# data[].attributes.body
After Enron was found using illegal accounting practices to inflate all kinds of numbers, but as a result, was forced to file for bankruptcy in December of 2001.

# data[].attributes.attachment_link.title
What Was Enron? What Happened and Who Was Responsible

# data[].attributes.attachment_link.description
Enron was a U.S. energy company that perpetrated one of the biggest accounting frauds in history. Read about Enron’s CEO and the company’s demise.

# data[].attributes.body
Enron was a US energy company that became embroiled in one of the biggest corporate scandals in history. In the early 2000s, it was revealed that Enron executives had engaged in massive accounting fraud and other illegal activities to inflate the company's profits and hide its losses. This led to the company's bankruptcy and the criminal convictions of several of its top executives. The Enron scandal led to a widespread loss of trust in corporate America and significant changes to financial regulations.

# data[].attributes.body
Investopedia goes into heavy detail about the Lehman Brothers in this 'case study'. They start off by giving a backstory on the humble beginnings as both men came from humble beginnings working at a grocery store. They go into lots of details right up to what they're doing now.

# data[].attributes.attachment_link.readable_text
Lehman Brothers filed for bankruptcy on September 15, 2008. Hundreds of employees, mostly dressed in business suits, left the bank's offices one by one with boxes in their hands. It was a somber reminder that nothing is forever-even in the richness of the financial and investment world.

In this article, we examine the events that led to the collapse of Lehman Brothers.

Lehman Brothers History

The firm prospered over the following decades as the U.S. economy grew into an international powerhouse. But Lehman faced plenty of challenges over the years. The company survived the railroad bankruptcies of the 1800s, the Great Depression, two world wars, a capital shortage when it was spun off by American Express ( AXP) in 1994 in an initial public offering, and the Long Term Capital Management collapse and Russian debt default of 1998.

Despite its ability to survive past disasters, the collapse of the U.S. housing market ultimately brought Lehman to its knees, as its headlong rush into the subprime mortgage market proved to be a disastrous step.

The Prime Culprit

The company, along with many other financial firms, branched into mortgage-backed securities and collateral debt obligations. In 2003 and 2004, with the U.S. housing bubble well under way, Lehman acquired five mortgage lenders along with BNC Mortgage and Aurora Loan Services, which specialized in Alt-A loans. These loans were made to borrowers without full documentation.﻿﻿

At first, Lehman's acquisitions seemed prescient. Lehman's real estate business enabled revenues in the capital markets unit to surge 56% from 2004 to 2006. The firm securitized $146 billion of mortgages in 2006-a 10% increase from 2005. Lehman reported record profits every year from 2005 to 2007. In 2007, it announced $4.2 billion in net income on $19.3 billion in revenue.﻿﻿

The Colossal Miscalculation

In February 2007, Lehman's stock price reached a record $86.18 per share, giving it a market capitalization of nearly $60 billion.﻿﻿ But by the first quarter of 2007, cracks in the U.S. housing market were already becoming apparent. Defaults on subprime mortgages began to rise to a seven-year high. On March 14, 2007, a day after the stock had its biggest one-day drop in five years on concerns that rising defaults would affect Lehman's profitability, the firm reported record revenues and profit for its fiscal first quarter. Following the earnings report, Lehman said the risks posed by rising home delinquencies were well contained and would have little impact on the firm's earnings.﻿﻿

The Beginning of the End

Hurling Toward Failure

In 2007, Lehman's high degree of leverage was 31, while its large mortgage securities portfolio made it highly susceptible to the deteriorating market conditions. On March 17, 2008, due to concerns that Lehman would be the next Wall Street firm to fail following Bear Stearns' near-collapse, its shares plummeted nearly 48%.﻿﻿﻿

By April, after an issue of preferred stock-which was convertible into Lehman shares at a 32% premium to its concurrent price-yielded $4 billion, confidence in the firm returned somewhat.﻿﻿﻿ However, the stock resumed its decline as hedge fund managers began to question the valuation of Lehman's mortgage portfolio.

