Bernie Madoff Ponzi Scheme

Bernie Madoff Ponzi Scheme

The Largest Financial Fraud in History

1970-2009

PONZI SCHEME: Taking money from the new investor to give to the old investor.

THE CASE: 

The Bernie Madoff Ponzi Scheme was a 50 billion dollar financial fraud led by former businessman, stockbroker, investment advisor and financier Bernard Madoff. People were investing into funds that both didn’t exist and/or were falsely represented. Madoff had many investors into his “company” and they kept bringing in new money to pay off what people perceived were their profits. He stole from the new investor and gave it to the old investor while stealing some money for himself. This was false representation of product and services. In most cases in this situation there was no product, just deception.

HOW HE GOT CAUGHT:

Madoff was turned in by his investors who realized that the money they were apparently making didn't match the numbers on the stock. He avoided confrontation with the SEC by keeping good relations with them throughout the scandal while making false filings at the same time. He was eventually charged and proven guilty. He expected to be caught within 10 years of starting this, but since he wasn't, he continued for almost 40 years.

SENTENCING:

Madoff was sentenced to 105 years of prison on account of 11 federal felonies.

In the video attached, Barbara Walters talks about her interview with Madoff while he was in jail. He talks about how he is happier that he is in jail because is isn't afraid anymore. His son killed himself and his wife left him, but it almost seems as if Madoff is at peace with himself after committing such a horrible crime.

• http://abcnews.go.com/US/bernie-madoff-live-fraud-victims-anger-familys-tells/story?id=14823108

MAJOR COMPANIES HE AFFECTED:

• Fairfeld Greenwich Advisors--- $7.5 billion
• Tremont Group Holdings--- $3.3 billion
• HSBC--- $1 billion
• Ascot Partners--- $1.8 billion
• Banco Santander--- $2.8 billion

These are just a few of the thousands of people that his scheme affected. The many people who lost money to him are expected to receive about 70% of their money back.

HOW HE AFFECTED SOCIETY:

• Made people lose trust in investment companies
• People started to not trust other companies because they didn't think they were real
• The people involved lost a lot of money

Madoff kept this scheme going on for so long and affected so many Americans including charities, universities, companies and people. He deserved to have a life sentencing of jail, but he proved to be a brilliant man by having this scheme last for so long. As said earlier, he expected to get caught within 10 years of starting this and it lasted for 39 years. No other person has kept a scheme going on for that long in history. Although he is a criminal and deserves to spend the rest of his life in jail, he did make history for the length that this scheme went on. Society learned from this that we need to be more aware about where we put our money because we don't really know what this person is doing with it. There is no law that can stop this from happening because it is already illegal to perform a crime like this, but the SEC has become more aware of the problem, and is starting to catch more people who are participating in this. 

How to Start a Business

Starting a business requires a great amount of work. There are several steps to starting a business. First you need to research and plan your business. What this means is you need to write a detailed business plan explaining, how you want your business to work and what you want to achieve from this business.
After you have your well-written business plan its a good idea to get business assistance and training. Basically these trainers and assistants will help and teach you everything about starting and running a business. They may also help you with getting loans, improving your business plan and marketing strategies. You may be able to even find some free training programs to help you start your business.
Next you will need to find the right business location. How do you know that it's the right location? Well, some of the factors you should look at that should help you with you decision are, do a lot of people come to this area? Is it a comfortable location for your customers? How much is the leasing on the building? Also tax credits offered by your local government. The right location can be crucial to helping your business succeed.
Your next step is to finance your business. To finance your business and help you get started you will most likely need to get a loan. In a loan you borrow money from a lender in which you are required to pay back the same amount of money plus interest at a later time.
You will then need to pick a legal structure for your business. This will determine what your job in the business is, how much you money you will make, and how much you have to pay for taxes and other finances. For example if you are working individually then you will work more and you don't have to share your profits. If you have a partnership you will make less money, but you will also reduce your costs. You may need to contact several federal agencies to help you with this. "The most common business structures are:

• Sole Proprietorship - A business owned and managed by one individual who is personally liable for all business debts and obligations.
• Partnership - A single business owned by two or more people.
• Corporation - A legal entity owned by shareholders.
• S Corporation - A special type of corporation created through a tax election. An eligible domestic corporation can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S corporation.
• Limited Liability Company (LLC) - A hybrid legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
• Non Profit - An organization engaged in activities of public or private interest where making a profit is not a primary mission. Some Non Profits are exempt from paying federal taxes. 
• Cooperative - A business or organization owned by and operated for the benefit of those using its services. Cooperatives are not a legal structure." (copied from www.business.gov)                               

 After that you will need a business name. if you are the solo owner of the business then the name of it is your first and last name. If your in a partnership then the name is either your last names or the name that both partners agreed on. If you would like a different name for your business then you will need to file a fictitious name registration form with your government agency. A fictitious name is just a name other then the official registered name of your business.                                                                   
     What you will need next is a tax identification number. Basically it is just used for identifying your business. All businesses are required to pay federal, state, and sometimes local taxes. Along with business taxes required by the federal government you will also have to pay for some state taxes which vary in every state. The most common ones are tax permit, income taxes, and employment taxes.    
   The final step to starting a business is getting the required licenses and permits for your business, some are basic and some may be very specific. You may only need one license or you may need several. This depends on what your business is, your state, location and what is required by federal, state and local Governments. If you don't have the required incenses and permits, you can get expensive fines.                   

Effects of Shoplifting on a Business

What is Shoplifting?

What is shoplifting? Shoplifting is common crime that occurs when someone steals merchandise offered for sale from a retail store. In order to be charged with shoplifting, the person must intend to permanently take an item for sale.

