Sunday, December 21, 2008

Stavisky Affair and the Bernard Madoff 'Affair'-Times change, same old crooks

The Stavisky Affair was a 1934 financial scandal generated by the actions of embezzler Alexandre Stavisky. It had political ramifications for the French Radical Socialist moderate government of the day. The scandal was described by the New Yorker's Paris correspondentJanet Flanner as follows:[citation needed]

The scheme which finally killed [Alexandre Stavisky], his political guests' reputations, and the uninvited public's peace of mind, was his emission of hundreds of millions of francs' worth of false bonds on the city of Bayonne's municipalpawnshop, which were bought up by life-insurance companies, counseled by the Minister of Colonies, who was counseled by the Minister of Commerce, who was counseled by the Mayor of Bayonne, who was counseled by the little manager of the hockshop, who was counseled by Stavisky.


Serge Alexandre Stavisky (1888–1934), who became known as le beau Sacha ("Handsome Sasha"), was a Russian Jew born in modern-day Ukraine whose parents had moved to France. He tried various professions, working as a café singer, as a nightclub manager, as a worker in a soup factory, and as the operator of a gambling den. In the 1930s he managed municipal pawnshops in Bayonne but also moved in financial circles. He sold lots of worthless bonds and financed his "hockshop" on the surety of what he called the emeralds of the late Empress of Germany — which later turned out to be glass.

Stavisky maintained his façade with his connections to various people in important positions. If some newspaper tried to investigate his affairs, he bought them off, sometimes with large advertisement contracts, sometimes by buying the paper.

In 1927, Stavisky was put on trial for fraud for the first time. However, the trial was postponed again and again and he was granted bail 19 times. He probably continued his scams during this time. One judge who claimed to hold secret documents was later found decapitated.

Faced with exposure in December 1933, Stavisky fled. On 8 January 1934, the police found him in a Chamonix chalet agonizing from a gun wound. Officially Stavisky committed suicide but there was a persistent speculation that police killed him. The latter is the theory followed in Flanner's New Yorker articles. Fourteen Parisian newspapers called it suicide and eight did not. The distance the bullet had traveled led Le Canard enchaîné to propose the tongue-in-cheek theory that he had "a long arm".

[edit]Political crisis of 6 February 1934

Main article: 6 February 1934 crisis

The affaire Stavisky went public with Stavisky's arrest, escape and death and rumors of murder. Then his long criminal record as anembezzler and confidence trickster went public. The suicide or murder, the losses many of the general public suffered, and his close involvement with so many ministers led to the resignation of premier Camille Chautemps amidst accusations from the right-wing opposition that Chautemps and his police had intentionally killed Stavisky to protect influential people.

Chautemps was replaced by Édouard Daladier from the same Radical-Socialist Party. One of his first acts was to dismiss the prefect of the Paris policeJean Chiappe, notorious for his right-wing sympathies and suspected of encouraging previous anti-government demonstrations. Next Daladier dismissed the director of the Comédie Française, who had been staging William Shakespeare's anti-democratic Coriolanus and replaced him with the head of the Sûreté-Générale, who was as reliably leftist as the Paris police chief had been of the right. He also appointed a new Interior Minister, Eugène Frot, who announced that demonstrators would be shot.

The dismissal of the Prefect by the Paris police was the immediate cause of the 6 February 1934 crisis, which the historian Alfred Cobbancharacterizes[citation needed] as a right-wing putsch. It would be more accurately characterized as a "putsch attempt", in the words of French historian Serge Bernstein.[citation needed] However, the left-wing at the time did fear an overt fascist conspiracy. Fomented byconservativeanti-Semiticmonarchist, and fascist groups, including Action Française (AF's leader, the novelist Léon Daudet, called the government "a gang of robbers and assassins"), the Croix-de-Feu and the Mouvement Franciste, the riots resulted in fourteen deaths over six hours on the night of 67 February 1934 at the hands of 800 police. The événement failed in its aim of overthrowing the Third Republic(1871–1940) but Daladier had to resign. His successor was conservative Gaston Doumergue who created a coalition cabinet. It was the first time during the Third Republic that a government had to resign before the pressure of the streets. They also led to the formation ofanti-fascism leagues and to the agreement between the SFIO socialist party and the communist party, which in turn led to the 1936Popular Front.

[edit]Further consequences

The scandal brought in a remarkable range of personalities from politics, high society and the literary-intellectual elite of Paris. Mistinguettwas asked why she had been photographed with Stavisky at a nightclub; Georges Simenon reported on the unfolding affair and Stavisky's ex-bodyguard threatened him with physical violence; and Colette, referring to the inability of any of Stavisky's high-placed friends to remember him, described the dead con artist as "a man with no face".[citation needed]

The trial of 20 people associated with Stavisky began in 1935. Printed charges were 1200 pages long. All of the accused, including Stavisky's widow, two Deputies, and one general, were acquitted the next year. The amount involved was estimated to be equal to eighteen million contemporary dollars plus an additional fifty-four million that came within months[clarification needed] of fruition. The location of Stavisky's wealth is still unknown.

The Stavisky Affair left France internally weakened. France remained deeply divided for the rest of the decade, but the political weaknesses it exposed and exacerbated were not confined to France. The Stavisky Affair was emblematic of a broader erosion of democratic values and institutions in post–World War I Europe.

Bernard Lawrence Madoff (IPA/ˈmeɪdɑf/) (born April 29, 1938) is an American businessman and former chairman of the NASDAQ stock exchange. He started the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960 and was its chairman until December 11, 2008, when he was arrested and charged with securities fraud.

Bernard L. Madoff Investment Securities, which is in the process of liquidation, was one of the top market maker businesses on Wall Street, often functioning as a "third-market" provider that bypassed "specialist" firms and directly executed orders over-the-counterfrom retail brokers.[1] The firm also encompassed an investment management and advisory division that is now the focus of the fraud investigation.[2]

On December 11, 2008, Federal Bureau of Investigation agents arrested Madoff on a tip-off from his sons, Andrew and Mark, and charged him with one count of securities fraud. On the day prior to his arrest, Madoff told his senior executives at the firm that the management and advisory segment of the business was "basically, a giant Ponzi scheme."[3] Five days after his arrest, Madoff's assets and those of the firm were frozen and a receiver was appointed to handle the case.[4] Madoff's alleged fraud may be valued at a loss of up to a $50 billion in cash and securities.[2][5] Banks from SpainFrance,SwitzerlandItalythe Netherlands and other countries have announced that they have potentially lost billions in U.S. dollars as a result.[6][7][8] To date, it is the largest investor fraud ever attributed to a single individual.[9]

Madoff has long been a prominent businessman and philanthropist.[10][11] The freeze of his and his firm's assets significantly affected businesses around the world and a number of charities, some of which, including the Robert I. Lappin Charitable Foundation, the Picower Foundation, and the JEHT Foundation, have been forced to close as a consequence of the fraud.[10][12][13][14]

Rejecting Madoff's assertion that he pulled off the large-scale operation by himself, investigators are now looking for others involved in the scheme.[15]

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