Tuesday Newspaper Review - Irish Business News and International StoriesJames (Jim) Cohen in Finfacts, June 30, 2009
The New York Times reports that a criminal saga that began in December with a string of superlatives — the largest, longest and most widespread Ponzi scheme in history — ended the same way on Monday as Bernard L. Madoff was sentenced to 150 years in prison, the maximum for his crimes.
Mr. Madoff, looking thinner and more haggard than when he pleaded guilty in March, stood impassively as Federal District Judge Denny Chin condemned his crimes as “extraordinarily evil” and imposed a sentence that was three times as long as the federal probation office suggested and more than 10 times as long as defense lawyers had requested.
Though many questions still surround the case, the judge’s pronouncement offered a brief sense of resolution, followed by a short burst of applause and one stifled cheer from the victims who filled the soaring Lower Manhattan courtroom.
Only a few moments before, Mr. Madoff had apologized for the harm he inflicted on the clients who had trusted him, his employees and his family. He blamed his pride, which would not allow him to admit his failures as a money manager.
“I am responsible for a great deal of suffering and pain. I understand that,” he said, leaning slightly forward over the polished table, his charcoal suit sagging on his diminished frame.
“I live in a tormented state now, knowing of all the pain and suffering that I have created.”
At the end of his personal statement, Mr. Madoff abruptly turned to face the courtroom crowd. He was no longer the carefully tailored and coiffed financier. His hair was ragged. His eyes were sunken into deep gray shadows. His voice was a little raspy, and he stopped on occasion to sip water.
“I am sorry,” he said, and abruptly added: “I know that doesn’t help you.”
Nine victims, some choked by sobs or swiping at tears, told the court of the damage he had caused, describing him as a psychopath and a monster who had destroyed their lives.
“It feels like a nightmare that we can’t awake from,” said Carla Hirschhorn, a physical therapist who said her daughter was juggling two jobs in her junior year to help pay for college expenses that their lost savings were supposed to cover.
Michael Schwartz, who said Mr. Madoff had stolen money set aside to sustain his disabled brother, expressed the hope that “his jail cell will become his coffin.”
In meting out the maximum sentence, Judge Chin pointed out that no friends, family or other supporters had submitted any letters on Mr. Madoff’s behalf that attested to the strength of his character or good deeds he had done.
Mr. Madoff returned to his cell at the Metropolitan Correctional Center in Lower Manhattan while federal prison officials determine where he will serve his sentence. The defense has 10 days to decide whether to appeal the sentence.
Although Judge Chin suggested that Mr. Madoff be assigned to a prison in the Northeast, at the request of the defense, the judge said the Bureau of Prisons would decide what kind of facility will become his permanent home.
No members of Mr. Madoff’s immediate family were in court.
In his statement, Mr. Madoff acknowledged the “legacy of shame” he has created for his family.
His wife, Ruth, later released a statement — her first since her husband’s arrest — expressing her grief for the victims and her sense of shock and betrayal when she learned of the crime.
Mrs. Madoff has not been charged in the crime and insists that she did not know of it until her husband told her just before his arrest. But she acknowledged that her silence, imposed by lawyers protecting her own interests, “has been interpreted as indifference or lack of sympathy for the victims.” That, she added, “is exactly the opposite of the truth.”
She said she felt “devastated” by the harm her husband had done. “I am embarrassed and ashamed. Like everyone else, I feel betrayed and confused,” said Mrs. Madoff, who has forfeited all but $2.5 million in assets. “The man who committed this horrible fraud is not the man whom I have known for all these years.”
Many victims also accused regulators and lawmakers of betraying them for decades by failing to stop Mr. Madoff, and failing them again by not helping them deal with their financial hardships since they learned their savings had evaporated.
Judge Chin cautioned one speaker that those entities “are not before me,” but, in a larger sense, the Madoff case seemed to put an entire era on trial — a heady time of competitive deregulation and globalized finance that climaxed last fall in a frenzy of fear, panic and loss.
The blame has been spread wide — to arcane credit-default swaps, to lax enforcement of weak regulations, to poorly understood risks and badly managed financial institutions.
But with his arrest on Dec. 11, Mr. Madoff, a senior statesman in the private corridors of Wall Street who was respected for his vision and trusted by tens of thousands of customers, put a human face on those abstractions.
Mr. Madoff’s luxurious lifestyle, including a penthouse, yachts and French villa, all quickly became fuel for public outrage.
