Identify White Collar Criminals

Identify the dissimilarities and associations between Madoff and the executives of Enron

Madoff used a Ponzi scheme to defraud his victims, while Enron executives used “market-to-market accounting”. Madoff was setting up portfolios to appear as if he matched the S&P 500 returns. This approach made him pay less to the existing investors at the same time while making his purported holdings appealing to new investors (Kennedy, 2012). His operations went on successfully while keeping his scheme low-key. His targets were an exclusive elite group of investors whom he managed to keep close and the SEC away. He also made sure to update his paperwork. By doing this, he trod water with limited returns keeping the scam going for years. On the other hand, Enron executives relied on dubious practices of accounting and the market-to-market accounting technique to hide their troubles. This technique enabled Enron to record false future gains from several business contracts into current statements of income to give an illusion of high current returns.

How the two schemes were discovered and charged

After more than ten years of duping his investors and the SEC, Madoff’s Ponzi scheme started losing steam in the year 2008 (Forbes, 2013). He was unable to keep up with the investors’ demand to liquidate their assets while the market was deteriorating. Soon, he could not keep up with the pressure and decided to confess to his sons, who were also partners in that company. They later turned him into the FBI. In 2009 he pleaded guilty and was sentenced to one hundred and fifty years in prison. In Enron, the situation’s severity became apparent in the year 2001 as several analysts started digging into the company’s details of the financial statements. An internal investigation took place, and SEC investigated the company’s transactions. On the 2^nd December 2001, Enron was declared bankrupt, and many of its executives were indicted on various charges and were later imprisoned for ten years.

Differences in Losses

Those who invested in Bernard L. Madoff Investment Securities LLC ended up losing billions of dollars in the Ponzi scheme (Kennedy, 2012). The amount of money that went missing from the accounts of the clients, over seventy percent that was fabricated gains, was approximately sixty-five billion dollars. The destruction caused by Madoff affected all the people he worked with. Some former associates and employees were also arrested, and at least three took their own lives, including Mark Madoff, his eldest son. The amount lost in Enron scandal was approximately seventy-four billion dollars, while hundreds of investors and employees lost their retirement accounts and thousands of employees lost their jobs.

Explain the factors that motivated Madoff and the executives of Enron to commit such crimes

In the analysis of the elements of the fraud triangle regarding the Ponzi scheme of Bernie Madoff, it is evident that there was the existence of opportunity due to the fact that he was the corporation’s head (Spiekermann, 2009). Even though others suspected, nobody questioned him seriously, allowing him to go on with the scheme for many years. The main factor that motivated the fraud was to keep making the corporation look successful in enabling him to gain additional clients to keep up his growing personal income. Enron’s motivation to defraud arose from the fact they promised their investors returns from the sale of electricity and gas, which was not the case. Like most corporations in a similar position, it decided to hide what was happening to the public and borrow a lot more money to fill the gap.

Relate the strategies applied in the Madoff and Enron scams

The Enron corporation started to deteriorate from increasing debts and financial losses in the year 2000. In order to hide those shortcomings, Enron committed a range of complex crimes so as to appear as if they were financially stable (Kennedy, 2012). For instance, fraud was committed by the company by transferring some liabilities from Enron to other corporations and not noting the losses on the accounting books. Additionally, the company deceived the public as well as the employees by significantly overstating the corporation’s value causing the shareholders and the employees to lose their cash and go bankrupt. The CEO of Enron also intentionally misinterpreted the auditors’ accuracy of the financial statements; subsequently, the company was portrayed as being in a better position, but it painted a false financial picture to the financial institutions and the public.

The scheme of Madoff entailed asking their clients to open accounts of trading with a promise of high returns and limited risks. The clients trusted Madoff since he paid off what he promised. Unknown to them, that money came from the funds of future investors. In order to hide the fraud, Madoff developed an unreal portfolio for the clients and filed false statements to the Securities and Exchange Commission (SEC).

Identify the victims in each case, and then explain how they differ

Some of the victims in the Ponzi scheme of Madoff were Elie Weisel, famous for Holocaust survival and going ahead to win the Nobel Peace Prize. Another one is Steven Spielberg, the famous director of Hollywood and former Governor of New York, Eliot Spitzer, and his business of real estate was also involved. To the victims’ dismay, Madoff did not acknowledge the destruction caused by his actions even though he pleaded guilty and took responsibility; he diverted his focus on the big banks and failure to expose that scheme when they had the chance instead of expressing any sympathy or personal regret.

