Tuesday, 1 January 2013

Protecting Your Assets , "How to avoid Madoff-like risk"

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Kostas Andrikopoulos & Kathy Bazioan Phelps
Live Show August 29th 2012 AT 4PM



Developing substantial wealth is based on principles that need to be understood and followed. Most people actually approach the above principles in the order of building first, protection second and managing your assets third . Unfortunately that is one of the largest mistakes one can make.
Although it seems like a natural fundamental that you need to have or build wealth before you can protect and manage it, that view is very short sighted. To build and keep real wealth requires a plan and a structure to protect wealth . If you build wealth without already having a plan to protect and manage it in place then a good portion of the wealth could be lost in taxes or to fraud.

Wealth preservation typically focuses on protecting assets, but it’s also important to protect wealth from erosion by fraud. There’s a common misconception that fraud victims usually are unsophisticated, but there’s no shortage of sophisticated investors who’ve been seduced by the promise of generous returns.

Just consider the Bernard Madoff debacle. Madoff’s $50 billion Ponzi scheme snared corporate CEOs, wealthy celebrities, prominent investment funds, universities, not-for-profit organizations and other experienced investors. Many of these investors lost millions of dollars. 
Some lost billions. Although there are no guarantees in the investment world, the best way to protect yourself against fraud is to do your homework and seek professional advice.

Even in the Madoff scheme, there were warning signs that might have tipped off cautious investors, including: Returns that were unusually high and consistent given the volatility of the markets, Investment strategy explanations that likely wouldn’t have held up to closer scrutiny. Use of the same investment strategy for every investor, regardless of his or her circumstances.

It appears that many investors had an emotional response to the prospect of enormous monetary gains and disregarded there due diligence on the basis of Madoff’s reputation as a highly successful and well-respected investment advisor. So if someone is bound and determined to be a crook and steal your money they just may find a way to do it but you can make it really hard by following our guest advice coming up shortly!

So is a qualified, independent investment firm can it help you take the emotion out of the equation and evaluate your investment options objectively and thoroughly? Yes of course !


Today live from his headquarters from Toronto is Kostas Andrikopoulos President & CEO of T.E.WEALTH, to discuss how you can protect your asset from unscrupulous investment firms and he will also explain what to look for in order to maximize your Return on investment in your portfolio! 

And later on the show we are going live to los Angeles California to discuss her latest book Ponzi Proof Your Investments: An Investor’s Guide to Avoiding Ponzi Schemes and Other Fraudulent Scams. And at the same time will have an update on the madoff case!

Stay tuned for an exciting show!

My name is Samuel Ezerzer, your host to the Money & Business show on Radio Shalom, CJRS 1650 AM. Thank you for tuning in live on the Money & Business show, with our Business studios headquarters in Montreal, the financial capital and the home to the greatest hockey team, the Montreal Canadians. We have another great show for you today and as always, you can call if you have any questions, comments, or criticisms on today's topic. Please call us direct at  514 738 4100 ext 200 or email me at if you have any inquiries. You can also visit our website at – all our shows are archived there.

Out topic for today "Protecting your assets , "How to avoid Madoff-like risk"

Kostas Andrikopoulos
Kostas N. Andrikopoulos, C.A., TEP
President and CEO, T.E. Wealth
D- 416-640-8567
T.E. Wealth - Successful wealth strategies since 1972

As a thought leader in the Financial Services world, Kostas Andrikopoulos has combined his passion for learning with more than 30 years of experience in this industry, to augment the model of excellence that T.E. Wealth is known for today. As President and CEO, he is responsible for leading a team of competitive, top-level executives in providing financial solutions to families, individuals and corporations across Canada.
Kostas began his C.A. career as a tax accountant with a major accounting firm in Montreal, which laid the foundation for a lasting financial planning practice. Later, he ran his own highly successful financial planning firm, giving him the opportunity to learn core principles for building a thriving, client-focused business from the ground up. This made him an ideal successor to T.E. Wealth after its President and founder, Tim Egan, stepped down in 2003.

In addition to being an alumnus of both McGill University and Concordia University, he was on staff for 6 years at the former as a lecturer in taxation. Kostas holds certifications from The Society of Trust and Estate Practitioners, past member of The Canadian Association of Financial Planners, Canadian Tax Foundation and The Institute of Chartered Accountants of Ontario. He is an avid reader and history buff, and is fluent in three languages, French, English and Greek.

