The Buzz - BuzzWorthy Radio

EXCLUSIVE INTERVIEW WITH RON GEFFNER: SENTENCING of BERNARD MADOFF!

Ron Geffner, Partner at Sadis & Goldberg LLP, overseas the Financial
Services Group. He is an expert in hedge funds and securities laws and
provides legal services to several hundred hedge funds and private equity
funds in the United States and offshore. He structures, organizes and
counsels private investment vehicles, investment advisory organizations,
broker-dealers, commodity pool operators and other investment fiduciaries.
Mr. Geffner's broad background with federal and state securities laws and
the rules and regulations of the Financial Industry Regulatory Authority of
Security Dealers, Commodities Futures Trading Commission and various other
regulatory bodies, enables him to provide strategic guidance to a diverse
clientele.

Mr. Geffner is often interviewed as a legal expert in the securities
industry and has been interviewed extensively on Bernard Madoff. He has
appeared on Fox News, CBS Morning Show, CBS Evening News with Dan Rather,
Squawk Box and Power Lunch on CNBC, The BBC, Bloomberg Radio, and is
regularly quoted in the New York Times, The Wall Street Journal, Bloomberg
News, Barron's, Barron's Online, Reuters, Dow Jones, Financial Times, New
York Newsday, London Daily News, TheStreet.com, Private Equity Week and
other national and international publications. In 2005, Mr. Geffner was
invited to speak to the U.S. Commodity Futures Trading Commission in
Washington D.C. as a panelist on the CPO and Commodity Pool Roundtable in
connection with recent developments in the hedge fund industry. In
addition, he has published a number of leading industry and legal
articles.

Duration:: 23m
Broadcast on:: 29 Jun 2009
Audio Format:: other

At Arizona State University, we're bringing world-class education from our globally acclaimed faculty to you, ranked number one in innovation for 10 consecutive years, and number two among public universities for employability. ASU isn't just ahead of the curve, it's creating new paths to success. Earn your degree from the nation's most innovative university. Online, that's a degree better. Explore more than 300 undergraduate, graduate, and certificate programs at asuonline.asu.edu. With New Year's resolutions, many of us will make a vow to eat healthier, and that's a good thing. But what about our beloved pets and their nutrition? Greetings, naturopathi Dr. Dennis Black here, and I'm on a mission to provide better nutrition for cats and dogs, because truthfully, all pet food is dead food, which is why we created rough greens and meow greens in the first place. We bring their food back to life with live vitamins, minerals, probiotics, enzymes, omega oils, antioxidants, and so much more. All in a tasty formula that your dog and cat will love, you can improve your pet's code, digestion, energy, and have less pet bills, let 2025 bring a new year, and a new pet. Get a jumpstart trial bag, normally $20, get a 100 discount with promo code, best friend. You discover the shipping, go to roughgreens.com use promo code bestfriend. Bring your pet's food back to life with rough greens. So good, your pet will ask for it by name. Good afternoon everybody and welcome to a very special afternoon edition of Buzzworthy. I am your host, Novelle J. Lee, we are joined on the line right now by Mr. Ron Gessner. How are you sir? I'm doing great. How are you doing? I'm doing very well. I can't complain here on the East Coast. Finally, not raining, so I will put it that way. What a good way to start it off. The East Coast are earlier, the East Coast now. That's true. That is true. I'm supposed to be in Seattle. Well, I won't go that far. Not yet anyway until I go back in August. But for those of you who haven't kept up on the news lately, as of today, Mr. Bernard Madoff was sentenced today for 150 years in prison. The maximum allowed Madoff who served as a non-executive chairman of the NASDAQ stock exchange played guilty to an 11-count criminal complaint emitting to defrauding thousands of investors of billions of dollars and with convicted of operating a economy scheme that has been called the largest investor fraud ever committed by a single person. Federal prosecutors estimated client losses, which included fabricated gains of almost 65 billion dollars. Mr. Gessner, what exactly are people saying on Wall Street right now to this situation? Well, it was obviously pretty much very upsetting to everybody involved. Not only the victims who happened to work in the area, but also to people who were trying to live their lives compliant with the law every single day. And this is really just not helping their reputation in the marketplace. But with regard to the punishment that's been needed out by the judicial system 150 years, there were some people that felt appreciative of the fact that the judge recognized that there were a lot of people over 1,000 that felt pain as a result of Madoff's fraud. Exactly. But the practical factors, 23 years in and of itself, would be enough to basically sentence him to life in jail. His average expected life expectancy is 13 years. And that's what he was expecting to get. He wanted 12 years. You didn't think that's what he deserved. He deserved the full time behind bars. Well, he deserved far worse if he go back to what I think he deserved. You know, I would say we'll go to old custom that type of punishment, if you would ask me, but I'm a little extreme in that way. But people expected, I think we expected him within the legal community, we expected him to maybe receive a punishment of 25 to 30 years. And that expectation is based upon what other people were prosecuted and subjected to. Bernie Edwards from Worldcom was in that range. Sam Israel from Bayou and other similar people, as well as there's somebody in the West Coast recently that was prosecuted and sentenced to roughly the same timeframe who was 81 years old who had engaged in some