Assignment #5 - Madoff and Enron 1 Running Head Madoff and...

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Madoff and Enron 1 Running Head: Madoff and Enron Allen Brown Ethical and Legal Issues in Business BUS-340 Module Five Exercise May 29, 2010
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Madoff and Enron 2 Madoff and ENRON Bernard Madoff was a pioneer in market-making. A market-maker is “ a broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its on inventory or seeks an offsetting order. This process takes place in mere seconds.” (Forbes Electronic Online, 2010) Madoff was responsible for the growth and development of the NASDAQ, his firm was the leading middle man between buyers and sellers. Unlike most of the small market-makers, Madoff choose to keep his business in the family and not sale his company to bigger firms while other smaller companies were cashing in by being bought out. Keeping the business allowed Madoff to develop his company into and asset-management firm in the early 1990’s. Madoff used his vast social network to find investors for his funds. In 1985 Enron began when Houston Natural Gas and InterNorth merged. Over the next decade Enron grew and expanded, by 1999 Enron’s largest expansion was in the online field. Enron used the website to trade commodities; it was not long before the site was the world’s largest business site, 90 percent of
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Madoff and Enron 3 Enron’s income would begin to roll in from trades made on their website. (CBC News, 2006) For Madoff a successful company was not enough, he wanted more. Madoff’s funds looked to be low risk investments, with the larger funds returning steady gains of one or two points per month. The strategies were simple, buy large cap stocks and supplement them with related options; this would generate stable
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Assignment #5 - Madoff and Enron 1 Running Head Madoff and...

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