Bernie Madoff is going to die in prison, and soon, if his unheard plea for clemency is to be believed. The king of financial fraud thus needs a crown prince, an heir to whom we can all turn when in need of an avatar of a very specific kind of gilded villainy.
Well, we’re in luck, according to some thirsty lawyers who can’t hide their excitement about the fact that bad times tend to turn up some bad people.
“A lot of uncertainty and a lot of fear could lead to a lack of caution,” [Fox Rothschild partner Jon] Heyl said. “We know that fraudsters seek to capitalise on times of chaos … it’s just a function of when there are losses. As we have seen from past crises, plaintiffs’ attorneys will get creative and try to recover those in any manner they can….”
“People will use the crisis as an excuse to try to renege on contracts” [Enyo Law business intelligence director Paul] Austin added. “As well as the contractual claims, you’ll have fraud claims since during the bad times fraud gets uncovered. You might also see a surge in criminal claims as a result of Covid-related fraud….”
“During periods in which global markets experience large movement upward or downward, regulators become more sensitive to perpetrators engaging in intentional and unintentional fraud or breaches of federal securities laws,” [former SEC enforcement lawyer Ron Geffner] said.
And those are just the general things that tend to come up during crises. This specific nightmare brings its own juicy possibilities for massive frauds, such as rickety, makeshift trading surveillance and a lack of regulatory visits, which were ineffective enough when people could actually take a look around the place.
Austin said the recent decline in face-to-face meetings and lack of physical research, driven by workers in lockdown, will be a contributing factor towards what he says will be a surge in litigation. “Social distancing has made due diligence more challenging,” he said. “Going to premises, interviewing people in person — that has stopped.”
Lawyers warn of spike in suits against hedge fund ‘fraudsters’ [FN]