On June 7, 2008, Lehman announced a second-quarter loss of $2.8 billion, its first loss since it was spun off by American Express, and reported that it raised another $6 billion from investors by June 12.﻿﻿﻿ According to David P. Belmont, "The firm also said it boosted its liquidity pool to an estimated $45 billion, decreased gross assets by $147 billion, reduced its exposure to residential and commercial mortgages by 20%, and cut down leverage from a factor of 32 to about 25."﻿﻿﻿

Too Little, Too Late

The devastating news lead to a 45% drop in Lehman's stock, along with the firm's debt suffering a 66% increase in credit-default swaps.﻿﻿﻿ Hedge fund clients began abandoning the company, with short-term creditors following suit. Lehman's fragile financial position was best emphasized by the pitiful results of its September 10 fiscal third-quarter report.﻿﻿﻿

Facing a $3.9 billion loss, which included a $5.6 billion write-down, the firm announced an extensive strategic corporate restructuring effort. Moody's Investor Service also announced that it was reviewing Lehman's credit ratings, and it found that the only way for Lehman to avoid a rating downgrade would be to sell a majority stake to a strategic partner. By September 11, the stock had suffered another massive plunge (42%) due to these developments.﻿﻿﻿

With only $1 billion left in cash by the end of that week, Lehman was quickly running out of time. Over the weekend of September 13, Lehman, Barclays, and Bank of America ( BAC) made a last-ditch effort to facilitate a takeover of the former, but they were ultimately unsuccessful.﻿﻿﻿ On Monday, September 15, Lehman declared bankruptcy, resulting in the stock plunging 93% from its previous close on September 12.

Where are They Now?

Former chair and CEO Richard Fuld runs Matrix Private Capital Group, which he founded in 2016. The company manages assets for high-net worth individuals, family offices and institutions. He reportedly sold an apartment in New York City for $25.9 million as well as a collection of drawings for $13.5 million.

In years following the collapse, Fuld acknowledged the mistakes the bank made though he remained critical of the government for mandating that Lehman Brothers file for bankruptcy while bailing out others. In 2010, he told the Financial Crisis Inquiry Commission the bank had adequate capital reserves and a solid business at the time of its bankruptcy.

Erin Callan (now Erin Montella) became chief financial officer at the age of 41 and resigned in June 2008 following suspicions she had leaked information to the press. Her LinkedIN profile lists her as an advisor at Matrix Investment Holdings. Other stints include six months serving as head of hedge fund coverage for Credit Suisse and co-founding a non-profit that provides paid maternity leave to mothers. In 2016, Montella published an autobiography, Full Circle: A Memoir of Leaning in Too Far and the Journey Back, about her experiences in the financial world.

The Bottom Line

Lehman's collapse roiled global financial markets for weeks, given its size and status in the U.S. and globally. At its peak, Lehman had a market value of nearly $46 billion, which was wiped out in the months leading up to its bankruptcy.

# data[].attributes.attachment_link.title
The Collapse of Lehman Brothers: A Case Study

# data[].attributes.attachment_link.description
Lehman Brothers filed for bankruptcy on September 15, 2008. Hundreds of employees, mostly dressed in business suits, left the bank's offices one by one with boxes in their hands. It was a somber reminder that nothing is forever-even in the richness of the financial and investment world.

# data[].attributes.body
This video perfectly explains the rise and fall of Enron, in simple terms. Around the 2:15 mark, he begins to explain how Enron had things set up in a way that external investors had no option to pull their money out if things went wrong.

# data[].attributes.attachment_link.title
The Rise and Fall of Enron - The Biggest Scandal in the History of American Finance

# data[].attributes.body
Coming from humble beginnings, the Lehman Brothers were forced to close their dooes on September 12th, 2008, as a result of filing bankruptcy.

# data[].attributes.headline
Investopedias Description of Bernie Madoff and How His Ponzi Scheme Worked

# data[].attributes.subject
Investopedias Description of Bernie Madoff and How His Ponzi Scheme Worked

# data[].attributes.body
He eventually was caught because the financial crisis of 2008 caused many investors to request withdrawals from his firm, but there wasn't enough money to cover the requests. This led to a chain of events that soon enough exposed his fraudulent scheme. To add to this, Madoff himself eventually confessed to his crimes to his sons, who then reported him to the authorities.

# data[].attributes.attachment_link.readable_text
Bernard Lawrence "Bernie" Madoff was an American financier who executed the largest Ponzi scheme in history, defrauding thousands of investors out of tens of billions of dollars over the course of at least 17 years, possibly longer.

He was also a pioneer in electronic trading and chair of the Nasdaq in the early 1990s. He died in prison at age 82 on April 14, 2021, while serving a 150-year sentence for money laundering, securities fraud, and several other felonies.

Early Life and Education

Bernie Madoff was born in Brooklyn, New York, on April 29, 1938, to Ralph and Sylvia Madoff. His father worked as a plumber before entering the financial industry with his wife. They founded Gibraltar Securities, which was ultimately forced to close by the SEC.

