Madoff Sentence Cheered, Seen as 'Strong' Message
The 150-year prison sentence issued to swindler Bernard Madoff Monday will send a strong message to other potential perpetrators of fraud and to the financial markets in general, the White House said in a statement Monday.
"The judge wanted to send a very strong signal to anybody that invests money on behalf of others of the amazing responsibility that they have to those investors and to ... the country," said Robert Gibbs, President Barack Obama's spokesman. "My guess is that that message will be heard loud and clear going forward," he told reporters.
The statement came hours after cheers erupted as a federal judge gave Madoff the maximum sentence Monday, calling his claims less than compelling.
U.S. District Judge Denny Chin said Madoff's breach of trust was massive, and that he lied to investors and to the SEC to buy homes, yachts and pay country club fees. He called the maximum sentence symbolic to those who might imitate the fraud and to the victims seeking relief.
"Here the message must be sent that Mr. Madoff's crimes were extraordinarily evil and that this kind of manipulation of the system is not just a bloodless crime that takes place on paper, but one instead that takes a staggering toll," Chin said.
"Not a single letter was submitted in support of Madoff," Chin said. "Not friends, not family. That is telling."
The sentence is in line with the judgment that prosectors were seeking for the multi-billion dollar fraud scheme.
Madoff's attorney Ira Sorkin had tried to argue that sentence was excessive and sought for him to receive 12 years.
After the sentencing, Sorkin told CNBC he was saddened by the "mob vengeance" directed at himself and Madoff.
"We accept his decision. He has ruled, and it is what it is. But symbolism doesn't appear in the guidelines. People are not made symbols of acts that they've performed," Sorkin said. "Regardless of what he did ... the fact of the matter is that he turned himself in."
A source close to the case told CNBC that it's far from over. Investigators are skeptical of some Madoff employees who claimed no knowledge of wrongdoing, the source said, adding that he expects charges against an additional 10 people.
Earlier Monday, dressed in a dark suit, white shirt and tie, Madoff sat with his head down and his back to his victims as they delivered their testimony Monday. He stood and faced them during his statement and apologized.
"I cannot offer an excuse for my behavior," Madoff said. "How do you excuse deceiving investors and 200 employees? How do you excuse lying to my sons and two brothers? How do you excuse lying to a wife who stood by me for 50 years and still stands by me? There is no excuse for that. I made a terrible mistake."
He went on to say he left a legacy of shame for his family.
Nine victims offered heart-wrenching testimonies earlier in the day, asking for the judge to deliver the maximum sentence. Said Burt Ross, who lost $5 million in the scheme, "Commit Madoff to prison for the rest of his life. May Satan grow a fourth mouth where Madoff can spend the rest of eternity."
Ruth Madoff in a statement Monday said she was embarassed, ashamed, betrayed and confused by her husband's actions.
"I am breaking my silence now, because my reluctance to speak has been interpreted as indifference or lack of sympathy for the victims of my husband Bernie's crime, which is exactly the opposite of the truth," she said.
"Nothing I can say seems sufficient regarding the daily suffering that all those innocent people are enduring because of my husband. But if it matters to them at all, please know that not a day goes by when I don't ache over the stories that I have heard and read."
The jailed Madoff already has taken a severe financial hit: Last week, a judge issued a preliminary $171 billion forfeiture order stripping Madoff of all his personal property, including real estate, investments, and $80 million in assets his wife Ruth had claimed were hers. The order left her with $2.5 million.
The terms require the Madoffs to sell a $7 million Manhattan apartment where Ruth Madoff still lives. An $11 million estate in Palm Beach, Fla., a $4 million home in Montauk and a $2.2 million boat will be put on the market as well.
Before Madoff became a symbol of Wall Street greed, he had earned a reputation as a trusted money manager with a Midas touch. Even as the market fluctuated, clients of his secretive investment advisory business — from Florida retirees to celebrities such as Steven Spielberg, actor Kevin Bacon and Hall of Fame pitcher Sandy Koufax — for decades enjoyed steady double-digit returns.
But late last year, Madoff made a dramatic confession: Authorities say he pulled his sons aside and told them it was "all just one big lie."
Madoff pleaded guilty in March to securities fraud and other charges, saying he was "deeply sorry and ashamed." He insisted that he acted alone, describing a separate wholesale stock-trading firm run by his sons and brother as honest and legitimate.
Aside from an accountant accused of cooking Madoff's books, no one else has been criminally charged. But the family, including his wife, and brokerage firms who recruited investors have come under intense scrutiny by the FBI, regulators and a court-appointed trustee overseeing the liquidation of Madoff's assets.
The trustee and prosecutors have sought to go after assets to compensate thousands of burned victims who have filed claims against Madoff. How much is available to pay them remains unknown, though it's expected to be only a fraction of the astronomical losses associated with the fraud.
The $171 billion forfeiture figure used by prosecutors merely mirrors the amount they estimate that, over decades, "flowed into the principal account to perpetrate the Ponzi scheme." The statements sent to investors showing their accounts were worth as much as $65 billion were fiction.
The investigation has found that in reality, Madoff never made any investments, instead using the money from new investors to pay returns to existing clients — and to finance a lavish lifestyle for his family.
In bankruptcy filings, Trustee Irving Picard say family members "used customers accounts as though they were their own," putting Madoff's maid, boat captain and house-sitter in Florida on the company payroll and paying nearly $1 million in fees at high-end golf clubs on Long Island and in Florida.
Picard has sought to reclaim ill-gotten gains by freezing Madoff's business bank accounts and selling legitimate portions of his firm. (Its season tickets for the Mets went for $38,100.) He's also sued big money managers and investors for billions of dollars, claiming they were Madoff cronies who also cashed in on the fraud.
The defendants include leading philanthropists Stanley Chais and Jeffry Picower — from whom Picard is seeking at least $5.1 billion alleged to have come out of victims' pockets — and hedge fund manager J. Ezra Merkin. All have denied any wrongdoing.