest and trustworthy for the public.
Unethical behavior is mostly influenced by the individual’s values. Since values lie behind the all the decisions we make, it follows they rest at the very core of the life we’ve made for ourselves through the decisions we’ve done Paul (n.d:1). The choices people make can also be influenced by their beliefs and their background. Employees are attracted to an organisation and work as loyal employees if they can associate with the ethics, values and norms of the organisation. So Ethics, values and culture therefore play a critical role for all stakeholders of an organisation.
Value-Centered ethics: An ethical manager must implement positive reinforcements by being very specific about what is desirable behavior in his/her employees and also understand what factors impact employee motivation. “Managerial action should be guided by professionalism and strong ethical value (Kerns, 2004, p. 176)”.