form of poverty scheme. So that's really where the 25 to 30 year expectation came from. What happened is our judicial system has sentencing guidelines that the judges are advised to follow. And as a society, we generally want that because it creates an objectivity so that you and I, neither based on creed or background, commit the same crime of one of us who's less liked than the other based on this background is given a worse penalty. Exactly, exactly. Another thing that I definitely want to point out, and I actually kind of agree with this, is that a lot of people don't think that he acted alone in this situation. And the thing is he's not giving up any accomplices if he had any. I would find it really hard to believe that he did not have any accomplices. I've actually been saying this since the day the story broke on air, that it's so, so, so unlikely. You and I have a better chance of winning on the lottery three or four times in a row each, than him having no accomplices. It's been going on for too long and involved over a thousand victims, involved significant sums of money. I think somebody else was actively involved. Even if somebody was not actively involved, there's no chance somebody did not have knowledge of it. I should have stepped up to the plate and gotten involved and stopped them from continuing in his fraud. It should have been easy to catch, but it wasn't feasible to even see the signs if they were clearly visible. Well, there were signs. I mean, the reality was it's really almost impossible to yield that kind of consistent return over the time frame in which he did it, especially using the strategy he was telling people he was using. But if we look beyond that sign, the things that actually made it harder to detect is, although there were allegations out there alleging that something was wrong with his story, he was a person who, in high regard, within the pillar of society in which he occupied. So the way I equate it to, it's like you're at a family reunion, and if a really wealthy uncle there, and the wealthy uncle asks for you to lend them $20, you sit here and say, "Hey, listen, I know this guy. I can't expect or imagine he'd steal from me, especially since he's wealthier than I am." And that in part is one of the things that made it difficult. The other thing is the reality is, unfortunately, there was some greed involved on behalf of a large number of investors as well. And when I say greed, my intention isn't to offend people, but the reality is, if you had a million dollars, if you did not diversify your portfolio outside of one manager, there's also something sort of shocking. Usually, most people might split up between two or three different places. What happens if the person dies, what happens if the person's strategy goes crazy. And so when you see these consistent returns and ward of mouth and all these buzz, to some degree, it's a little too good to be true, and the human condition oftentimes overload the factional information because, "Hey, look, he's been doing this for a while and it's great and it's safe and that's all I care about." Would you say that that was the reason why he wasn't caught a while ago before now, basically before now, as of today, before he was sentenced, that had an effect as to why he wasn't looked at before, and that's why he was never caught is because he was the kind of person that you would not think that he would do something this severe. Well, he was looked at. He was looked at it about four or five times by the SEC alone, and there's also, here in the world, which used to be the NAFD, which governs regulated broker dealers. And then also recognized certain institutions also conducted diligence on him, and toward the degree, it didn't necessarily clear one would think it wasn't as great as one hoped on the diligence side. So people did look at him, but I imagine the reality is they didn't look hard enough. And unfortunately, the fault lies were the large number of people, not just the SEC. But you're right, it does make it, you realize anybody who's conducting diligence is a human being. So we're all, including you and I, have our human frailties. And so we will interpret things differently, depending on who they come from, by the way of example. You meet two people on the street telling you the same story. One's dressed up in a way which causes you to not trust, and the other one's wearing a nice suit, speaks properly. Yes. Probably more apt that you draw some sort of judgment. Well, you trust the person's properly dressed, speaking to you in a certain way to trust them, even if they're saying the same thing. Exactly. That's exactly. So people, it's easy to play, I guess, Monday morning quarterback, where you're questioning all the decisions that were made by people. Now, I'm not suggesting that regulators did not have fault or bear any blame, but people's expectations for government to some degree also is not necessarily realistic. Victims are out crime, where was the SEC? And the SEC could have done a better job. But the victim also done a better job in conducting diligence. And you can't expect by way of example, that no matter our demand as a society, that we can expect, for example, traffic cops to stop every person from speeding, to stop every person from running a red light, to stop every person from carrying an unregistered firearm. Exactly. You can't have that app. I mean, you can try to stop it, but you really can't. It's a nice segue into my next question is, what can we do or what can anybody do if this situation presents itself again? What can anybody do to make sure it never happens again to you or an I, for example, like if this happened to us, what can we do in order to prevent it from not happening to one of us? There's two components here. What should you be doing prior to making an investment? And the second half, I would tell you, is what happens if you're investing your money with somebody