sentence for the largest Ponzi scheme in history, didn’t agree to
a plea deal with prosecutors because of their demand that he
admit to a conspiracy, a charge that would require him to say he
worked with others, said people familiar with the matter.
Madoff’s decision not to negotiate a deal means the
government won’t have his help in determining whether his
employees assisted in the fraud, the people said. Madoff, 70,
will plead guilty today to all 11 counts he faces without any
promise of leniency or anything else in return. He could receive
150 years in prison at sentencing on charges including fraud,
perjury and money laundering.
Talks between defense lawyers and prosecutors over the
charges extended into late last week before the government
decided to proceed with the counts against him, according to a
person familiar with the matter.
“The information crafted by the government does not contain
a conspiracy charge, and you can read what you like into that,”
Mauro Wolfe, a Madoff attorney, said yesterday in an interview,
referring to a document listing the charges that was filed March
10 in federal court in Manhattan. “The information speaks for
itself.”
Madoff told 4,800 investors in November that their accounts
held $64.8 billion, though their holdings were a “small
fraction” of that, the government said in court papers. Madoff
defense lawyer Ira Sorkin said during a March 10 court hearing in
the case that his client will plead guilty today. Madoff arrived
at the courthouse this morning for the 10 a.m. hearing.
False Account Documents
Madoff told workers to create false account documents and
trade confirmations of phony returns, and to create false
financial statements for regulators, according to the government.
Prosecutors working for acting Manhattan U.S. Attorney Lev
Dassin said Madoff didn’t act alone in the fraud, which dated
back to the 1980s, according to the people. Janice Oh, a
spokeswoman for Dassin, declined to comment.
Madoff was arrested Dec. 11 and charged with securities
fraud for using billions of dollars from new investors to pay off
old ones at his New York-based firm, Bernard L. Madoff Investment
Securities LLC. He was charged after the government said he
confessed to his sons and the Federal Bureau of Investigation
that he led a $50 billion Ponzi scheme.
At the March 10 hearing, prosecutors said Madoff would plead
guilty to securities fraud, as well as mail fraud, wire fraud,
investment adviser fraud, three counts of money laundering, false
statements, perjury, false filings with the Securities and
Exchange Commission and theft from an employee benefit plan.
Madoff, free on $10 million bond, may be jailed after his plea.
Conspiracy Charge
A conspiracy charge requires prosecutors to prove that two
or more people agreed to commit an illegal act, and that they
committed at least one act to further the crime. Madoff could be
charged later with conspiracy, and prosecutors may still charge
others involved in the scheme, former federal prosecutor
Christopher Clark said in an interview.
“It’s kind of rare in a white-collar case to have a one-
person indictment -- you often have a number of people
included,” Clark said. “You need two to tango in a conspiracy.
One thing it says about the current moment is that there’s no
other individual they’re claiming Madoff is conspiring with.”
By not charging Madoff with conspiracy, the government
“signaled it’s not going to stand in the way of him pleading
guilty,” said Daniel Richman, a former federal prosecutor who
now teaches law at Columbia University. Most judges would require
him to identify his co-conspirators if he were to plead guilty on
that charge, “and that would prevent him from going forward.”
Fictitious Returns
The U.S. claimed that Madoff hired unqualified workers for
his investment advisory business to generate documents showing
fictitious returns for investors. Madoff sought to give the
appearance of “operating a legitimate investment advisory
business” in which client funds were traded, when “no such
business was actually being conducted.”
Assistant U.S. Attorney Marc Litt said in court on March 10
that Madoff doesn’t have a plea bargain. Through such deals,
defendants often receive some benefit for pleading guilty, such
as a reduced sentence, in return for providing details about a
crime. Litt said Madoff will be required to plead guilty to all
11 counts.
In a March 10 statement, Dassin said the investigation of
the fraud is continuing.
By not entering a plea deal, Madoff may be trying to protect
employees of his firm, former federal prosecutor Christopher
Steskal said in an interview.
Protecting Employees
Madoff’s brother Peter was chief compliance officer at the
company, and his sons Mark and Andrew held senior positions in
the market-making and proprietary trading businesses. None of
Madoff’s family members have been accused of any wrongdoing.
Bernard Madoff’s wife, Ruth, who had been represented by
Sorkin, will hire her own lawyer, Sorkin said March 10.
An attorney for Peter Madoff, John “Rusty” Wing, didn’t
return a call seeking comment. Martin Flumenbaum, an attorney for
the sons, has said they “were not involved in the firm’s asset
management business” and “had no knowledge whatsoever of the
fraud.”
Prosecutors and regulators have been probing whether the
chief financial officer at the advisory firm, Frank DiPascali
Jr., knew of the fraud, according to people familiar with the
case. DiPascali has denied wrongdoing. His lawyer, Marc Mukasey,
didn’t return a call seeking comment.
Andrew Lankler, a lawyer for Madoff’s auditor, David
Friehling, declined to comment. A call to Madoff’s longtime aide,
Annette Bongiorno, wasn’t immediately returned. They aren’t
accused of any wrongdoing.
The criminal case is U.S. v. Madoff, 09-cr-00213, U.S.
District Court for the Southern District of New York (Manhattan).
To contact the reporters on this story:
David Voreacos in federal court in Newark, New Jersey, at
dvoreacos@bloomberg.net;
Robert Schmidt in Washington at rschmidt5@bloomberg.net;
David Glovin in New York federal court
at dglovin@bloomberg.net.
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