Without Deal, Madoff Faces 150 Years In Prison

Mar 11 2009 | 2:53am ET

Bernard Madoff, the New York financier and hedge fund manager accused of orchestrating a $50 billion Ponzi scheme, will plead guilty this week to fraud charges, his lawyer said yesterday.

At a hearing in Manhattan, Madoff waived potential conflicts of interest involving his attorney, Ira Sorkin. Sorkin then told U.S. District Judge Denny Chin that Madoff would plead guilty to the 11 counts of fraud in the criminal information filed today by prosecutors. There is no plea agreement, and the 70-year-old faces up to 150 years in prison.

“I gather it is the expectation that he will plead guilty,” Chin asked Sorkin. Sorkin responded, “That’s a fair expectation, your honor.”

Madoff will be back in court tomorrow, when Chin will decide whether to accept Madoff’s plea and whether the accused fraudster, who has remained free on bail, confined to his New York apartment, since his arrest in December, should be sent directly to prison. Madoff’s victims, who were originally told they would be invited to address the court tomorrow, were told they will not have to wait for the sentencing hearing.

“I understand that emotions are high,” Chin said.

Madoff, who had originally been charged with just a single count of securities fraud, saw 10 new charges added yesterday: investment adviser fraud, adviser fraud, mail fraud, wire fraud, false statements, perjury, false filings with the Securities and Exchange Commission, theft from an employee benefit plan and three counts of money laundering. Madoff is not charged with conspiracy, likely to reignite the debate on whether he could have run so massive a fraud without help.

The criminal information also offered new details of Madoff’s alleged fraud. According to prosecutors, Madoff promised investors returns as high as 46% a year, and set up a back-office infrastructured, staffed by employees with “little or no prior pertinent training or experience,” to create the appearance of “a legitimate investment advisory business in which client funds were actively traded.” In another misleading move designed to make investors think he was legitimate, Madoff set up accounts in London to make it appear that he was trading European securities. The court-appointed receiver for Madoff’s firm said recently that he had found no evidence that Madoff ever bought securities with client funds.

“The charges reflect an extraordinary array of crimes committed by Bernard Madoff for over 20 years,” Lev Dassin, acting U.S. Attorney for the Southern District of New York, said in a statement. “The size and scope of Mr. Madoff’s fraud are unprecedented.”

Dassin added that his office’s investigation in the Madoff fraud is continuing.

The criminal information alleges that Madoff “repeatedly lied” to the S.E.C. and his clients, telling the latter of “fictitious returns.” He is also charged with using some $250 million of client funds from his investment advisory to finance his market-making and proprietary trading businesses, which were run separately from the investment advisory.

Prosecutors also demand that Madoff forfeit a whopping $177 billion in proceeds and property, a figure more than three times as high as the highest estimates of the size of the fraud—estimates that have recently come into question as being too high.

Another lawyer for Madoff, Daniel Horowitz, called the $177 billion figure “grossly overstated.”

“We respectfully suggest that the amount of the government’s forfeiture is grossly overstated—and misleading—even for a case of this magnitude,” Horowitz wrote to Chin.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.