Bernard Madoff was sentenced to 150 years in federal prison for masterminding the largest Ponzi scheme in history, a penalty six times longer than those meted out to the chief executives of WorldCom Inc. and Enron Corp.Madoff appeared today before U.S. District Judge Denny Chin in New York for the first time since his March 12 guilty plea in an epic swindle that may have reached $65 billion in both real and phantom investments.
“I don’t ask for any forgiveness,” said Madoff, 71, wearing a single-breasted charcoal gray suit and navy blue tie as he stood before the judge. The money manager said he deceived his brothers, his two sons and his wife, none of whom was in the courtroom. The audience burst into applause as Chin imposed the maximum sentence. Madoff was then led off by U.S. marshals.
The judge cited Madoff’s failure to identify accomplices, which has made it harder for prosecutors to build cases against others. The receiver of his firm, Bernard L. Madoff Investment Securities LLC, has also said Madoff hasn’t substantially helped him, complicating efforts to locate assets.
“I made a terrible mistake,” Madoff said.
Madoff asked to be jailed at a federal prison in Otisville, New York, about 80 miles northwest of Manhattan. The Federal Bureau of Prisons will decide where he goes. Chin said Madoff should serve his term in the northeastern U.S.
Sat Silently
Madoff sat silently as nine former investors assailed him for a fraud that cost many their life savings.
The disgraced money manager has shown “no remorse,” said victim Carla Hirschhorn, of Manalapan, New Jersey. She told Chin her life is a “living hell,” her mother is dependent on Social Security and her daughter works two jobs to pay tuition.
“Don’t fail us,” Hirschhorn told the judge.
Sharon Lissauer, a model who lives in Manhattan, said Madoff “shattered my dreams” and lost her mother’s inheritance. Miriam Siegman, of Stamford, Connecticut, said Madoff “discarded me like road kill,” and that she now relies on food stamps, collecting recyclable cans and digging through Dumpsters.
Madoff apologized to his victims in his statement to the court, saying he “left a legacy of shame,” and that he lives “in a tormented state.” The financier said he couldn’t admit his error in judgment while the scheme grew, and thought he could “work his way out.”
Hundreds of Onlookers
Hundreds of onlookers and dozens of television cameras were outside the lower Manhattan courthouse where Madoff was sentenced. The courtroom, the largest in the building, was standing-room only.
Madoff’s wife, Ruth, said today in a statement that she was “devastated” by the fraud, as well as “embarrassed and ashamed.” It was her first statement since her husband’s arrest.
She will be left with $2.5 million under a settlement with federal prosecutors.
Defense lawyer Ira Sorkin told the court that his client is a “deeply flawed human being.” He declined to say after the proceeding whether Madoff would appeal the sentence.
Sorkin also challenged the government’s claim that his client’s fraud has so far led to $13.3 billion in disclosed losses. In a letter to Chin this weekend, he said the amount should be offset by $1.3 billion held by the trustee for Madoff Securities; by $1.3 billion already recovered by the trustee; and by letters sent by the trustee, Irving Picard, seeking to “clawback” $735 million from Madoff investors.
$10 Billion
Sorkin also cited the $10 billion demanded in various other lawsuits as an offset, according to a letter filed with Chin yesterday.
“The media hysteria that the Ponzi scheme was approximately $65 billion and that Mr. Madoff lined his pockets with billions is simply not correct,” Sorkin wrote.
Madoff sat silently as Chin said that no other fraud case was comparable to his. No letters were submitted to vouch for Madoff’s character, Chin said, adding that the “symbolism” of the 150-year sentence is “important.”
“Mr. Madoff’s crimes were extraordinarily evil,” Chin said.
Chin didn’t impose a fine because Madoff will be ordered to forfeit billions of dollars.
Madoff’s sentencing caps the downfall of an acclaimed investment adviser who told the world his fortune came through an eponymous firm that specialized in making markets, trading securities and advising wealthy clients.
Shattered Facade
Over three decades, he built a reputation as a brilliant stock picker who delivered steady returns through both bull and bear markets. He attracted an international client roster that included celebrities including filmmaker Steven Spielberg, fund managers J. Ezra Merkin, charities, universities, friends and European royalty.