you don't trust? So step one of that question would be, with regard to any investment you make, if you don't have the experience in conducting diligence, whether we're talking about a $5,000 investment or $250,000 investment, you should find somebody who's agnostic, meaning they don't care whether you make the investment or not, where their compensation is not tied to it, that is capable of assisting you in conducting that diligence and has experience at hopefully better within your own. So by way of example, and let's not just look at the securities instrument, do you realize how many people probably are fraudulently being induced to invest in restaurants or other operating businesses all around the planet? It goes on all day long. And the reason why we're not necessarily reading about it is oftentimes those amounts are de minimis or small amounts. So the reality is find somebody if you are unable to do the diligence or you're emotionally too connected to it, find somebody who's objective on your behalf to act on your behalf. Now the second aspect is you've now given money to somebody who you don't trust. What do you do? The mistake I've often heard people make is, hey listen, I gave my money to this person, we're thinking of hiring you, we want to litigate it up, but you know what? They promised us money in three months. They said if we got lawyers, they're going to spend money to fight it, thereby reducing any money that might have been left over for us. The reality is if you're dealing with somebody who's dishonest, stop the conversation. You can't count on them for anything at this stage. So if they're promising you that, well, wait, be more patient, they're going to get it back, assume you're not going to get it back. And they're quite frankly just continuing to peddle their lives. And in that regard, sometimes you just have to be, unfortunately, ruthless and objective and hire somebody who can go and prosecute the claim or go to your government, go to your local attorney general's office or anybody in the authorities, go to the police. So even if we're not talking about a large sum of money, whether it be $500 or $1,000, there are alternatives. And quite frankly, you're probably not best suited to handle them if you're already in that position to begin with on your own. Exactly. In your own opinion, do you think Madoff is cooperating with authorities at this point? I mean, he's already tended to do you think he's... No, I don't think he's been cooperating with any material consequence. The fact that he has not named names right, and that we haven't read about it, because if he named names, it would have leaked out. We would have read about it in one of these trashy rag magazines or store tablets. So he has not named names. So right there, I've come to the conclusion from my perspective that he hasn't been clean. Two, right after he got arrested, he tried sending all these valuable items to other people. Three, the evert before he got arrested, he tried to bonus out all this money to his employees and family members. So now I don't think he's been of any value in his cooperation. The other thing that people often are still finding very upsetting is how does his wife ending up still with $2.5 million? Now, the bills that hadn't done, Ruth made off of this house, still will have $2.5 million. She will still have that money? She will still have that money. And then we save that money. She's negotiated with authorities to relinquish claims of about $80 million in assets. So I was on with a reporter earlier today and they're like, "Well, I don't get it. Why is a government letting her keep $2.5 million?" Exactly. Well, the reality is there's a cost-benefit analysis to it as well. If she relinquished claims in 95% of the assets, it's one one thing that the government has to fight for. And if you're talking about billions of dollars and a limited amount of resources, better that they should cut this deal and focus on the bigger sums of money than to sit there and fight with her for the $2.5 million. Well, she's probably going to end up having to spend some of it for Tony's fees, bodyguards, everything you and I couldn't even imagine. Right. Wow. I cannot believe she would still hang on to that money. That's absolutely absurd in my impromptu opinion. That's absolutely that's an eye. Well, man, that's why I highlight that for you because that was one of the things that's been causing the big issue. Now, the other question is what are authorities going to do now that he has been sentenced? Yes. I imagine they're going to continue their investigation and continue to try to prosecute others. Now, obviously, the people who are believed by many in society to participate in this scam are his sons and his brother, whether they did or didn't only donate in these people now. Now, so far since they have not spoken to authorities, I don't believe that they've been deposed because they can assert their Fifth Amendment privileges. My expectation is, and this is for my days at the FCC, that both the FEC and the criminal authorities have been speaking to other employees within their institution at the lower end, that maybe even offering a grant on immunity that they open up and tell them what actually happened. But the goal is always you go from the bottom and work your way up to the top and you build the case. And obviously, they're sifting through written records, but finding a smoking gun when you're going through that much information may be really, really hard. Okay. This is definitely going to be something that's going to be talked about, if not months, for a few years yet. This is definitely going to be something that they're going to try to find out who was involved besides made off. And I just think this is going to be widely usually talked about, not just on Wall Street, but also on Main Street. Oh, yeah. This is going to go on for years and years. The other question is, what's really