Thursday, May 02, 2013

Six degrees of separation from Bernard Madoff

Just to be clear, I'm in no way shape or form related to or anything that Bernard Madoff perpetrated. He Made-off with peoples' money. I do nothing of the sort. at all. ever.

I was researching First Solar Inc (FSLR) for a class project. I noticed something very weird: FSLR paid USD 54 million in TAXES on NET LOSS of USD 96MM. This simply boggled my mind: typically, companies making losses don't pay tax (because they didn't have any INCOME). Actually most companies can extend their losses to reduce their net income (and consequently taxes paid) to future years! in some cases, they can also extend them backwards to claw back taxes already paid. So this makes no sense at all. at least not readily.

So to determine the strength of their business, which includes making photo-voltaic solar panels and using those panels to build and sell complete solar power plants, i wanted to see how FSLR maintains its competitive edge. One of the ways of doing so is to make a better PV cell, cheaper than others. This typically translates to technical innovation, which is normally enshrined in enforceable patents. So off I headed to search for "FSLR patents".

The first few results to comeback surprised me: they included patents for determining the value of tradeable securities. When I saw the inventors, I was in for a bigger surprise: Peter Madoff. The patent assignee is Primex Holdings, LLC. 

For those just tuning in, Peter Madoff is Bernard Madoff's brother. The same Bernard Madoff who purportedly ran the world's largest Ponzi scheme (initial estimates were around USD 65 BILLION). Bernard Madoff single handedly made the words "Ponzi scheme" a household name during the 2009 economic meltdown. Well, maybe not single handed, but with help from his brother Peter, and two sons, Mark and Andrew. Mark eventually committed suicide. Bernard is serving 120 years in prison for defrauding the likes of Steven Spielberg, Bon Jovi and Kyra Sedjwick, and many other Jewish charities.

Here's a Bloomberg news report of Peter Madoff, Primex Holdings LLC and others related to Bernie Madoff being sued by several investors. The article also includes a brief history of the scam, and the main participants.

Here are a couple of the patent search results:

Opening price process for trading system
Grant - Filed Aug 29, 2006 - Issued Sep 20, 2011 - Peter B. Madoff - Primex Holdings LLC
Branch, “91 CCH Dec., FSLR 1I79,804, Exchange Services, Inc. Inquiry Letter”, No-Act, NAFT WSB File ... Hood, “91-92 CCH Dec., FSLR 1)76,093, Instinet Corp.

Auction market with price improvement mechanism 
Grant - Filed Mar 19, 1999 - Issued Nov 10, 2009 - Peter B. Madoff - Primex Holdings LLC