In the case of Enron hundreds of employees got affected since they were encouraged by Ken Lay to make investments in the company’s stock (Spiekermann, 2009). The company’s executives were well aware that the company was sinking into debt. Still, they continued to encourage the employees to invest their hard-earned income knowing they were selling the company’s shares. The employees put their trust in the company’s executives and depended on their decisions, hurting them. As well as the employees, investors were also a significant part of the corporation, and as a result of the false financial data, they lost millions of dollars. Thousands of individuals who were unsuspecting were solicited into investing in a sure stock were also wiped out without a shred of warning.

Use the Enron and Madoff cases to determine obstacles for law enforcement in identifying and investigating white collar crime

Often, white collar crimes involve complicated evidence and concepts. The majority of prosecutors find it hard to understand the complex financial scenarios included in many white-collar crimes (Forbes, 2013). The attorneys involved in the prosecution often experience difficult tasks turning the financial records’ hundreds of pages, procedures of accounting and much more complicated evidence into details that the jury can understand. They tend to face additional challenges; the jury is generally not familiar with white collar crimes, and the defence often upstands the community members.

The law’s challenge while dealing with white collar crimes tends to start long before the beginning of the statement opening. In various cases, it begins with an overburdened enforcement agencies’ local law (FITZPATRICK, 2018). The new budget cuts era implies that law enforcement officials throughout the country should allocate resources carefully to concentrate on the most pressing issues. In a complicated case that drains resources, white collar crimes tend to take more money and time compared to other cases. Internet and computer fraud, embezzlement allegations, and laundering of funds require the prosecution to know various concepts compared to violent crimes and property crimes seen by the local police more often.

In such cases, the most challenging determination is to find sufficient evidence like an electronic communication which provides a hint concerning the concepts going through the defendant’s mind. Circulating the elements up by defense furnishing on the basis of the law’s ignorance limits the punishment to those that flout the law. However, that change might significantly put corporate executives’ prosecution greatly off-limits at least when they are not directly involved in the transaction or decision.

References

FITZPATRICK, J. C. (2018). White Collar Crimes—3 Reasons Why They Take Years to Prosecute. Retrieved from http://callonfitz.com/white-collar-crimes-3-reasons-why-they-take-years-to-prosecute/

Forbes, W. (2013, December). Bernied Madoff: the creation and subversion of regulatory authority. Retrieved from https://www.researchgate.net/publication/260420056_Bernied_Madoff_the_creation_and_subversion_of_regulatory_authority

Kennedy, K. A. (2012). An Analysis of Fraud: Causes, Prevention, and Notable Cases. Retrieved from unh.edu: https://scholars.unh.edu/cgi/viewcontent.cgi?article=1099&context=honors

Spiekermann, H. B. (2009). Shady business: On the history of white-collar crime. Journal of Business History , 289-304.

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Week 2 – Assignment: Identify White Collar Criminals

Instructions

In the last decade, Bernie Madoff and the executives of Enron committed the most devastating white-collar crimes in the United States. The employees of Enron lost their life savings and retirement, and the investors believing Madoff never saw the promised profits and lost their investment. These two cases demonstrate how these types of white collar crime are very difficult to detect. The Security Exchange Commission (SEC) is continuously monitoring suspicious business transactions to potentially report to law enforcement fur further investigations.

Assume you have been asked to speak to undergraduate college students studying fraud and other corporate white-collar crime. You decide to use the Enron case and the Madoff case as the foundation for your informational presentation. Develop a PowerPoint presentation that addresses the following:

• Identify the dissimilarities and associations between Madoff and the executives of Enron.
• Explain the factors that motivated Madoff and the executives of Enron to commit such crimes.
• Relate the strategies applied in the Madoff and Enron’s scams.
• Identify the victims in each case, and then explain how they differ.
• Use the Enron and Madoff cases to determine obstacles for law enforcement in identifying and investigating white collar crime.

Incorporate appropriate animations, transitions, and graphics as well as speaker notes for each slide. The speaker notes may be comprised of brief paragraphs or bulleted lists.

Support your presentation with at least three scholarly resources. In addition to these specified resources, other appropriate scholarly resources may be included.

Length: 12-15 slides (with a separate reference slide)
Notes Length: 100-150 words for each slide

Be sure to include citations for quotations and paraphrases with references in APA format and style where appropriate. Save the file as PPT with the correct course code information.