Madoff Essay

Submitted By kcoward1207
Words: 832
Pages: 4

Kate Coward
AC 202 10:00am
Professor Sugarmeyer
27 February, 2012
Madoff Frontline Video Case Ethical decisions and business operations go hand in hand, especially when it comes to handling money from investors. Whether it is from a financial or managerial standpoint, business ethics should be taken into consideration based not only on what is right for the company, but also what is fair to those who have invested time and money into the business. Ponzi schemes, like the one that Bernie Madoff conducted are types of cases that make people question ethical values of not only the people directly involved, but also people like investigators and the SEC who become judged based on what they did to prevent it from happening. Behavior that is ethical is important in both financial and managerial accounting because they both are reflective of the company. Financially, company accountants must make sure that the business is reporting numbers that are in fact true, and not create fake data to present to investors which would misrepresent the company. Also, it is important because the company should be paying the taxes that its true financial position would require, which means companies should not alter their financial data to try and eliminate tax expenses. Management should be making ethical decisions because they are in charge of the financial data, as well as making decisions that will benefit the company as well as investors, keeping everyone’s best interests in mind, not just what they want. A ponzi scheme is when investment companies promise investors extremely high returns, and pays these returns out of money of other investors, rather than actually earning the interest. In the Frontline video, Madoff was the head of the investment company who conducted the illegal operation by fraudulently investing people’s money, and paying interest that was not earned. The investor was giving money to the company, who had no idea that investment companies were not involved other than Madoff’s scheme he contemplated, and the SEC was attempting to regulate the investments, with little success for a long time, because the ponzi scheme was not discovered until much later. If the SEC had listened to the whistleblower who reported three times that Madoff was running an illegal investment operation, this could have all been avoided. The SEC probably did not act on the information they were given because their own investigations had turned up nothing that seemed worth pursuing, and were understaffed as the video claimed. They did not have the manpower or the willpower to pursue the case being presented based on one man’s reasoning, which they also most likely did not think was true. The big question is could the scheme Madoff conducted have been regulated? Requesting records of specific investments and following up with companies could reduce the change of this happening in the future, as well as requiring investment firms to not promise such high returns that seem extreme. Investors should also have a record of where their money is going, with monthly statements of income and exchanges, and proof from the companies invested in that this is actually happening. There are two ways to look at who is responsible for the scheme