Retail stores lose about 13 billion dollars per year due to shoplifting. The growth of shoplifting is on the rise. When the economy drops, shoplifting rises. Most shoplifters are amateurs, but more and more people are making a living being a professional shoplifter. Some shoplifters work in teams to distract the workers, and other just perform a “grab and run”. A “grab and run” is when a person takes merchandise and attempts to run away with it. There are so many techniques to shoplifting that many people use to make a living. Unfortunately it affects many businesses around the world because they are losing money and value.

Shoplifter’s Perspective

Many people say that shoplifting is wrong, and that it needs to stop. I do agree with that, but let’s face it; people aren’t going to stop shoplifting just because it is wrong. I am sure the shoplifters can distinguish right from wrong, but when they need to make a living, shoplifting is a necessity. Sometimes, people can’t get a job in this economy, so therefore they resort to stealing. In addition, the problem with preventing shoplifting is that it can be very easy. Therefore, the responsibility to prevent shoplifting needs to be placed in the hands of the business.

Business Owner’s Perspective

Shoplifting can be easy because businesses can’t afford to hire employees if their business is doing poorly, therefore there are fewer employees to monitor and keep track of customers coming in and out of stores. Another problem with shoplifting

Businesses need to find ways to make sure shoplifters can’t walk out of the store without paying. They could possibly add more cameras, or maybe push their budget for more employees. I know most businesses can’t afford to hire more employees, but in the long run, each business will be in good shape because they haven’t lost a lot of money to shoplifters.

One problem that may occur with hiring more employees could include the employees. One scary thought that hurts businesses is that employees steal eight times as much as a regular shoplifter would. Now this introduces another problem, do you hire more employees to protect your store? Doesn’t hiring more employees increase the risk of shoplifting? In a way hiring more employees could hurt your business even more since employees steal eight times as much as a shoplifter. But not all employees steal, therefore you have to be very careful when hiring and monitoring your employees.

My Perspective

There will never be a perfect solution to shoplifting prevention, but trying to keep your store from losing as much items as possible is the key. Here are some key points to prevent shoplifting from being a major problem in your business.

First you need to make sure that no outsiders can steal from your business. Therefore, you need to hire more employees and add more technology (i.e. cameras) to monitor customers. By doing this, a owner is eliminating the high risk of a professional shoplifting from stealing from their store. Now that no outsider can take from your business, it is time to monitor the other risk, the employees. A business owner needs to learn how to monitor the employees. Since employees are more likely to steal from a store, monitoring the employees is extremely vital to a business. I believe the owner should choose their employees wisely and then keep track of what employees do during a certain time. When interviewing an employee, it is important to make sure you are hiring a top quality worker. Now some employees may be misleading, so sometimes an employee a business hires might steal. In this case, here comes the importance of monitoring the employees. A business needs to have a system where the owner can know where and what every employee is doing at any given time while working. As long as the cameras are never off, an employee can be spotted at anytime throughout the store. This can prevent an employee from walking out of the store after work with items. Although money may be a issue, it is important to prevent customers from stealing from your business. In conclusion, a business is responsibility for preventing shoplifting, rather than hoping that shoplifters stop themselves.

Major Corporations Making the Switch to Fair Trade

When you're working at your minimum wage job, do you feel unappreciated? At the end of a three-hour day, is $24.00 just not enough? Well, I'd hate to put you on a guilt trip, but there are people all over the world who are not being paid well for their hard work. Fair trade was created to instill positive change in the working conditions for countries all over the world. Large companies take advantage of cheap labor to increase their profits. To counteract the injustice of cheap labor, fair trade ensures that workers are being sufficiently paid and working in adequate conditions. Millions of children are being forced into cheap labor and will exhaust themselves for over twelve hours and receive less than 20 cents a day. Fair trade follows the Convention on the Rights of the Child, which protects the best interests of children. Fair trade company's are obligated to set prices for costs of material and labor. Another vital factor that fair trade companies must agree to is no discrimination in pay. No longer will superiors mistreat diligent workers' pay on the basis of gender, race etc.

Fair trade strives for large corporations to adapt to their policies. Recently Ben and Jerry's announced plans to make their company use fair trade certified products by 2013. Ben and Jerry's is also determined to convert all their European products to fair trade standards by 2011. They began using their first fair trade certified flavor five years ago. Another well-known company that uses fair trade products is Starbucks. Starbucks has been using fair trade certified coffee for ten years. Starbucks helps farmers market fair trade coffee for United States and increase farmers' knowledge of business skills. Companies along with Starbucks and Ben and Jerry's acquiring fair trade products are making an ethical move. Their decisions make a statement against cheap labor as well as promising that the money that the average consumer is spending will be properly distributed in the company.

Fair trade is not a movement that is well publicized, in my opinion, and if fair trade could get great press people would make changes in where they spend their money. Currently, fair trade organizations are campaigning for Michelle Obama to make the White House a "Fair Trade Home". If the White House were to only use fair trade products, I believe fair trade would become a universal trend. Fair trade is not a topic that came up frequently on my Google blogging account, leading me to believe that more awareness of fair trade needs to be spread. If major corporations such as Starbucks are making the fair trade change, it is apparent that fair trade is working. Making fair trade certified products can take a few years so by no means can the world expect this change to happen fast. This will be a gradual process hopefully creating a chain effect of other major corporations to follow.

To be honest, I have never given consideration to where I spend my money. My spending habits would be based on immediate gratification and on buying inexpensive products. After researching fair trade, I feel obligated to spend my money with ethical businesses. We have the tools necessary to research whether or not a company is practicing fair trade. In particular we have the Internet at our disposal. There are no excuses. Spend your hard earned income at a place deserving of your money.

If you are interested in purchasing fair trade products check out this website!

All photos courtesy of creative common search.