NEW YORK (Reuters) - Days after the arrest of veteran Wall Street money manager Bernard Madoff, many questions remain about the alleged fraud.
Here are some of the things investigators will want to nail down as they continue their probe:
* WAS ANYONE ELSE INVOLVED?
This may be the most pressing question. Investigators are sure to look at others who worked at Madoff’s firm and who had knowledge of his activities and his company’s books.
According to the criminal complaint filed against him, Madoff has told the FBI that he alone is responsible. Madoff himself has not responded to the securities fraud case against him in court. A lawyer for his sons, who worked at his firm, has said they knew nothing of the alleged fraud.
Legal experts say investigators will look at whether anyone else was involved in sending account statements to clients and keeping records for his asset management business.
“I think a lot more is going to come out over time,” said Ken Springer, a former FBI agent who heads Corporate Resolutions Inc, which investigates companies on behalf of investors and other clients.
Already, the small auditing firm Madoff used, Friehling & Horowitz in a suburb of New York City, is under investigation by the District Attorney in Rockland County for potential violations of New York state law. A message left on the auditor’s voice mail by Reuters was not returned.
* WHERE IS THE MONEY?
Madoff managed assets of at least $17 billion as of the beginning of 2008, but he told employees last week that he had about $200 million to $300 million left, the government contends. He said he personally was insolvent, according to the criminal complaint.
Experts say investigators will want to know if any money is left in Madoff’s company accounts and if any is held offshore.
“I doubt they will ever be able to figure it all out completely, although maybe he kept good records,” said Peter Henning, a professor at Wayne State University Law School and an expert on white-collar crime.
Henning said investigators were apt to examine the firm’s bank accounts and overseas transfers, which could be complicated because Madoff had many European clients, which could make some transfers hard to trace.
* WHEN AND HOW DID THE SUSPECTED FRAUD START?
Madoff founded his firm in 1960 and has been a prominent figure on Wall Street for decades.
Investigators will want to know if his money management business started legitimately, then turned into a suspected fraud, or if the suspected wrongdoing went on for much longer.
Madoff is accused of running a Ponzi scheme, a swindle in which money taken from newer investors is used to pay older investors. Unlike many Ponzi schemes that start fraudulently promising high rates of return, Madoff offered steady gains, said Joel Cohen, deputy head of law firm Clifford Chance’s litigation and dispute resolution practice in New York.
“In this case, he was offering returns of 10 or 11 percent,” he said. “So the relatively modest returns would seem to suggest it developed into a Ponzi scheme, or he had such a sophisticated understanding of a Ponzi scheme that he knew the returns to offer to make investors comfortable.”
* WHAT WAS THE MOTIVE?
Perhaps surprisingly, legal experts say this is the least pressing question and one that might never be answered. They say that when someone is accused of running a long-running scam, the person may never reveal the true story behind it even if he or she confesses.
“To the extent he wants to try to justify what he did somehow is so unimportant given the harm that he caused,” Henning said. “Frankly, I would never want to know.”
Reporting by Martha Graybow; Additional reporting by Dan Wilchins; Editing by Toni Reinhold
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