Types of parties impacted by actions of Mr. Madoff
Illegal behavior of Madoff affected many people, including investors, his business partners and employees. In this regard, it is worth mentioning the fact that Madoff’s schemes contributed to the substantial financial losses from the part of investors, business partners of Madoff and his employees. In fact, like so many others who invested with him, his employees weren’t lured to his funds simply by a promise of outsize returns. Rather, they say, they sought the security of investing with a man they knew and trusted. The Bernie they thought they knew (Creswell & Thomas, 2009). The position of employees was the most desperate because often they invested their savings because they trusted Madoff but, as he failed, their future was ruined because they lost their savings and the financial empire of Madoff was ruined too. Therefore, employees working for Madoff had no job and no savings as well as they had uncertain future.
As for investors, they were also deceived by Madoff. Many organizations were ruined in the result of criminal activities conducted by Madoff and the ruin of his company affected many organizations and business. In fact, both profit and non-profit organizations were affected by criminal behavior of Madoff. For instance, many Jewish organizations have lost substantial funds, where some of them had to give up operating and they were just ruined because of Madoff’s crimes. Investors trusted Madoff due to his experience and successes of his business in the Wall Street. Investors were unaware of schemes used by Madoff to rob them off and to deceive them. When the truth about his schemes became available to the public, many investors were shocked because Madoff’s company was one of the behemoths of the Wall Street.
Finally, business partners of Madoff were also confident in his business and they trusted Madoff. At this point, it is important to place emphasis on the fact that trust is extremely important in the development of business relations and partnership in the Wall Street. Therefore, as Madoff had extensive experience and was extremely successful, his business partners could hardly expect and illegal behavior from his part. They were absolutely confident in Madoff, whereas many business partners maintained close relations with Madoff’s company for years. As a result, they were involved in his schemes, being unaware of criminal behavior of Madoff. Financial losses of business partners of Madoff was enormous because they were engaged in partnership relations and invested or shared substantial funds with Madoff. After the ruin of Madoff and his company, his business partners naturally lost their money and investments.
Three business safeguards (risk management) that may have prevented the harm caused by Madoff
Basically, the criminal behavior of Madoff could not be forecasted but still investors and business partners of Madoff should use some business safeguard to secure their position and prevent the harm being caused to them by Madoff. For instance, business partners should secure their investments separating their funds from those of Madoff and making Madoff responsible only for his part of investments, whereas the part of business partners should be managed by their representatives. In addition, they should conduct auditing of Madoff’s company and its operations. Regular auditing could secure investors and business partners and could push Madoff to change his behavior and to act legally. Finally, the transparency, which Madoff hypocritically insisted upon, could have been an efficient prevention measure but the Wall Street lacked and still lacks transparency. As a result, the frauds are still possible and the lack of transparency provoked the substantial financial losses of investors, business partners and other parties affected by Madoff’s crimes.