DCS 3301

BUSINESS ETHICS AND CORPORATE CITIZENSHIP

BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

WHAT IS PONZI SCHEME?

Investment fraud which is identical to Pyramid Scheme Promises high ROI (Return On Investment) Pays dividend by using investments from other investors

Requires sufficient new investors to sustain the scheme OR;

When the investors withdraw all of his investments

BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

MAIN ETHICAL ISSUES

The Power of Greed
Negligence of the Securities and Exchange Commission(SEC)

Exploitation of trust gained from close members

BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

ETHICAL DILEMMAS I PUBLIC INTEREST VS FINANCIAL GOODS

Is it ethical for Madoff to cheat the public to fulfill his desire of getting fast money or it is unethical to do so?
Trick investors through his wealth management company
Promising high ROI (Return On Investment) Unethical to earn money through illegitimate method Fraud amounted more than $10 Billion
BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

ETHICAL DILEMMAS II GREED VS TRUST

Is it ethical for Madoff to give up his title, generous philanthropist (trust) to get what he is addicted in doing, cheating investors (money)?
Bernard Madoff Well-known public figure Charity and Liberal Contributor Used Trust gained from his title to scam people into the scheme The Power of Greed caused others to lose their trust and faith in him.

BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

ETHICAL DILEMMAS III NEGLIGENCE OR DECEPTION

Securities and Exchange Commission (SEC) failed to follow or did not want it to be found?
SEC failed to properly investigate Madoffs trading even though complaints have been made. No necessary step executed to determine the legality of Madoffs trading SEC might be deceiving the public to cover up facts that some SEC affiliates are involved in the Scheme. Unrealistic investigation done by SEC
BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

RECOMMENDED ACTIONS IN FACING THE ETHICAL ISSUES Investors should conduct a background research on the company that they plan to invest in
Research about the company details and the owner details
Research on company licensure on investment trading Shared to public via mass media

BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

RECOMMENDED ACTIONS IN FACING THE ETHICAL ISSUES The government and their regulators should be thorough and strict on their investigation
SEC exists to protect investors, uncover frauds that are happening in the market and protect the public interest

SEC to set-up Customer Service Department to follow-up on complaints from investors

SEC should be more professional in approaching complaints by executing detailed investigations

SEC should send spies to the company in order to understand how the company runs and what actions are used to fraud on investors
Increase punitive on people running fraud businesses.
BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

RECOMMENDED ACTIONS IN FACING THE ETHICAL ISSUES Bernard Madoff should not have involved his family members into his fraud
Family members should stop him from going any further and cause major damage to others Family members can choose not to be involved in the scheme by not helping him

Family members should not be overwhelmed by the Power of Greed

BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

RECOMMENDED ACTIONS IN FACING THE ETHICAL ISSUES Bernard Madoff should not have even committed the fraud as it made him betray the trust of his peers
Should not take advantage of the trust between him and his friends. Check the background of the scheme and not build trust based on Madoffs positive personality expressed. Should not trust schemes that guarantee high or over-consistent Return On Investment

BERNARD MADOFFS PONZI SCHEME

DCS 3301 BUSINESS ETHICS AND CORPORATE CITIZENSHIP

REFERENCES
Solution Inn, 2012, What are the ethical issues involved in the Madoff case? , Solution Inn, viewed 5 March 2013, < http://www.solutioninn.com/business/organizational-behavior/business-ethics/what-are-the-ethical-issues-involvedin-the-madoff-case> The FBI, n.d., Common Fraud Schemes , FBI.gov, viewed 13 March 2013, < http://www.fbi.gov/scamssafety/fraud/fraud> DesJardins J, 2011, An Introduction to Business Ethics , pg 17, 4th Ed, Mc-Graw-Hill DesJardins J, 2011, An Introduction to Business Ethics , pg 2, 4th Ed, Mc-Graw-Hill Evans M, 2012, Ponzi schemes can be a threat to banks , American City Business Journals, viewed 13 March 2013, < http://www.bizjournals.com/triad/print-edition/2012/08/31/ponzi-schemes-can-be-a-threat-to-banks.html?page=all> Collins D, n.d., Bernie Madoffs Ponzi Scheme: Reliable Returns from a Trustworthy Financial Adviser , pg 447, School of Business at Edgewood College in Madison, Wisconsin Jory S & Perry M, 2013, Ponzi Schemes: A Critical Analysis, FPA, viewed 13 March 2013, < http://www.fpanet.org/journal/BetweentheIssues/LastMonth/Articles/PonziSchemes/>

BERNARD MADOFFS PONZI SCHEME

DONE BY TAN XIEN YI TEY YI YAN MOCKEE KOH KISHEN MOHAN AUDREY SAN HOR WAI YIN