Every move in the case was closely watched, including his confession to his sons, Andrew and Mark, who were in his business; his guilty plea to 11 counts of various financial crimes in March; and his wife’s legal efforts to save some family assets from a sweeping government forfeiture.
The fury increased in January with Congressional testimony from a whistle-blower who had repeatedly alerted the Securities and Exchange Commission about his suspicion that Mr. Madoff was operating a gigantic fraud. An internal investigation is now under way at the S.E.C. to determine why the agency did not detect Mr. Madoff’s scheme and shut it down years ago.
The S.E.C. and the Securities Investor Protection Corporation, a government-chartered program to compensate customers of failed brokerage firms, were criticized repeatedly in the courtroom statements by the victims on Monday, and at a rally of victims held near the courthouse afterward.
The litigation already filed in and around the Madoff case will help shape how regulators, the courts and SIPC respond to large-scale Ponzi scheme losses in the future. How the losses of victims will be addressed is just one of many open questions.
The criminal investigation is continuing, as prosecutors try to determine who else bears responsibility for the crime. So far, only Mr. Madoff’s accountant has been arrested on criminal charges, but securities regulators have filed civil suits against several of his long-term investors, accusing them of knowingly steering other investors into the fraud scheme for their own gain.
And the bankruptcy trustee has sued more than a half-dozen hedge funds and large investors, seeking to recover more than $10 billion withdrawn from the fraud in its final months and years. It is uncertain how much money he will be able to recover to share among the victims and how long that effort will take.
And the sentence itself is likely to leave a mark as well, according to legal experts on white-collar crime.
In remarks before announcing his decision, Judge Chin acknowledged that any sentence beyond a dozen years or so would be largely symbolic for Mr. Madoff, who is 71 and has a life expectancy of about 13 years.
But “symbolism is important for at least three reasons,” he said, citing the need for retribution, deterrence and a measure of justice for the victims.
Judge Chin said he did not agree with the suggestion by Ira Lee Sorkin, Mr. Madoff’s lead lawyer, that victims were seeking “mob vengeance” through a maximum sentence.
“They are placing their trust in the system of justice,” he said, adding that he hoped the sentence he imposed would “in some small way” help the victims to heal.
Several former prosecutors called Judge Chin’s decision somewhat surprising but appropriate.
“The judge sent a powerful deterrent message and an ominous signal to possible co-conspirators,” said George Jackson III, a lawyer with Bryan Cave and a former federal prosecutor in Chicago.
Richard L. Scheff, a lawyer with Montgomery, McCracken, Walker & Rhoads and an assistant secretary for law enforcement for the Treasury Department, said the magnitude of the sentence “demonstrates real concern for the harm caused by Madoff to so many victims.”
He added, “Am I surprised? Yes, to a degree — but I strongly suspected that the sentence would be tantamount to a life sentence.”
To Robert S. Wolf, with the law firm Gersten Savage, the sentence “sent a clear and resounding message that Judge Chin felt that Madoff had not come clean and told all about the enormity of his criminal activity and others who participated.”
But James A. Cohen, an associate professor of law at Fordham, said he was troubled by the sentence. “I don’t think symbolism has a very important part in sentencing,” he said. “I certainly agree that a life sentence was appropriate, but this struck me as pandering to the crowd.”
The victims who spoke in the courtroom were unanimous in their demand for a maximum sentence, saying that Mr. Madoff had forfeited his right to live in society. They pointed to the extent of the crime: a fraud that ensnared millionaires, private foundations, a Nobel Prize laureate and hundreds of small investors who lost their life savings to an investment guru they had trusted completely.
Burt Ross, who lost $5 million in the fraud, cited Dante’s “The Divine Comedy,” in which the poet defined fraud as “the worst of sin” and expressed the hope that, when Mr. Madoff dies — “virtually unmourned” — he would find himself in the lowest circle of hell.
Prosecutors said Mr. Madoff deserved the maximum term for carrying out one of the biggest investment frauds in Wall Street history. Mr. Madoff’s lawyers said he should receive only 12 years.
After Mr. Madoff’s victims finished speaking, his lawyer, Mr. Sorkin, said the government’s request for a 150-year sentence bordered on absurd. He called Mr. Madoff a “deeply flawed individual,” but a human being nonetheless. “Vengeance is not the goal of punishment,” Mr. Sorkin said.
Even with a lesser term, Mr. Sorkin added, Mr. Madoff expects to “live out his years in prison.”