E-BAY FORGER KENNEDY CAPTURED IN TIJUANA; A LOOK INSIDE MADOFF FOUNDATION TAX RECORDS

Special to the Readers of Milwaukeeworld.com

By Michael Horne

and the Milwaukee World Hound Dog Team

Dear Reader -- Here are a couple of items for you to ponder as you get ready to head down to City Hall this evening for its rededication. First, we hear that forger James Kennedy has been caught, again. And secondly, we open up the IRS vault to look at the curious tax returns of swindler Bernard Madoff and his foundation. Thanks for visiting. -- Horne

Fugitive James F. Kennedy, dealer in forgeries, has been captured in Mexico and will be returned to the United States in a few weeks, according to a report yesterday, December 17th, 2008, by Jeff Coen in Chicago Breaking News.
Kennedy, of Northbrook, Illinois, was captured without incident at an internet cafe in Tijuana.
In February you read here that he had been arrested in Florida. And, by October, he failed to appear at a court hearing in case 3:08-mj-01017-HTS, leading to the international search for him. He first appeared on the Milwaukeeworld radar screen in May, 2004, when he spent his birthday in Milwaukee County Jail after having tried to sell some fake Picasso drawings to reputable dealer Bill DeLind, who turned him in.

Over the years numerous of his victims have told their sad tales to this department, and other blogs have used Kennedy as a cautionary tale for the unwary. Meanwhile, he apparently crisscrossed sections of the country, leasing empty booth space at the very last moment at art fairs and similar shows. He would then not turn up in the brochures or promotional materials for the shows, and could conduct his crooked business more or less away from scrutiny.

[Over the years Milwaukeeworld has received some odd messages -- you might call them threats -- that could have been from Kennedy or his family. Earlier this month I noted a visitor to this site from Mexico who had searched "James Kennedy Art" and found Milwaukeeworld. I notified the authorities on the chance it might have been Kennedy himself. (A criminal always returns to the scene of the blog). I have no idea if this had any connection to his capture. --Ed.]

THE TOPSY-TURVY MAGICAL WORLD OF THE MADOFF FAMILY FOUNDATION'S FUNDS

Another dealer in useless goods is Bernard Madoff, whose mathematical shenanigans will occupy accountants, trust officers and lawyers -- including some in Milwaukee -- for years to come. A look at the Madoff Family Foundation tax records should be instructive.

In 2007 [pdf], it looks like Madoff churned a remarkable $181,993,372 through the foundation to achieve a $1.4 million or so gain ("net gain from sale of assets"). He had the foundation buy "B.L. Madoff Info on Request" for $180,591,467, and sold it for $181,942,273 -- quite a considerable sum, and an inexplicable one, for a foundation with assets only one tenth the amount. Significantly, Madoff failed to list the date of purchase and the date of sale for the assets -- a key component of any financial statement, especially one filed with the IRS. Odd.

He listed assets of "B L Madoff" in the amount of $19,060,372, and claimed them to be "100% US Government Securities." More odd. Somebody named Alan Kinnburger received $9,040 for "other professional services." I can't find him anywhere -- odd.

The sole managers of the foundation were Madoff and his wife Ruth; Madoff was listed as the only contributor. The IRS form 990-PF was prepared by Paul J. Konigsberg, a CPA and attorney with the firm Konigsberg, Wolf & Co. and signed by Ruth Madoff.

In 2006 [pdf] Madoff had the foundation buy $146,646,134 in B L Madoff, which it then sold for $147,682,050., netting a $1 million gain. Again, the dates of purchase and sale were missing. Doesn't anybody audit these things? Anyway, Kinnburger got $14,000 for his services, whatever they were, and whoever he is.

In 2005 [pdf] Madoff didn't do any crazy trading, and had assets of $13 million or so in B L Madoff.

The year 2004 [pdf] was rather quiet as well, except that "B.L. Madoff" is called Cohmad Securities, and is worth $15 million. Cohmad -- jointly owned by Madoff and Sonny Cohn -- has been subpoenaed by investigators in the case, according to the Wall Street Journal.


Madoff lost money that year trading stocks the foundation listed as having been purchased in 1997, although this is the first time we have heard of them. He and Ruth are both listed as working 50 hours per week at the foundation, accepting no pay. If only that were the case!

This is a far cry from 2002 [pdf] when Bernie and the Missus were listed as working zero hours managing the foundation of which they were the sole trustees. Odd, and inconsistent.
In 2001 [pdf] the Madoffs were all over the place, claiming a fair market value of $26 million for their holdings. The foundation's "investment corporate stock" went from $2,413,972 at the beginning of the year to an astounding $22,661,214 at the end, while its "investment other" sank from $24,673,783 to $4,203,035. However an investment value of just over $1 million for the foundation was used for another calculation on the form. Also, the co-managers put in zero hours that year.

Well, go take a look at it yourself, or send it to a forensic accountant as a winter project. However, it appears to a layperson with a reasonable degree of familiarity with such things, that the Madoff Foundation would not have passed the smell test had we ever heard of it.

Here is a sheet outlining a typical Madoff investment vehicle, in this case "Fairfield Sentry."

Here is a "Factsheet" from November 17th, 2008, outlining the types of returns promised to investors from the "well-established" Fairfield Sentry, which invested $7 billion with Madoff.

You can be sure the Lynde and Harry Bradley Foundation or the Chipstone Foundation, or any number of Milwaukee foundatiions -- even those built on a single-source fortune -- don't employ the curious tricks and questionable accounting methods the Madoffs used.
--Michael Horne