Thank you Kostas for taking time off on your busy schedule, and I want to congratulate your firm T.E.WEALTH for turning 40 this fall?

In October of 2012, T.E. Wealth will celebrate 40 years in business and throughout the coming year, we will be holding anniversary celebrations across the country. Whenever we mark a significant milestone, it is a welcome opportunity to look back and reflect on how far we’ve come,and look forward to see where we are heading. During our anniversary year, I will be sharing my thoughts with you on how our experience, commitment to education, dedication to excellence and focus on growth will continue to benefit clients. In this issue of  Strategies, I want to take a step back and look at our shared history.

When you examine how the world has changed, how our clients’ needs have changed and how T.E. Wealth has changed over the past 40 years, the value of experience is abundantly clear. The
lessons learned over the years, through the various market cycles and economic challenges,have given us the insight and understanding necessary to provide our clients with the quality of
guidance they expect and value. Experience is not only a great teacher; it provides us with the knowledge and expertise for building a prosperous future

(The new millennium saw the Dow Jones Industrial Average peak at 11,723 points. The TSE 300 wasn’t far behind – Nortel Networks at a share price of $124.50 occupied 34.2% of the index.

Following the attacks of 9/11, the oil price dipped to U.S.$17.50 a barrel. In 2002, stock markets corrected as the tech bubble burst and T.E. Financial opened offices in Edmonton and Halifax.

The following year, Jovian Capital Corporation acquired T.E. Financial and in 2004, T.E.I.C. introduced Prosperity, our proprietary pooled fund program. We launched the Aboriginal Services

 division in 2005 and T.E. Wealth was introduced as the umbrella brand for T.E. Financial and T.E.I.C. in 2006. The S&P/TSX hit 15,073 points by 2008, the same year T.E. Wealth expanded to

 St. John’s in Newfoundland.)


Kostas The sovereign debt crisis in Europe is a problem that has yet to find a workable solution. Every time it looks as though the European Union leadership has found a way to resolve the issues, another country lurches towards defaulting on its debt or has major debt issues. The case point being is how does it all fit, in the scheme of a wealth management solution for investors the European debt issue? It just too confusing for the average investor to manage there portfolio?

  There is clearly a lack of leadership in Europe. The problem is that the longer it takes to find a solution, the greater the probability that the world economy will be dragged down by Europe.

What investors need to remember is that there is no magic bullet.
The starting point is determining what your goals and priorities are:

·         Purchase a house
·         Put your kids through school
·         Have a child
·         Go back to school, etc

Once you’ve determined what your goals and priorities are, you should draft up a financial plan. A plan that includes not just investments, but cash flow projections, personal balance sheet, insurance and income tax planning.

Through the ups and down of the markets investors during the financial crisis invested there money in high rate savings account earning 1.5%-2.55 interest? A flight to safety is a typical in bear market reaction.
Kostas in your view this is not the time to invest in Guaranteed Investment Certificates, these investors may miss out on markets gains?

  I don’t agree with the statement that this is not the time to pursue GIC – What will help determine what you’re invested in, will be your asset allocation. Your asset allocation will be determined by your:

·         Temperament
·         Your time horizon / age
Your goals, etc…..

Kostas one of the most exciting developments in the financial services industry recently has been the trend toward managed asset investment solutions. As an enhancement to the more traditional relationship between advisor and client, managed asset solutions shift the focus from the selection of investment products to a highly individualized approach of selecting and maintaining an appropriate investment strategy and portfolio?

kostas -
   Yes, asset investment solutions is a great development. It is something we do very well. Instead of trying to time the market we:

·         Gear a solution that is geared to the client
·         research and hire best in class managers
·         monitor their performance; and

Ensure they are following their stated objectives


There’s a common misconception that fraud victims usually are unsophisticated, but there’s no shortage of sophisticated investors who’ve been seduced by the promise of generous returns?

    When we look at investment decisions and we ask what drives these decisions, the answer is human behavior. Specifically:

·         Greed and fear
·         To avoid this you need to do your due diligence on the particular investment
·         If you feel you are not capable of performing due diligence hire an advisor to do it for you
·         Get a number of references
·         The advice I’ve always given my clients is the same as the principal we follow in deciding on an investment: If you don’t understand it, DON’T DO IT!
·         If it’s too good to be true, it probably isn’t true!