Bernie earned a bachelor's degree in political science from Hofstra University in 1960 and briefly attended law school at Brooklyn Law School. While in college, Bernie married his high-school sweetheart, Ruth (née Alpern), with whom he later founded Bernard L. Madoff Investment Securities LLC in 1960.

At first, he traded penny stocks with $5,000 he earned installing sprinklers and working as a lifeguard. He soon persuaded family friends and others to invest with him. When the "Kennedy Slide" flash crash lopped 20% off the market in 1962, Madoff's bets soured and his father-in-law had to bail him out.

Notable Accomplishments

Madoff had a chip on his shoulder and felt that he was not part of the Wall Street in-crowd. In an interview with journalist Steve Fishman, Madoff advised, "We were a small firm, we weren't a member of the New York Stock Exchange. It was very obvious."

According to Madoff, he began to make a name for himself as a scrappy market maker. "I was perfectly happy to take the crumbs," he told Fishman, giving the example of a client who wanted to sell eight bonds; a bigger firm would disdain that kind of order, but Madoff's would complete it.

Success finally came when he and his brother Peter began to build electronic trading capabilities-"artificial intelligence" in Madoff's words-that attracted massive order flow and boosted the business by providing insights into market activity. "I had all these major banks coming down, entertaining me," Madoff told Fishman. "It was a head trip."

He and four other Wall Street mainstays processed half of the New York Stock Exchange's order flow-controversially, he paid for much of it-and by the late 1980s, Madoff was making in the vicinity of $100 million a year.

Madoff would become chair of the Nasdaq in 1990, and also served in 1991 and 1993.

Scandal, Scheme, and Crime

At some point, Madoff attracted investors by claiming to generate large, steady returns through an investing strategy called split-strike conversion, a legitimate trading strategy. However, Madoff deposited client funds into a single bank account that he used to pay existing clients who wanted to cash out.

He funded redemptions by attracting new investors and their capital but was unable to maintain the fraud when the market turned sharply lower in late 2008.

On Dec. 10, 2008, he confessed his wrongdoing to his sons-who worked at his firm. The following day, they turned him over to the authorities. Bernie remained adamant that his sons were not aware of his scheme.

The fund's last statements indicated it had $64.8 billion in client assets.

The Players

It is not certain when Madoff's Ponzi scheme began. He testified in court that it started in the early 1990s, but his account manager, Frank DiPascali, who had been working at the firm since 1975, said the fraud had been occurring "for as long as I remember."

Even less clear is why Madoff carried out the scheme at all. "I had more than enough money to support any of my lifestyle and my family's lifestyle. I didn't need to do this for that," he told Fishman, adding, "I don't know why." The legitimate wings of the business were extremely lucrative, and Madoff could have earned the Wall Street elites' respect solely as a market maker and electronic trading pioneer.

Madoff repeatedly suggested to Fishman that he was not entirely to blame for the fraud. "I just allowed myself to be talked into something and that's my fault," he said, without making it clear who talked him into it. "I thought I could extricate myself after a period of time. I thought it would be a very short period of time, but I just couldn't."

The so-called Big Four-Carl Shapiro, Jeffry Picower, Stanley Chais, and Norm Levy-have attracted attention for their long and profitable involvement with Bernard L. Madoff Investment Securities LLC. Madoff's relationships with these men go back to the 1960s and 1970s, and his scheme netted them hundreds of millions of dollars each.

"Everybody was greedy, everybody wanted to go on and I just went along with it," Madoff told Fishman. He indicated that the Big Four and others (several feeder funds pumped client funds to him, some all but outsourcing their management of clients' assets) must have suspected the returns he produced or at least should have. "How can you be making 15 or 18% when everyone is making less money?" Madoff said.

Madoff's apparently ultra-high returns persuaded clients to look the other way. In fact, he simply deposited their funds in an account at Chase Manhattan Bank-which merged to become JPMorgan Chase & Co. in 2000-and let them sit. The bank, according to one estimate, may have made as much as $435 million in after-tax profit from those deposits.

When clients wished to redeem their investments, Madoff funded the payouts with new capital, which he attracted through a reputation for unbelievable returns and grooming his victims by earning their trust. Madoff also cultivated an image of exclusivity, often initially turning clients away. This model allowed roughly half of Madoff's investors to cash out at a profit. These investors have been required to pay into a victims' fund to compensate defrauded investors who lost money.

