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Tuesday, March 10, 2009

Madoff to Plead Guilty in Largest U.S. Ponzi Schem

Madoff to Plead Guilty in Largest U.S. Ponzi Scheme
Bloomberg News by David Glovin, Erik Larson and David Voreacos - March 10, 2009

March 10 (Bloomberg) -- Bernard Madoff will plead guilty in two days to fraud charges related to the largest Ponzi scheme in U.S. history, his lawyer Ira Sorkin said in a court hearing.  Madoff, 70, will admit on March 12 that he directed the fraud, his lawyer said. Prosecutors said today in Manhattan federal court that it totaled as much as $64.8 billion. The government will seek forfeiture from Madoff of as much as $170 billion. Madoff, free on $10 million bail, faces 150 years in prison. The guilty plea had been expected since March 6, when Sorkin said his client would agree to be prosecuted without a grand jury indictment. Sorkin said Madoff would plead guilty during a hearing today on whether the lawyer faced a conflict of interest. “There is no plea agreement,” Assistant U.S. Attorney Marc Litt said at the hearing, meaning Madoff must plead guilty to 11 counts that he now faces in a criminal information filed today. Madoff is charged with securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the U.S. Securities and Exchange Commission and theft from an employee benefit plan, Litt said.

Two Issues

U.S. District Judge Denny Chin said at today’s proceeding that there will be only two issues at the March 12 hearing -- whether he will accept the guilty plea and whether Madoff will be sent to jail that day. Chin said victims who wish to speak about the jail term Madoff receives will have to wait until sentencing. Madoff promised investors returns of as much as 46 percent, prosecutors said. He “repeatedly lied to the SEC” and sent documents showing fictitious returns, they said. Madoff had about 4,800 client accounts as of Nov. 30, prosecutors said. Madoff was arrested on Dec. 11 and charged with fraud for using billions of dollars from new investors to pay off old ones. The day before, he told relatives that his business was “one big lie,” prosecutors said in court papers. Thousands of investors with Madoff’s New York-based firm, Bernard L. Madoff Investment Securities LLC, have reported about $43 billion in losses, according to Bloomberg’s tally of disclosures, news reports, and court filings. The alleged Ponzi scheme may have cost investors $50 billion, Madoff said before his arrest, according to court papers.

Wife’s Lawyer

Sorkin and Madoff appeared in court today with another lawyer, Peter Chavkin. Chavkin said he may be a “potential counsel” for Madoff’s wife, Ruth, in future related litigation. Madoff’s years-long scheme unraveled in early December amid a rush of investor redemptions. On Dec. 9, he told his son Mark, 42, who ran Madoff’s proprietary trading business, and Andrew, 40, who was a director of that unit, that he wanted to pay bonuses two months earlier than usual, according to the FBI complaint and to the sons’ lawyer, Martin Flumenbaum. Neither is accused of wrongdoing. The conflict of interest involved an investment that Sorkin’s now-deceased father had with Madoff. Also, in 1992 Sorkin represented a Florida investment firm, Avellino & Bienes, that invested with Madoff.

Father’s Investment

The investment by Sorkin’s father came to light last month with the filing of a list of Madoff clients in federal court. The elder Sorkin opened an individual retirement account that he left to the attorney’s mother in 2001, Sorkin said. When Sorkin’s mother died in 2007, the IRA was cashed out. Madoff’s alleged Ponzi scheme, which would be the largest in history, went back at least to the 1980s, prosecutors said. Sorkin represented Fort Lauderdale-based Avellino & Bienes in 1992 after it was sued by the SEC. The unregistered firm invested more than $441 million in client money with Madoff, according to court papers. The firm agreed to close the business and refund the money, the regulator said. Michael Bienes told the Sun Sentinel of Fort Lauderdale, Florida on March 8 that he lost millions of dollars and was wiped out after investing with Madoff. The criminal case is U.S. v. Madoff, 08-mj-2735, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David Glovin in New York federal court at; David Voreacos in New York federal court at; Erik Larson in New York federal court at


Anonymous said...

10-1 he jumps.

Anonymous said...

God damn thieves. The world is a shitcan because of dishonest trash like this guy. His sickening greed has hurt the financial wellbeing of countless people. Has he no conscience?
The economy is is ruins and it is becasue of ONE thing...GREED. People always wanting to undercut others or make irresponsible decisions for their own gain with no concern for whom they may negatively effect. If the Bible is actually real and if Jesus really is coming back, we need him now more than ever. This world is rotten and festering with bastards like this guy who need the Lord's judgment (along with the rest of us).

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