been the impact and impact both on the government and impact on the Main Street and the investment community as a whole? I think the impact on Main Street or the investment community as a whole is going to be short-lived. In the sense that I don't see people conducting the necessary diligence that I would hope that they would have learned their lesson from. In other words, A, one of the things we've learned is don't invest in something just because you think somebody smarter than you is invested. Conduct your own diligence. By way of example, also, even if somebody smarter than you have invested, it may not be a sign that it's suitable for you, which is suitable for them, a way of example. You earn $10,000 a year and somebody's earning a million dollars a year, and they put up 10 grand. That 10 grand means a lot less to that person earning a million dollars in here than it would mean for you. So they may say, you know what, this is a really high risk investment, but the rewards are a hundred to one if it hits. You don't necessarily know what variables they've looked at or what their options are, their opportunity cost for making the investment. And then with regard to diligence, I'm still surprised that people are out there not consulting with people who have the skill sets to assist them in making the diligence. That's crazy. It's like Enron all over again. I mean, I refer to it as sort of like Enron, would you agree with that sentiment? Yeah, in the sense that you had a lot of people that were harmed, I mean, it's similar to Enron in the sense that there was a significant amount of losses. There's better and worse components. It's worse than Enron because the amounts lost are in access of Enron or World Comm will call it, from what I understand. Although it's not clear how much was really lost, that's still being debated. However, in some ways, you had a smaller pool of people that have been harmed. With companies that are public who are engaging in some form of fraud, a number of people who are harmed by it are even greater than investment advisors who are engaging in fraud. But the downside here is those people who have been harmed, have been harmed probably at a collator of magnitude, meaning it's unlikely that anybody who's lost money in Enron or World Comm put 100% of their assets there. It might be one out of hundreds of holdings or dozens of holdings, whereas some of the victims with Madoff put all their eggs in one basket. Right. That's right. And so when they got wiped up, I mean, they got wiped out. They got wiped out. They got wiped out to be 5% percent. Yeah, I mean, there were people out there saying, "Listen, you know what? I'm too old to work and I've lost everything I've had and, you know, we'll make too, but, you know, we've spent the better part of our life saving money in allocating to him because we've viewed it as a safe investment." Mm-hmm. So the main question is as to what we were saying a few minutes ago, what is going to happen to those that didn't invest with him? Are they going to wind up getting that money back or what's going to happen with these people that are invested with Madoff? No, I would expect that they'll get pennies on the dollar at best. It means still too soon to tell that I am not optimistic and there's still a lot of work that needs to be done. The people that are getting attention based on various newspaper columns are those people who invested and not only walked away with all their money, but they walked away with all their money and some profit. Mm-hmm. And what positions are government in to try to get some of that money back? Exactly. That's exactly it. I feel for these people and hopefully something will come out of this as far as the situation progresses. But I want to thank you again for coming on to the show today to discuss your opinions in regards to as to what happened as of today with Mr. Bernard Madoff. Ron Geffner, everybody, thank you so much. That was my pleasure. Thanks for having me. Anytime. Now for those of you that want to know about our next upcoming show, we are going to be on at midnight tonight, 9 p.m. Pacific, coast time. With the band lunar, they're going to be on the show tonight. It's got to be in there. Single, I love my time to go. She we're going to be playing it on the air today. And we will let you know exactly what's coming up with some upcoming shows as well. I believe we're supposed to have on Daniel Goddard as of next Thursday, but I will keep you posted exactly when that's going to happen after tomorrow. So for all of you from that are listening to Buzzworthy, I want to thank you again for stopping by, Novald J. Lee signing off, making sure you get the latest Buzz with Buzzworthy Radio. We'll see you guys tonight. Take care. With New Year's resolutions, many of us will make a vow to eat healthier, and that's a good thing. But what about our beloved pets and their nutrition? Greetings, naturopath, Dr. Dennis Black here, and I'm on a mission to provide better nutrition for cats and dogs because truthfully, all pet food is dead food, which is why we created rough greens and enemy outgreens in the first place. We bring their food back to life with live vitamins, minerals, probiotics, enzymes, omega oils, antioxidants, and so much more. All in the tasty formula that your dog and cat will love, you can improve your pet's coat, digestion, energy, and have less vet bills. Let 2025 bring a new year and a new pet. Get a jumpstart trial bag, normally $20.00, get a 100% discount with promo code best friend. You just cover the shipping. Go to roughgreens.com, use promo code bestfriend. Bring your pet's food back to life with rough greens. So good, your pet will ask for it by name. My dad works in B2B marketing. He came by my school for career day and said he was a big row as man. Then he told everyone how much he loved calculating his return on ad spend. 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