Madoff created a front of respectability and generosity, wooing investors through his charitable work. He also defrauded a number of nonprofits, and some had their funds nearly wiped out, including the Elie Wiesel Foundation for Peace and the global women's charity Hadassah. He used his friendship with J. Ezra Merkin, an officer at Manhattan's Fifth Avenue Synagogue, to approach congregants. By various accounts, Madoff swindled $2.4 billion from its members.

Madoff's plausibility to investors was based on several factors:

His principal, public portfolio appeared to stick to safe investments in blue-chip stocks.

He claimed to be using a collar strategy, also known as a split-strike conversion. A collar is a way of minimizing risk, whereby the underlying shares are protected by the purchase of an out-of-the-money put option.

His returns were high (10 to 20% per annum), consistent, and not outlandish. As the Wall Street Journal reported in a now-famous interview with Madoff, from 1992:

"[Madoff] insists the returns were really nothing special, given that the Standard & Poor's 500-stock index generated an average annual return of 16.3% between November 1982 and November 1992. 'I would be surprised if anybody thought that matching the S&P over 10 years was anything outstanding,' he says."

The Investigation

The SEC had been investigating Madoff and his securities firm off and on since 1992-a fact that frustrated many after he was finally prosecuted since it was felt that the biggest damage could have been prevented if the initial investigations had been rigorous enough.

Financial analyst Harry Markopolos was one of the earliest whistleblowers. In 1999, he calculated in the space of an afternoon that Madoff had to be lying. He filed his first SEC complaint against Madoff in May 2000, but the regulator ignored him.

In a scathing 2005 letter to the Securities and Exchange Commission (SEC), Markopolos wrote, "Madoff Securities is the world's largest Ponzi Scheme. In this case, there is no SEC reward payment due to the whistle-blower so basically I'm turning this case in because it's the right thing to do."

Using what he called "Mosaic Theory," Markopolos noted several irregularities. Madoff's firm claimed to be making money even when the S&P was falling, which made no mathematical sense, based on what Madoff claimed he was investing in. The biggest red flag of all, in Markopolos's words, was that Madoff Securities was earning "undisclosed commissions" instead of the standard hedge fund fee (1% of the total plus 20% of the profits).

The bottom line, concluded by Markopolos, was that "the investors that pony up the money don't know that BM [Bernie Madoff] is managing their money." Markopolos also learned Madoff was applying for huge loans from European banks (seemingly unnecessary if Madoff's returns were as high as he said).

It was not until 2005-shortly after Madoff nearly went belly-up due to a wave of redemptions-that the regulator asked Madoff for documentation on his trading accounts. He made up a six-page list, the SEC drafted letters to two of the firms listed but didn't send them, and that was that. "The lie was simply too large to fit into the agency's limited imagination," writes Diana Henriques, author of the book "The Wizard of Lies: Bernie Madoff and the Death of Trust," which documents the episode.

The SEC was excoriated in 2008 following the revelation of Madoff's fraud and their slow response to act on it.

The Punishment

In November 2008, Bernard L. Madoff Investment Securities LLC reported year-to-date returns of 5.6% during the same period when the S&P 500 dropped 39%. As the selling continued, Madoff became unable to keep up with a cascade of client redemption requests.

So, on Dec. 10, according to the account he gave Fishman, Madoff confessed to his sons Mark and Andy, who worked at their father's firm. "The afternoon I told them all, they immediately left, they went to a lawyer, the lawyer said, 'You gotta turn your father in,' they went, did that, and then I never saw them again." Bernie Madoff was arrested on Dec. 11, 2008.

Madoff insisted he acted alone, though several of his colleagues were sent to prison. His elder son Mark Madoff committed suicide exactly two years after his father's fraud was exposed. Several of Madoff's investors also killed themselves. Andy Madoff died of cancer at age 48 in 2014.

Madoff was sentenced to 150 years in prison and forced to forfeit $170 billion in 2009. His three homes and four boats were auctioned off by the U.S. Marshals. On Feb. 5, 2020, Madoff's lawyers requested that Madoff be released early from prison claiming that he was suffering from a terminal kidney disease that may kill him within 18 months.

However, Madoff, prisoner No. 61727-054, remained at the Butner Federal Correctional Institution in North Carolina until he died on April 14, 2021.

The Aftermath

The paper trail of victims' claims displays the complexity and sheer size of Madoff's betrayal of investors. According to documents, Madoff's scam ran for more than five decades, beginning in the 1960s. His final account statements, which include millions of pages of fake trades and shady accounting, show that the firm had $47 billion in "profit."

