Bernard Madoff was sentenced to 150 years in prison in the Manhattan federal court yesterday.
Judge Denny Chin opted for the maximum sentence possible for Madoff's convictions, underlining that his offence was not a "bloodless financial crime", but one that "takes a staggering human toll". Chin also noted the lack of letters from family friends and colleagues attesting to Madoff's good deeds and character, which are usually present in such white-collar fraud cases.
Ira Sorkin, an attorney representing Madoff, accepted his client is a "deeply flawed individual". However, prior to sentencing, he reminded the judge, "vengeance is not the goal of punishment", asking for a sentence of 12 years based on Madoff's health and life expectancy.
Madoff accepted full responsibility for his actions. "Although I may not have intended harm, I did a great deal of harm. I believed when I started this problem, this crime, it would be something I could work my way out of, but that became impossible. I live in a tormented state now knowing of all the pain and suffering that I have created," he stated.
Before sentencing, the court heard statements from nine investors who lost money with Madoff. "The fallout from having your entire life savings drop right out from under your nose is truly like nothing you can ever describe. We worked honestly and we worked hard. This can't be real. We did nothing wrong," said Dominic Ambrosino, a retired New York City prison officer.
Maureen Ebel, another of Madoff's victims, commented: "I am a 61-year-old widow and I am now working full time. I have lost a home that my husband and I had owned for 25 years. The Securities and Exchange Commission (SEC), by its total incompetence and criminal negligence, has allowed a psychopath to steal from me and steal from the world."
Madoff was arrested on December 11, 2008 having confessed to his two sons that his investment management firm - Bernard L Madoff Investment Securities (BLMIS) - was "one big lie". On March 12, Madoff admitted a $65 billion scam, pleading guilty to 11 charges including securities fraud, money laundering and perjury.
As of June 23, Irving Picard, the court-appointed trustee responsible for liquidating BLMIS, had recovered $1.2 billion pertaining to the Madoff estate. Picard and the SEC have also taken legal action against alleged accomplices to the fraud as well as feeder funds that invested substantial amounts of client capital with BLMIS.
On June 22, Picard filed a lawsuit in the Southern District Bankruptcy Court of New York against New York-based Cohmad Securities, alleging the firm and its owner Maurice Cohn of "participation and aiding of the massive Ponzi scheme perpetrated by [Madoff] and BLMIS, as well as [Cohmad's] receipt of avoidable transfers from BLMIS". In the lawsuit, Picard alleges Cohmad received payments from BLMIS of $98 million between 1996 and 2008.
On the same day, the SEC filed a lawsuit in the US Southern District Court of New York accusing Cohmad Securities and Cohn of "knowingly or recklessly" participating in the scam by raising "billions of dollars from hundreds of investors under a shroud of secrecy". The defendants - who also included Cohn's daughter Marcia Cohn and Cohn's colleague at Cohmad Robert Jaffe - were allegedly paid more than $100 million "for their stunning marketing success" in securing investor money for Madoff. They also stand accused of helping Madoff cover his tracks by making false regulatory filings concealing Cohmad's "extensive dealings" with BLMIS.
On June 22, the SEC filed a separate lawsuit against Stanley Chais, a California-based investment adviser. Chais ran three funds, which invested a combined value of $900 million directly with BLMIS. The lawsuit alleges Chais had "clear indications" Madoff was running a scam, but nonetheless continued to provide investors with reports demonstrating the funds' strong performance based on Madoff's returns "while charging the funds well over $250 million for his purported 'services'".
Other feeder funds face similar accusations. On May 18, Picard filed a lawsuit in the US Bankruptcy Court in the Southern District of New York against New York-based Fairfield Greenwich Group, claiming the "defendants knew or should have known that [BLMIS] was predicated on fraud". The lawsuit seeks repayment of the $3.5 billion that Fairfield Greenwich Group received from BLMIS between 1995 and 2008.
Elsewhere, Picard secured a clawback of $235 million from Optimal Investment Services, the Swiss asset management arm of Banco Santander, which had an exposure of €2.33 billion to BLMIS. The agreement means Picard will not take further legal action against Optimal or Santander. However, Optimal's dealings with Madoff have since come under scrutiny from Dario Zanni, Geneva's public prosecutor. Zanni is investigating allegations in a lawsuit filed by Franck Berlamont - chief executive of Geneva-based asset management firm Geneva Partners, which invested money with Optimal - that Optimal misled investors by not carrying out adequate due diligence on BLMIS.
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