Bernie Madoff: Curious Case of Cohmad Securities
I'm just catching up on the latest in the Madoff scandal and a great place to start was Nina Mehta's latest post at her blog, Mehtafiscal. Mehta reviewed online documents issued by Massachusetts Secretary William F. Galvin in connection with his investigation of Cohmad Securities. In her superb analysis, Mehta lays out the Cohmad operations, gives the who's who and demonstrates how intertwined Cohmad and Madoff are.
(Cohmad Securities is the brokerage firm owned by Bernie and Peter Madoff and members of the Cohn family which operates out of Madoff's offices on Third Ave.)
What surprised me is how old the Cohmad brokers are. Cyril David Jalon, 95, joined Cohmad in 1991, after spending seventeen years with Bream Foster. (Bit of trivia - Jalon's son, Allan, married Mary Tricarico in 1984. Her father and a senior vice-president of sales trades at the Stanford Group are both named Vito Tricarico.)
Stanley Berman was 88 when he retired in 2007 and Richard Spring is 73.
Each of the brokers were paid commisssions on how much money he or she had under managment. Alvin J. Delaire, for example, managed approximately $88 million compared to Stanley Berman's $511 million.
(Revised) Exhibit 11 is a list of account balances by broker with the names of the customer redacted. The negative balances probably reflect decreases in the account balances from a prior period. BMIS paid monthly commissions on managed fund balances based on the balance in a prior period. The account balances were then adjusted for deposits and withdrawals at the end of the next period.
A number of the account balances are negative, the highest being $43 million.
Copies of BMIS checks made out to Cohmad Securities included in Galvin's exhibits are, in some cases, signed by Enrica Cotellessa Pitz, Madoff's controller. I wrote about Pitz in December and wondered how she was keeping a low profile in the scandal. If Pitz functioned as a real controller, she had to have known Bernie wasn't trading billions of dollars.
On a different note, Marcia Beth Cohn, Sonny Cohn's daughter, worked at M. A. Berman in Boca Raton between 1992 and 1998. M. A. Berman was owned by Meyer Berman, a two-time guest at the Clinton White House and big contributor to the Dems.
Meyer Berman was involved in the Eagle Building Technologies scandal in 2002 which involved, among other things, selling fake anti-terrorism equipment to the government after 9/11. In connecton with the Eagle Builidng fraud, Berman and Albert Reichman (Olympia & Yorke) had invested in a defense company, BioSterile Technologies which had already sold worthless cargo scanning equipment to Turkey before 9/11. Berman, a major supporter of Yeshiva University, died in 2007.
More to come.
The key to the Madoff Cohmad relationship is simple: Madoff paid Cohmad referral fees for accounts referred by Cohmad's brokers, but Madoff characterized the fees as trading fees or brokerage fees, thus giving the impression that Cohmad was doing lots of trades for Madoff. In other words, Cohmad was just window dressing....btw, Madoff wasn't making loans to Cohmad brokers, although I can see why you might think so. What you are seeing there is an annual adjustment which was sometimes positive and sometimes negative. The amounts being paid by Madoff to Cohmad were referral fees, and were paid annually based on the money under management. Fees due were calculated each March based on money under management in the previous Fiscal Year. The April payment was then adjusted to reflect actual money under management for the FY just ended.
March 1, 2009 6:23 PM | Reply | Permalink
Thanks. You are, of course, right.
Richard Spring, the top sales representative, was interviewed in December and he was a bit disingenous about his $11 million "loss". He omitted to mention he was pullling in $500k per month on phony Madoff trades for years.
I'd say Mr. Spring was well ahead of the game and should have kept his mouth shut.
Interesting to note how total account balances declined between 2002 and 2008.
LOL - Whoever pulled out the $43 million will undoubtedly be quizzed.
I still suspect some sort of rumour about Madoff was going around. I think more than a handful of people knew what was really going on.
If I recall correctly, there was supposedly a demand for $7 billon in withdrawals but no one ever said who was making the demand.
March 1, 2009 7:30 PM | Reply | Permalink
I am glad sometimes that I am a nobody. Certainly I am glad that I never had anything to do with Madoff or anyone who ever met Madoff. Because if I did, you would hunt me down.
We need to get you a contract with the DOJ.
March 2, 2009 10:14 AM | Reply | Permalink