While Madoff pleaded guilty in 2009 and was sentenced to spend the rest of his life in prison, thousands of investors lost their life savings, and multiple tales detail the harrowing sense of loss victims endured.

Investors victimized by Madoff have been helped by Irving Picard, a New York lawyer overseeing the liquidation of Madoff's firm in bankruptcy court. Picard has sued those who profited from the Ponzi scheme; by April 2021, he had recovered nearly $14 billion.

In addition, a Madoff Victim Fund (MVF) was created in 2013 to help compensate those Madoff defrauded, but the Department of Justice didn't start paying out any of the roughly $4 billion in the fund until late 2017. Richard Breeden, a former SEC chair who is overseeing the fund, noted that thousands of the claims were from "indirect investors"-meaning people who put money into funds that Madoff had invested in during his scheme.

Since they were not direct victims, Breeden and his team had to sift through thousands and thousands of claims, only to reject many of them. Breeden said he based most of his decisions on one simple rule: Did the person in question put more money into Madoff's funds than they took out? Breeden estimated that the number of "feeder" investors was north of 11,000 individuals.

In a September 2021 update for the Madoff Victim Fund, Breeden wrote, "MVF is thrilled to announce a new distribution totaling $568,648,065 to 30,539 victims of the crimes committed at Madoff Securities. Measured by the number of victims paid, this is our largest distribution yet." With the completion of the seventh distribution of funds in September 2021, approximately $3.762 billion has been distributed to 39,494 Madoff victims in the U.S. and around the world. Breeden also noted that they have recovered 81.35% for victims.

Depictions of Bernie Madoff in Popular Culture

As a financial antagonist, Bernie Madoff has been depicted as a villain in the media and pop culture. For instance, in a 2009 episode of HBO's Curb Your Enthusiasm, Jason Alexander (who played George on Seinfeld) is swindled by Madoff and loses all of his money made off of a fictional app that he invented. Other fictional characters have also been had by Madoff (or similar knock-offs) such as a couple in Woody Allen's film Blue Jasmine, and the protagonist of Elinor Lipman's novel, The View from Penthouse B.

Madoff himself has also been depicted in several incarnations, from a 2010 theatrical production called Investing with Madoff to and ABC miniseries starting Richard Dreyfuss. In 2017, Madoff was played by Robert DeNiro in the HBO film The Wizard of Lies. Several documentaries, books, and journalistic accounts have also featured Bernie Madoff in describing his fraud and subsequent demise.

Who Was Bernie Madoff?

How Much Money Did Bernie Madoff Return?

How Did Madoff Get Caught?

The Bottom Line

In 2009, at age 71, Madoff pleaded guilty to 11 federal felony counts, including securities fraud, wire fraud, mail fraud, perjury, and money laundering. The Ponzi scheme became a potent symbol of the culture of greed and dishonesty that, to critics, pervaded Wall Street in the run-up to the financial crisis. Madoff, the subject of numerous articles, books, movies, and biopic miniseries, was sentenced to 150 years in prison and ordered to forfeit $170 billion in assets, but no other prominent Wall Street figures faced legal ramifications in the wake of the crisis. In April 2021, Madoff died in a federal correctional facility at age 82.

# data[].attributes.attachment_link.title
Bernie Madoff: Who He Was, How His Ponzi Scheme Worked

# data[].attributes.attachment_link.description
Bernie Madoff was an American financier who ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.

# data[].attributes.headline
CNBC Documentary on Bernie Madoffs life and crimes

# data[].attributes.subject
CNBC Documentary on Bernie Madoffs life and crimes

# data[].attributes.body
Bernie Madoff is a hot topic when it comes to financial crimes. He's just about at the top of every list for one of the biggest financial crimes committed in modern history.

# data[].attributes.attachment_link.title
Bernie Madoff - His Life And Crimes (CNBC Documentaries - Part 1)

# data[].attributes.body
Bernie Madoff was a prominent American financier who orchestrated one of the biggest financial frauds in history. He ran a Ponzi scheme that defrauded thousands of investors out of billions of dollars, resulting in his imprisonment for 150 years.

# data[].attributes.headline
What went wrong with the Lehman Brothers?

# data[].attributes.subject
What went wrong with the Lehman Brothers?

# data[].attributes.body
While I do recommend only watching the first 3-4 minutes of this video, it's very informative in that short time frame. It explains in laymens terms what happened and how a downfall for them was inevitable.

# data[].attributes.attachment_link.title
Lehman Brothers collapse: What went wrong ten years ago?