Background
150 years in prison for 40 years of luxury living, versus no pension for 40 years of work?
This is not a choice, but the shocking outcome of a financial scandal.
Using equity funds, a fraudulent investment advisor operated a Ponzi scheme for decades, syphoning over 20 billion US Dollars from American and European banks, insurance companies and pension funds. Ultimately the bubble burst, and the equity fund was left in a state of insolvency. The pensions of thousands of people seemed irretrievably lost.
But just a few weeks after his appointment, the insolvency administrator developed a spectacular plan. It demanded the return of all sales and brokerage commissions that banks, advisors and asset managers had received from the equity fund over a period of 40 years, amounting to several billion US Dollars. Since none of the mediated money had actually flowed into an equity fund - the fund did not even exist - the insolvency administrator asserted that there was no legal basis for the commission payments. In addition, had the mediators carried out the usual checks, they should have known that it was a Ponzi scheme.
Task
In order to substantiate this plan with facts, the insolvency administrator commissioned comprehensive investigations by REMARKABLE Research. The specialists were briefed specifically to seek information on the commissions paid in Europe and the USA.
In addition, the insolvency administrator wanted to establish whether suspicious connections existed between the intermediaries and the equity fund administrators, and whether they had either explicit knowledge of the Ponzi scheme or suspicions in this regard.
Findings
During the course of this research project, which extended over more than three years, around 60 intermediaries were identified as having indirectly profited from the Ponzi scheme. These intermediaries included independent investment advisors, major banks and prestigious private banks in the USA and Europe.
The investigations demonstrated that the commissions paid were often more than 200% over market rate, confirming an enormous interest on the part of the intermediaries in the continued existence of the largely exclusive distribution partnerships.
Many witnesses were interviewed in order to build up a detailed picture of the parties who profited from the arrangement. Around 50% of all the brokerage transactions could be attributed to 10 independent brokers/asset managers. Almost all of them had their suspicions that it was probably a Ponzi scheme. With regard to all other asset managers and banks, there is strong evidence that compliance regulations were deliberately circumvented in order to market associated products.
Results
The evidence gathered by REMARKABLE Research exerted extreme pressure on the people and organisations who profited from the Ponzi scheme. As a result, the insolvency administrator succeeded in concluding a number of confidential settlements with the banks and intermediaries concerned. These negotiations generated more than 9 billion US Dollars, which was used to compensate the pension funds affected by the scheme.