Kostas If the custodian of investor’s assets and the advisor are one of the same, than there is room for plenty of bad acting, on the other hand if the custodian is completely a separate institution, then there are safeguards in place? Most investors don’t have a clue how important a custodian is to there overall safeguarding of there assets?

First off, not all advisors are bad. However, having a custodian adds another level of protection. In essence what you have is a separation of duties.

As I stated before in the introduction that you don’t have to be an unsophisticated investor who can be lured by big returns and a promise of huge returns, sophisticated investors can be lured by greed, So how can investors sophisticated or unsophisticated be protected from Madoff-like risk? 

kostas -
    You can protect yourself by:
·         Independent investment manager selection
·         Diversify – so if one manager goes rogue you don’t loose all your investable assets
·         Visit the provider’s premises
·         Find out who works for the firm – is it primarily family member?
·         Find out who the auditors are. Is it a one person firm? We use one of the Big 4 accounting firms. Highly unlikely that their independence will be compromised.

Kostas what should Investors look for to maximize their Return on Investment?
 The key is the asset mix. We all know that the stock markets will go up and it will go down.  

Despite cautions from Bank of Canada governor Mark Carney and a rolling back of some of the more aggressive mortgage lending practices, Canadians have continued to pile on debt and are close to hitting their debt ceiling. At the same time, Canadians are facing cost-cutting and wage restraint. Kostas what can you suggest for Canadians who are indebted at this point to do, we are getting to a point that interest rates will rise in the future?

 Interest rates will eventually rise – but I don’t see this happening in the near term. That’s the silver lining. This gives people time to seek financial advice and get their debt under control before this happens.

The number of seniors in Canada is projected to increase from 4.2 million in 2005 to 9.8 million by 2036 representing ¼ of the entire population ( statics Canada) As baby boomers near retirement and life expectancies increase the importance of savings and retirement planning will be even more significant? What makes T.E. WEALTH unique in this space in the wealth management industry.

 The aging population needs to take responsibility for their financial well being. The government cannot be solely responsible for this. Individuals need someone to look at the whole picture and devise a strategy that meets their unique needs.

Many events motivate people to seek professional investment advice. For example, you may have recently received a large sum of money, gone through a major life change (such as marriage, divorce, the birth of a child, the death of a spouse), or recently retired. You may be dissatisfied with your progress toward investment goals or no longer have the time to manage your own investments. Do-it-yourself investors may not be as knowledgeable as professional financial advisers within the investment marketplace. Additionally, the demands and complexities of effective investment management can prove challenging even for the most diligent individual investor.. Can you suggest some criteria to our listeners for choosing a wealth advisor?

Select a financial planner  whose competence, integrity, outlook, and philosophies are well determined.
Is the Financial Advisor Properly Licensed?
How Much and What Kind of Service Do I Need?
What Is the Advisor's Designation?
Is the Financial Planner Competent?

Sam- Thank You Kostas

4:40pm -5pm

Kathy Bazoian Phelps

Kathy Bazoian Phelps

Kathy Bazoian Phelps , she is a Partner at Danning, Gill, Diamond & Kollitz, LLP
Los Angeles, California

Kathy Phelps has over 21 years of experience as a lawyer in bankruptcy law and fraud litigation, has spoken and written widely on a broad range of fraud and bankruptcy related matters, and has co-written The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes.

DGDK Building

She is a thought after keynote speaker on all issues relating to fraud, due diligence, compliance, and Ponzi schemes throughout the United States. Kathy speaks to hundreds of professionals, lawyers, accountants, bankers, financial advisors, investors, and others about mandatory due diligence and red flag warnings that simply cannot be ignored. Kathy has now also written a practical guide for investors and others containing specific tools and due diligence questions to ask, and insights into the marketing and sales tactics employed by the Ponzi perpetrator or other fraudster.

