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Posted on March 14th, 2013, by

Three ways private investors may have protected themselves from risks
Obviously, the illegal behavior of Madoff could hardly be predicted but investors and his business partners should be aware of possible risks related not only to Madoff’s illegal behavior but also normal business risks that always exist in the Wall Street and functioning of companies operating in the financial market. In this regard, it is possible to focus on three business safeguards, which could prevent investors and other parties affected by Madoff’s criminal behavior from financial losses and engagement in his schemes. First of all, investors should collect as much information as possible about Madoff’s company and its performance. It was necessary to analyze its financial performance to reveal its close dependence on the investments attracted by Madoff and its inability to maintain the steady financial performance without the flow of new investments.

Second, investors should track their investments and how their funds were used or managed by Madoff. Madoff’s company should provide detailed reports on the management and using funds of investors. At the same time, investors should check the reports and conduct their own investigation concerning any doubtful case or action being taken by Madoff’s company.
Finally, investors should attract auditors to monitor the development of Madoff’s company and the use and management of funds investors granted for Madoff. At this point, it is extremely important to involve independent auditors to prevent any risk of error or misbehavior from the part of auditors. They should not deceive investors. Instead, they should uncover schemes conducted by Madoff. However, the detailed auditing was quite difficult, taking into consideration the size of Madoff’s company. Nevertheless, regular auditing could reveal the fact that Madoff’s company is not as successful as Madoff’s attempted to present his company to be.

Three legal actions that may be brought against Madoff under criminal or civil law

Obviously, illegal behavior of Madoff needed respective legal action. In this regard, it is possible to suggest several options. First, Madoff could be and was tried and was sentenced to 150 years imprisonment. Second, Madoff accounts could be arrested and his company would stop operating, whereas available funds could be shared between investors and other parties. Finally, Madoff could be tried for breach of contract as he did not perform properly his obligations in relation to investors and he deceived them repeatedly.

Conclusion
Thus, it proves beyond a doubt that Madoff’s behavior was illegal. Companies should be aware of risks of the illegal behavior from the part of other companies. Therefore, they should develop their risk management and prevent risks and threats associated with illegal activities similar to those undertaken by Madoff.

 

REFERENCES
Brown, D. C. (2003). Leading complex change. New York: Touchstone.
Creswell, J. & L. Thomas Jr. (2009). The Talented Mr. Madoff. New York Times.

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