283). Stolen funds were used to support Madoff’s luxurious lifestyle and to bribe employees to conceal the fraud (p. 284). Elaborate falsifications were also created to hide the fraud (p. 289). However, Madoff finally confessed to his family on December 10, 2008 (Gregoriou & Lhabitant, 2009, p. 91), due to the steady flow of redemptions following the financial crisis (Rhee, 2009, p. 365). Madoff knew that the scheme could not continue indefinitely. Henriques (2011, p. XXIII) quotes Mr. Madoff saying, “By 1998, I realized I was never going to get out of this. That’s when I acknowledged the fact to myself that the ax was going to fall on me eventually.” The “ax” fell when Madoff’s sons turned him in to the U.S. authorities for securities fraud the evening of his alleged confession (Gregoriou & Lhabitant, 2009, p. 91). He was arrested the next day and sentenced to 150 years in prison on June 29, 2009, after pleading guilty to eleven felony charges (Lewis, 2013, pp. …show more content…
93-94) describe several warning signs of something amiss with Bernard L. Madoff Investment Securities. Because all services were handled internally, without an independent third-party to oversee operations, BMIS had a lack of segregation of duties, an anomaly in the industry. This weakness increases the risk for misappropriation of assets and allows for performance manipulation. BMIS was audited by Friehling and Horowitz, a virtually unknown accounting firm comprised of one partner in his late 70s, a secretary, and a single active accountant. The firm was not peer reviewed and since 1993 had claimed in writing to the American Institute of Certified Public Accountants that it was not conducting any audits. Meanwhile, feeder funds were audited by large, reputable accounting firms such as KPMG, PricewaterhouseCoopers, BDO Seidman, and McGladrey & Pullen, instilling confidence to investors in the legitimacy of the operations. Madoff allowed little transparency regarding his investing decisions with his funds. Access to BMIS offices in either New York or London for due diligence was limited, and Madoff was evasive regarding questions concerning his investment strategies and general business