The book, tentatively titled, Ponzi Proof Your Investments: An Investor’s Guide to Avoid Ponzi Schemes, is expected to be released soon. Kathy’s memberships include International Chamber of Commerce FraudNet; Advisory Board, Association of Certified Financial Crime Specialists; Advisory Board, American Bankruptcy Institute, American Bankruptcy Institute; National Association of Bankruptcy Trustees

Danning, Gill, Diamond & Kollitz, LLP

For more information on The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes, go to and for more information about Kathy, go to Kathy can be reached at

Attached are: my photo; a photo of The Ponzi BookA Legal Resource for Unraveling Ponzi Schemes; and my Bio. The Bio is a bit long, so feel free to cut if off after the first few paragraphs. I don’t have a picture yet of my next book, which is tentatively titled "Ponzi Proof Your Investments: An Investor’s Guide to Avoiding Ponzi Schemes and Other Fraudulent Scams".

The Madoff update ?
The Madoff Trustee, Irving Picard has previously distributed $335.5 million, or about 4.6% of the customer claim amounts.Picard has recovered about $9.144 billion, but has been unable to distribute all of those funds because of pending appeals and the uncertainty over the final claim amounts which will be allowed.

The issue over the total investor losses in this case relates to whether the claimants who have been sued for avoidable transfers will return the funds and whether their claims will ultimately be allowed. This could lead to a $10 billion swing in the numbers.  There are currently $7.5 billion of allowed claims, but that number might ultimately be about $10 billion higher.  

Picard just obtained court permission to distribute an additional $2.4 billion, which should occur in the next month or so.  He will hold a reserve of 3% of the funds he has for the purposes of paying Time Based Damages, if those damages are ultimately allowed by the court at a later date.  Picard believes that no such interest should be paid on the claims, while over 1,240 claimants contend that Picard should pay 9% interest.  The court settled on a 3% reserve at this time, which will enable Picard to distribute the $2.4 billion.  

Irving Picard, the trustee charged with unwinding the Bernie Madoff estate

2. What about the professional fees paid in the Madoff case? Are they fair, or too high?
The numbers are huge in the Madoff case - both the fees of the professionals, along with the amount of the recoveries.

The total fees to date of Picard and all of the professionals approximates half a billion dollars, with a “public interest discounted rate” of 10% off standard rates.
There is much criticism that fees are too high.  The numbers are admittedly big, but we must not lose sight that Irving Picard is the neutral fiduciary charged with collecting funds for investors.  He is not Bernie Madoff. Picard did not run the Ponzi scheme.

Let’s put the fees in Madoff case in relation to the rest of the world.
(1)  A study prepared by the International Monetary Fund for 2011 shows that:  -$9.1 billion is greater than 30% of the world’s countries’ gross     domestic product.  If we look at the total potential size of this estate of $65 billion,     then Picard is working in the territory of the top third.
(2)   So why all the criticism over Picard’s $850 hourly rate? CEOs of much smaller corporations are paid well over $5.1 million for just one year’s worth of work, and Picard has been working at this for well over 3 years now.
(3)  If we look at fees as a percentage of recovery, the fees are well under 10%.  Contingency counsel usually charges 30 to 40% of recoveries.  If that were the case here, the fees would be in excess of $3 billion.

The professional fees paid in the Madoff case are not paid from funds recovered by Picard. All fees and expenses approved by the court will be paid by the Securities Investor Protection Corporation (SIPC), a membership organization funded by the securities industry.
The scope of the services that Picard and his professionals have provided is overwhelming. Court describes it as:  “It is clear under the circumstances that a Herculean effort to follow those trails has been involved both with counsel herein the United States and counsel overseas.”

3. The Madoff Ponzi scheme went on for decades. What were some of the warning signs that the victims of Bernie Madoff could have seen before investing?

Madoff promised and delivered returns that defied the market.  They were too consistently good to be true.  Harry Markopolis noted that Madoff only lost money in 3 of the 87 months between 1993 and 2000. The  S&P 500 had been down 28 of those months.  So the question to ask is why hadn’t other firms duplicated his strategy?

Madoff delivered paper statements only, and did not provide real time electronic access to customer accounts. Madoff used a small 3 man auditor shop in a strip mall, which was disproportionately too small to be handling the auditing of a multi-billion business.
Madoff was very secretive and his investment program was an exclusive club that investors begged their friends to get them into.  Madoff made feeder funds and investors promise to not disclose they were involved with him.  Madoff explained that it was “too complicated” when people asked for an explanation.

4. What can an investor do prior to making an investment that would be considered "best-practice" from a due diligence perspective? What Lessons to be learned from Madoff?

5. Was it the SEC’s fault that the Madoff scheme went unnoticed for so long?

Again, we have to keep the perspective that the SEC didn’t perpetrate the fraud, Madoff did.  Having said that, though, the SEC should have detected the fraud.

