Madoff Should Spend Rest of His Life in Prison, Prosecutors Say

Date: Monday, June 29, 2009
Author: David Glovin and Thom Weidlich. Bloomberg.com

Bernard Madoff, the investment manager who pleaded guilty to masterminding the largest Ponzi scheme in U.S. history, should be sentenced to a term of 150 years in prison, federal prosecutors recommended.

Madoff, 71, has asked for prison term of as little as 12 years and no more than 20 when he is sentenced in Manhattan federal court on June 29.

“The scope, duration and nature of Madoff’s crimes render him exceptionally deserving of the maximum punishment allowed by law, and the guidelines advise a sentence of 150 years,” assistant U.S. attorneys Marc Litt and Lisa Baroni said in a letter to the sentencing judge. If the judge opts for a lesser term, the sentence should be one that “would assure that Madoff will remain in prison for life,” they said.

U.S. District Judge Denny Chin will impose the sentence more the six months after Madoff confessed to a decades-long fraud scheme. Federal sentencing guidelines recommend that Chin impose a 150-year prison term, the maximum under the law, prosecutors said.

Madoff pleaded guilty in March to federal charges that he used funds from new investors to pay off other clients. His customers were told they had as much as $65 billion in the weeks before the fraud came to light.

Prosecutors have identified 1,341 Bernard L. Madoff Investment Securities LLC account holders who collectively suffered losses of more than $13 billion. They said in their letter yesterday that the fraud dates to the early 1980s. Madoff said when he pleaded guilty that the fraud began in the 1990s.

‘Sheer Scale’

“The sheer scale of the Madoff fraud calls for severe punishment,” prosecutors said in their 22-page letter.

Ira Sorkin, Madoff’s lawyer, asked this week for a lenient sentence, citing his client’s 13-year life expectancy and urging the judge not to be swayed by public fury. Sorkin declined to comment yesterday on the government’s request.

Madoff confessed in December after a flurry of redemption requests by his customers.

He pleaded guilty to securities fraud, mail fraud, wire fraud, investment adviser fraud, three counts of money laundering, false statements, perjury, false filings with the SEC and theft from an employee benefit plan. Madoff, who didn’t have a plea deal with prosecutors and has been in prison since March 12, will be sentenced separately on each count.

In yesterday’s letter, prosecutors outlined six reasons why Madoff deserves the maximum possible sentence. They cited the investors’ loss, the thousands of victims, and his “leadership role” in the scheme.

WorldCom, Adelphia

“The court should consider that Madoff’s conduct occurred before and continued for years after the well-publicized stiff sentences were meted out in WorldCom, Adelphia, Refco and other recent fraud cases involving breaches of duty by financial and corporate professionals and substantial economic harm,” the prosecutors wrote.

Bernard Ebbers, 67, the former WorldCom Inc. chief executive officer, is serving a 25-year prison sentence after he was convicted at trial of an $11 billion fraud. Samuel Israel, co-founder of hedge fund Bayou Group LLC, was sentenced to 20 years in prison for a $400 million fraud.

The government criticized Madoff’s claim that he deserves leniency because he surrendered.

“Madoff waited to tell his family of his purported plans to turn himself in only when it became clear, and inevitable, that his scheme would collapse, he was almost out of money and he faced redemption requests that he knew he could not meet,” prosecutors wrote.

‘Could Not Die’

According to prosecutors, Irving Picard, the trustee for Madoff Securities, said Madoff hasn’t provided “meaningful cooperation or assistance.” Prosecutors added that the inspector general of the U.S. Securities and Exchange Commission said information Madoff provided won’t shape future regulation, as Sorkin claimed.

Also yesterday, Madoff and his wife, Ruth, agreed to forfeit their apartment in Manhattan and houses in Palm Beach, Florida, and Montauk on the east end of New York’s Long Island. They also agreed to surrender cars and boats.

An order by Chins requires Madoff to forfeit $170 billion, eliminating his interest in all real estate, investments and other property, according to a statement yesterday by Acting U.S. Attorney Lev Dassin in Manhattan.

Wife’s Settlement

Ruth Madoff will retain $2.5 million while giving up her claims to more than $80 million in assets under an agreement approved by Chin, prosecutors said. She has said she had $45 million in bonds and $17 million in cash that were “unrelated” to her husband’s scheme.

Prosecutors said that fleeing wasn’t an option for Madoff once he was arrested because of “his apparent interest in attempting to shield all others from culpability.”

Prosecutors also recited the words of victims.

“We now have nothing,” Kathleen Bignell wrote, according to prosecutors. “Only living off Social Security. I told my father (89) he could not die because I didn’t have enough money to bury him.”

The case is U.S. v. Madoff, 09-cr-00213, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David Glovin in U.S. District Court in New York at dglovin@bloomberg.net; Thom Weidlich in New York at tweidlich@bloomberg.net.