His facade shattered on Dec. 11, when he confessed to authorities that Madoff Securities was “one big lie.” Under immense pressure from a rush of investor redemptions, he admitted he used money from new investors to pay old ones. Regulators later said his investment advisory business hadn’t made a trade in at least 13 years.
Some of his thousands of investors lost their life savings. Thierry Magon de La Villehuchet, chief executive officer of Access International Advisors, which managed $3 billion, was driven to suicide because of his firm’s Madoff-related losses, his brother, Bertrand Magon de la Villehuchet, said in January.
Madoff received the maximum sentence on the 11 fraud charges to which he pleaded guilty. He received 20 years each on counts of securities fraud, mail fraud, wire fraud, two counts of international money laundering, and making a false statement to the SEC.
Ebbers, Rigas
He got 10 years for money laundering and five years each for investment-adviser fraud, making a false statement, perjury, and theft from an employee benefit plan. The sentences, which are the maximum on each count, are to be served consecutively, totaling 150 years.
Since being locked up in March, Madoff has been housed in the maximum security Metropolitan Correctional Center next to the Manhattan courthouse where he was sentenced.
Several aging white-collar convicts are in low-security prisons. Former WorldCom Chief Executive Officer Bernard Ebbers, 67, is housed at the Federal Correctional Institution in Oakdale, Louisiana. John Rigas, 84, the ex-CEO of Adelphia Communications Corp., is imprisoned at the Federal Correctional Institution in Butner, North Carolina. Former Enron CEO Jeffrey Skilling is serving a 24-year sentence at a prison in Englewood, Colorado.
‘Compelled’ to Steal
When pleading guilty in March, Madoff said that in the early 1990s, with the U.S. in a recession, he felt “compelled” to provide the returns his investors expected and began stealing investor money. He said the proprietary trading and market- making units of his business, both run by his sons, were “legitimate,” and his U.K.-based affiliate, Madoff Securities International Ltd., was an “honestly run” business.
“I cannot offer you an excuse for my behavior,” Madoff said today. “Although I may not have intended any harm, I did a great deal of harm. I believed when I started this problem, this crime, that it would be something I would be able to work my way out of, but that became impossible. As hard as I tried, the deeper I dug myself into a hole.”
Madoff agreed last week to forfeit all his property to the U.S. government.
The case doesn’t end with the sentencing. Investigators have seized control of Madoff offices at the lipstick-shaped building at 885 Third Avenue in midtown Manhattan, where Madoff Securities operated out of three floors.
Probe Continues
Prosecutors are probing whether his subordinates helped him swindle investors. A central issue is whether employees knew of the fraud. Madoff’s accountant, David Friehling, was charged with lying to Madoff investors about whether he audited the firm.
No one else at the firm has been charged, and Madoff has not publicly implicated others. His sons, Andrew and Mark Madoff, ran the proprietary trading operations at Madoff’s firm. They turned their father in to authorities on Dec. 10 after he confessed to them, their attorney, Martin Flumenbaum, has said.
There has been a burst of civil litigation related to Madoff. Stephen Harbeck, president of the Securities Investor Protection Corp., which works with Picard and is liquidating Madoff Securities, said in May that it may take longer than 10 years to finish locating the company’s assets and paying back victims.
Investor Lawsuits
Investors have filed lawsuits against funds that invested with Madoff and were wiped out, including Fairfield Greenwich Group and Gabriel Capital LP. SIPC has also filed “clawback” suits against the feeder funds. Fairfield Greenwich is being sued for the $3.5 billion it withdrew before the fraud unraveled.
“The sentence imposed today recognizes the significance of Bernard Madoff’s crimes,” Acting Manhattan U.S. Attorney Lev Dassin, whose office led the prosecution, said in a statement. “While today’s sentence is an important milestone, the investigation is continuing.”
The case is U.S. v. Madoff, 09-cr-00213, U.S. District Court for the Southern District of New York (Manhattan).
Courtesy: Bloomberg