 The SEC commissioned a report from its internal watchdog, the SEC Office of Inspector General.  The report, issued in August 2009, is entitled Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme - Public Version
The Report found: There were not any inappropriate relationships that influenced SEC.
There were 6 substantive complaints and 2 reports between 1992 and 2008 that warranted examination and/or investigation of Madoff and his company for operating a Ponzi scheme.
There were significant red flags raised that should have led to questions about whether Madoff was actually engaged in trading. Some of the red flags that were identified in the complaints and reports were:

-Unregistered securities
-100%” safe investments
-High and extremely consistent rates of return – no loss to “special” customers.
-Unrealistic volume of options Madoff represented he was trading.  One SEC examinier said ther was some suspicion as to whether Madoff is trading at all.”
-No one could duplicate his strategy
-No correlation to the overall equity markets in over 10 years
-Very secretive about the operations and refusal to disclose anything.
-One complaint in 2005 was entitled “The World’s Largest Hedge Fund is a Fraud
 -A “Concerned Citizen” said  “It may be of interest to you to that Mr.Bernard Madoff keeps two (2) sets of records. The most interesting of  which is on his computer which is always on his person.”

The SEC Report concluded that the complaints contained specific information so the SEC needed to thoroughly examining and investigating Madoff for operating a Ponzi scheme.   The journal articles should have reinforced the concerns about how Madoff could have been achieving his returns.  The SEC conducted two investigations and three examinations, but never actually conducted a Ponzi scheme examination or investigation of Madoff. The Report concluded that the SEC had sufficient information to inquire further and investigate Madoff for a Ponzi scheme back in 1992.

Judge Steven Rhodes (center) presents a copy of a book he co-authored with Kathy Bazoian Phelps called “The Ponzi Book: A Legal Resource For Unraveling Ponzi Schemes” to Chief Judge Gerald Rosen (right) of the United States District Court for the Eastern District of Michigan as Judge Avern Cohn looks on. Designed to be a comprehensive guide to the complex issues that arise in Ponzi schemes, The Ponzi Book includes a thorough legal analysis to support competing claims and defenses of affected parties, and contains a sophisticated discussion of the administrative practicalities that arise in Ponzi cases.

The Money and Business Show Talks to Kathy Phelps

Listen in tomorrow at 4 p.m. to 5 p.m. EDT to The Money and Business Show on Radio Shalom to hear Kathy Phelps, co-author of The Ponzi Book:  A Legal Resource for Unraveling Ponzi Schemes, talk about the latest issues in the Madoff case and what progress is being made in Ponzi scheme detection.  You can listen to the show at


Past Shows with T.E.WEALTH

Alzheimer's, Can It Wreak Havoc on Family Finances 



Alzheimer's, Can It Wreak Havoc on Family Finances ;
A. Claudio Cuello, M.D., D.Sc., FRSC
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A. Claudio Cuello is currently the holder of the Charles E. Frosst/Merck endowed Chair in Pharmacology of the Department of Pharmacology and Therapeutics at McGill University,Montreal, Canada.

Alzheimer's, Can It Wreak Havoc on Family Finances ; Debbie Gilbert
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Alzheimer's, Can It Wreak Havoc on Family Finances ;  Marcy Ages ;
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Surviving Financially After Divorce

Surviving Financially After Divorce.
Kathryn Jankowski’s ,
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Surviving Financially After Divorce.,
Johane Ohanlon


De-Mystyfying Financial Education

De-Mystyfying Financial Education ;
Ismo Heikkila, 
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De-Mystyfying Financial Education ; 
Gilles Couterier


Canada's Aging Population ; Financial Tsunami Ahead

Canada's Aging Population ; Financial Tsunami Ahead ; David Gillan, Debbie Gilbert, Dr. Kellie Leitch MP for Simcoe-Grey
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Canada's Aging Population ; Financial Tsunami Ahead ; David Gillan, Debbie Gilbert, Dr. Kellie Leitch MP for Simcoe-Grey

Presentations, Interviews and Articles for 2012 Include:


Financial Wealth Strategies

Financial Wealth Strategies with Gilles Couturier & Will the New Super Visa system for immigrants Decrease the Backlog? with the Honourable Rick Dykstra. Telecharger / Download