Late on Friday afternoon January 16th 2009, John Carney at Clusterstock posted a most interesting entry entitled Madoff's Favorite Accountants "Inherited" Clients. This post concerns the rather obscure New Jersey accounting firm of Sosnik, Bell & Co. that somehow came to be retained by many of the victims of Bernie Madoff's fraud.
Back in December 2008, there was quite a bit of conjecture about how such a small, virtually unknown accounting firm could come to prepare their various investment accounting statements for so many Madoff victims. Now, in the above post, John Carney speculates that Sosnik Bell took over some of the accounting duties previously performed by the accounting firm of Avellino & Bienes, the accounting firm whose principals were busted by the SEC in 1993 for running an unregistered securities business that raised money about $440 million in principal notes that were subsequently invested with Madoff.
By happenchance a day earlier, Toomre Capital Markets LLC ("TCM") wrote the post entitled Frank Avellino, Michael Bienes and Bernie Madoff. This included details about the relationship between these former accountants, Frank Avellino and Michael Bienes, their former firm Avellino & Bienes ("A&B"), Bernie Madoff, Ruth Alpern Madoff, and Saul Alpern (Ruth's father and head of the firm when A&B was then known as Alpern & Heller).
TCM too had read the story back on Christmas Eve 2008 on NorthJersey.com entitled Life Savings Erased. That story explained
The Fort Lee accountants whose firm handled statements for hundreds of Madoff's clients also lost "several million" dollars in Madoff's alleged scam.
[Scott] Sosnik and [Larry] Bell, principals in the eight-person firm based near the George Washington Bridge, also lost their pensions with Madoff's firm, said Robert Anello, an attorney speaking for Sosnik and Bell. "These guys are screwed, royally," Anello said. "Mr. Madoff leaves many in his wake."
The accounting firm Sosnik Bell & Co. only received monthly statements from Bernard L. Madoff Investment Securities LLC, tallied reported profits and losses, and prepared tax summaries and schedules for clients' other accountants to use, Anello said.
"That's all this was — not to do any analysis of the trading or anything that even remotely got involved with the stock selection or the strategy," he said.
At the time scant attention was paid to a later paragraph in the story, "Anello said Sosnik and Bell took on many of its clients who invested with Madoff when they took over an accounting practice in 1993, and they gained more Madoff clients through word-of-mouth recommendations, Anello said." [TCM emphasis added]
Toomre Capital Markets LLC agrees with John Carney that this comment points to the strong likelihood that Sosnik Bell & Co. took over the investment accounting function of the old A&B firm. That latter firm reached a settlement with the SEC in late 1992 that demanded that A&B close up shop and that the settlement was implemented during the first portion of 2003. The timing of the Sosnik and Bell's taking on Madoff clients is far more than coincidental.