By Julie Earle-Levine
By the time Bernard Madoff arrived at court last Thursday, two hours before his 10am hearing, an angry mob had gathered outside the Manhattan courthouse. The $64.8 billion fraudster wore a charcoal-grey suit but no wedding ring or one of his usual vintage watches. A first sign, perhaps, that he knew this was the end.
Three months after this fallen pillar of Wall Street’s scams were exposed, Madoff is now in jail awaiting sentencing. His crimes made headlines around the world and battered the fortunes of the rich and famous, including Steven Spielberg and Nobel Peace Prize winner and holocaust survivor Elie Wiesel, as well as wiping out smaller savers and charities.
After last week’s dramatic court appearance, though, many questions remain unanswered. Could Madoff, as he claims, have orchestrated this giant scam alone? How much did his family know? And where is the money?
Prosecutors are no clearer about what role, if any, Madoff’s wife, Ruth, brother Peter, sons Mark and Andrew and his employees played in perhaps the largest Ponzi scheme in history. His family members have denied any involvement. In court Madoff gave no clues. Because he pleaded guilty without making a deal, he is under no obligation to co-operate. There is no guarantee he ever will.
Jim Cox, law professor at Duke University, said Madoff had refused to plead guilty to charges of conspiracy, which would have implicated others. “He has clammed up. It looks like he’s going to take the real story to his grave,” said Cox.
One lawyer there to observe the historic moment, Robert Mintz, white-collar crime expert at McCarter & English, said: “There was a palpable sense of frustration among defrauded investors.”
Inside the packed court, Madoff, flanked by his attorney, Ira Sorkin, and four FBI agents stood stony-faced as the judge reviewed all 11 counts, including security fraud, investment fraud, mail fraud, wire fraud, international money laundering, perjury, making false statements, and theft from employer benefits.
The judge asked Madoff if he understood the possible sentence he faced — 150 years’ imprisonment. “I do,” said Madoff. “Do you understand you may lose the right to vote, the right to hold public office,” asked the judge to sniggers from the courtroom.
Once the formalities were over with, Madoff was given his chance to explain what had happened. It was the moment his victims and investigators had been waiting for. He held out his notes and read a 12-minute address.
“I am actually grateful for this first opportunity to publicly speak about my crimes, for which I am deeply sorry and ashamed. As I engaged in fraud, I knew what I was doing was wrong, indeed criminal,” he said. “When I began the Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme.
“However, this proved difficult, and ultimately impossible, and as the years went by, I realised that my arrest and this day would inevitably come.”
Madoff said he was in court to “accept responsibility” and explain what happened. But he gave little new information and may never publicly answer for his crime again.
The scam began in the early 1990s when Madoff was finding it hard to make the returns his clients wanted. He felt “compelled to satisfy my clients’ expectations, at any cost”.
Clients were told Madoff had a secret “split strike conversion strategy”. They were told he would invest their money — instead those funds were deposited in a bank account at Chase Manhattan Bank.
When clients asked for their cash, Madoff took the money out of Chase, using cash that belonged to them, or to other clients, he confessed.
Madoff was at pains to claim that his investment advisory business, “the vehicle of my wrongdoing”, was the only part of Madoff Securities engaged in criminal activity. His brother and two sons ran the other branches of his business, proprietary trading and market making, and these were “legitimate, profitable and successful in all respects”, said Madoff.
Even concealing his fraud sounded simple. Madoff confessed he lied to the authorities on numerous occasions and cooked his own books. In recent years, Madoff said, he wired money between New York and his London office “to make it appear as though there were actual securities transactions executed on my behalf”.
He said the London office knew nothing of his crimes and was “a legitimately, honestly run and operated business”.
Mintz said prosecutors would be frustrated by Madoff’s testimony. He said it was a “road map” for the defence as investigations continue. “His strategy is to shield as many assets for his family as he can. He has fallen on his sword.”
While Madoff claims he co-ordinated this vast conspiracy alone, prosecutors seem less convinced. More prosecutions are likely, though they may be months away. “A lot of resources and effort are being expended, both to find assets and to find anyone else who may be responsible for this fraud,” prosecutor Marc Litt said in court.
“It seems to me that it would be difficult for one individual to pull this off. Especially on such a grand scale,” said Mintz.
Cox added: “You have got to think others were at least suspicious. It’s not just who was involved but where all this money went. Is there cash hidden in some Swiss bank account? My guess is we are not going to find much in the way of assets, but so far nothing has really been resolved.”
At the courthouse investors were seething. There was no sense of relief among the victims, many of whom call themselves survivors, a weighty word for this elderly, largely Jewish crowd.
One, Barbara Dweck, 58, had red paint on her hands and carried a billboard with newspaper headlines about the scam. “I wanted to express my feelings about this guy,” she said. “He has blood on his hands. He is equivalent to a murderer. He has destroyed lives. People are sick from this, people are committing suicide.”
The Madoff effect was even felt in the more serene surroundings of leafy north London. One couple, who asked to remain anonymous, tried to take their mind off Madoff by doing some gardening. When asked whether justice had been served at the previous day’s hearing, they just laughed. At best they hope to retrieve a fraction of their investment. Their retirement has been destroyed.
Ilene Kent, a paralegal who lives on Manhattan’s Upper West Side, said: “Justice has been served, but I can’t retire.” She said her family had lost their life savings. She is also a spokeswoman for the online Bernard Madoff Survivors Group, which has 350 members. She wants the government to investigate if others were involved. She said: “It was too complicated and the money too large for just one man.”
ends
