Saturday, December 20, 2008

Mr. Madoff's Secrets

From all appearances, Bernard Madoff is an out-and-out crook, the mastermind of one of history's largest thefts, and likely, one of it's most destructive as well.

What did investors know about Mr. M? I decided to look at EDGAR, the usually-frustrating, but sometimes-wonderful database at the SEC that houses all their publicly filed reports.

What EDGAR reveals about Madoff's firm, Bernard L. Madoff Investment Securities, LLC, is...not much. The public would be hard pressed to know anything of significance about BMIS from the electronic reports in EDGAR. Apparently, so would the SEC.

Start with Madoff's FOCUS report. This is an annual financial report required under the Securities laws. Here is how the SEC site somewhat unhelpfully describes it:

"Focus Report (Form X-17A-5) Every broker or dealer registered pursuant to Section 15 of the Exchange Act must file annually, on a calendar or fiscal year basis, a report audited by an independent public accountant."

Whatever it is, it sounds intriguing. As a possible investor (or regulator), I suppose I'd like to have a look. Let's pull it up, shall we.






Ooops. Every FOCUS report has a [Paper] tag, meaning, it's not available electronically. Why would that be? Could Madoff not afford a computer or two needed for electronic filing? Do I really want to make a trip to the SEC Documents Room in the hopes I might be able to see it?

Actually, almost all FOCUS reports, from all firms, seem to be reported on paper, rather than electronically. I'm not sure why this is, but it certainly bears some looking into.

But no matter, there are also the 13F-HR quarterly reports of Madoff's holdings, and happily, they are available online.

Let's see what they tell us.



Oddly enough, the form details holdings with a combined value of about $275 million. Where is the $17 billion, or $25 billion, or $50 billion that Madoff allegedly manhandled? In some other fund? Unreported? Locked away on the 17th Floor? These are open questions. They money is certainly not detailed in EDGAR.
Here's a look at BMIS' top ten holdings:


=============================================

NOV 2008 HOLDINGS ........Value($000) .....SHARES

ISHARES RUSSELL 2000 IDX.......12,172 .......179,000
TRIAN ACQUISITION I CORP .......4,720 .......533,300
HICKS ACQUISTION CO 1 INC ......4,489 .......501,600
UNITED REFINING ENERGY CORP ....4,470 .......495,000
ANHEUSER BUSCH COS INC .........4,412 ........68,000
LIBERTY ACQUISITION HLDGS CORP .4,316 .......496,100
SAPPHIRE INDUSTRIALS CORP ......4,180 .......465,000
GREY WOLF NC ...................3,819 .......490,846
UST INC ........................3,726 ........55,992
WRIGLEY WM JR CO ...............3,709 ........46,710


=============================================

Anyone can claim to be holding $4.4 million of Anheuser Busch stock. But there's just no way to really check now, is there?

If I called Anheuser Busch, or any of the hundeds of other firms on Madoff's list, to ask if BMIS really is one of their shareholders, they'll just tell me...

Sorry. It's a secret.

2 comments:

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  2. Per WSJ, 'Some of Mr. Madoff's investors say they were told the firm put the bulk of its money in cash-equivalents at the end of each quarter, explaining why the public filings showed so few shares'

    Still no evidence...

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