Madoff pleads guilty to $65b. swindle

"I knew what I was doing was wrong;" disgraced financier faces 150 years in prison.

March 12, 2009 16:37
4 minute read.
Madoff pleads guilty to $65b. swindle

madoff arrives at court 248 88 ap. (photo credit: )

NEW YORK - Bernard Madoff's freedom came to an end Thursday with the definitive "click-click" of handcuffs closing around his wrists, just moments after he pleaded guilty to defrauding investors of $65 billion in a transatlantic pyramid scheme. The disgraced financier told a packed Manhattan courtroom that he was "deeply sorry" for robbing and in many cases bankrupting thousands of unwitting clients, including a number of large Jewish charities and institutions, in a scam of unprecedented size and scale. "I knew what I was doing was wrong and criminal," Madoff, 70, said in a clear voice after entering guilty pleas on 11 criminal counts, ranging from securities and investment fraud to money laundering. Madoff, who had been living under house arrest at his posh $7 million penthouse apartment on Manhattan's Upper East Side since he was charged in December, was taken to a federal detention center in lower Manhattan immediately after the hearing. He faces up to 150 years in prison when sentenced, possibly as early as June. Prosecutors estimate he handled more than $170b. in deposits and faked returns over the course of the swindle, skimming off millions to finance a lifestyle that included vacation homes in Palm Beach and Montauk, and lavish gifts to family and friends. The rapid fall of the US stock market last autumn ultimately led to the scam's collapse as cash-strapped investors asked to redeem their investments - which turned out not to exist. The collapse of Bernard L. Madoff Investment Securities instantly obliterated as much as $64.8b. in paper wealth, leaving holes not just in individual pocketbooks but in the budgets of nonprofits that depended on family foundations that were wiped out. On Thursday, the UJA-Federation of New York confirmed it was laying off 52 staff members and freezing wages to make up for a sharp reduction in donations, partly because of the Madoff scandal. In court, Madoff read from a prepared statement that for the first time described the mechanics of the fraud, which he said had begun in the early 1990s as he struggled to meet investors' expectations of high returns amid an economic downturn and began simply paying existing investors with money deposited with him by other clients. "I never invested those funds," Madoff said. He explained that he had initially believed he would be able to extricate himself from the scam, but instead carried on for two decades, during which he rose to become chairman of the Nasdaq stock exchange in New York as well as a trustee of Yeshiva University. Madoff explained how he had wired money from accounts in New York to London to conceal the absence of stock trades and "knowingly caused" the production of account statements documenting nonexistent balances to trick his clients. "I cannot adequately express how sorry I am for what I have done," he went on. About 40 victims who attended the hearing had no problem expressing their fury at Madoff, who looked away from them as he walked into the courtroom and then stood stiffly with his back turned toward the gallery, the outline of a bulletproof vest visible beneath his well-tailored gray suit jacket. One angry victim challenged Madoff to turn around and face the gallery of one-time clients and friends. "I don't know if you had a chance to look around at some of your victims," said George Nierenberg, stepping toward Madoff. Marshals gently directed him back to the speakers' podium. Nierenberg was among a handful of investors US District Judge Denny Chin invited to address the court on the subject of whether he should accept Madoff's guilty plea or let the matter proceed to trial. "At a trial, we can hear and bear witness to the pain Mr. Madoff has inflicted on the young, the old and the infirm," said Maureen Ebel, as Madoff sat stock-still at a table a few feet away. Some cried during the hour-and-15-minute proceeding, while others sat stone-faced. Many let out a bitter laugh as Madoff's attorney, Ira Sorkin, reminded the judge that his client had been paying for 24-hour court-ordered security "at his wife's own expense" - an irony for those whose life savings had been wiped out to pad the Madoffs' bank accounts. The well-dressed group, seated together in the gallery, burst into applause as Chin cut short Sorkin's request that Madoff be allowed to wait out the months until his sentencing at home instead of in the drab gray federal jail across the street from the courthouse. "The judge made me proud today," Norma Hill said on her way out of the courthouse. "He restored my faith in the justice system - I was beginning to think there was a two-tiered system." Others said they weren't satisfied with seeing Madoff pay his pound of flesh - they wanted their money back. "He pleaded his guilt, and that's fine, but I don't see how it helps his victims," said Sharon Lissauer, a model who lost her whole life savings in the scam. Tears welled up in her eyes as she told reporters she was still hoping the courts would find a way "to make investors a little more whole." Federal investigators have found about $1b. in assets, including artwork, that could be liquidated to repay investors. A US government insurance program guarantees each at least $500,000 back. Prosecutors told the court that their investigation was continuing. Madoff's wife, brother and two sons - none of whom were in court to witness his guilty plea - have been identified as potential targets for additional charges. Madoff went out of his way to shield them from suspicion in his statements to the court, insisting that the trading and marketing arms of his company, which were run by his brother and sons, were legitimate and profitable businesses whose accounts were untainted by fraud. Prosecutors declined to comment on the ongoing investigation, but Madoff's victims left no doubt about their conviction that others should also be held accountable for the crime. "It would have required an army of people to generate the number of documents we got," Nierenberg told the court.

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